General

The complexities of project finance are such that the project parameters and interrelations need to be managed within a clear framework, which is formalized via contracts. Project finance can therefore be subject to numerous subcontracts within the overall framework of the project financing. We consider below some of these contracts.

Pre-development agreements

Prior to commencing a project, several elements need to be already in place before the project can begin. Elements such as:

• Licences and concessions In many cases, implementing a project financing in its building as well as operating phases depends on obtaining the appropriate licences, permits and concessions from the government of the country in which the project is based. The government may negotiate certain clauses which give it the right to revoke the licence or concession. Lenders should therefore seek security via a variety of issues such as government approval of the financing and of the project, and enabling the lenders to take enforceable security, manage the project if necessary, and repatriate profits.

• Concession agreements Concession agreements create the right and obligation to build, own and eventually transfer back to the grantor infrastructure used for the general benefit of the population. Concession agreements should therefore clearly state the rights such as terms and duration of the concession, ability to extend the concession even if there are changes in the law, termination of the concession should not be expropriatory, and banks should be able to freely transfer the concession to a third party.

• Shareholder agreements