Federal/State Agency Commercial Lenders Project Company Borrower Indenture/Note Purchase Agreement Loan Agreement Capital Markets Offering Lead Commercial Banks as Agents/Underwriters Syndicate of Commercial Banks Collateral Agent/ Trustee Common Agreement Loan Agreement Collateral Trust Agreement Credit Support Instrument Credit Support Entity Security Agreements: Cash Collateral Agreement Pledge Agreement Assignment Agreement Mortgage Typical Co-Financing Transaction
Credit Default Option Counter Party Bank Project Lender Project Company Municipal Entity BPS = Basis Points CEP = Credit Event Payment $ $ $ Services CEP Zero Fee x BPS No credit event Credit event
Credit Linked Note Counter Party Bank Project Lender Project Company Municipal Entity CEP = Credit Event Payment $ $ $ Services CEP Principal Interest on note No credit event Credit event Principal
Legal Counsel Design Engineer Investment Banker Revenue Modeler Accountants Rating Agency(ies) Interconnection/Gas Distribution Services Provider Parent Guarantor O&M Provider Sponsors Senior Lenders Term Notes -Banks -Public -Institutional Investors Bank Revolver/LC Facility - Subordinated Lenders Subcontractors Equipment and Material Suppliers EPC Contractor Parent Guarantor Warranties Performance Guarantees Typical Energy Project Financing Equity Investment Shareholders Agreement Fuel Supply Contract Fixed Price EPC Contract Offtake Agreement O&M Agreement Guarantees or Support Paying Agent Collateral Agent Funding Company Passive Equity Investors Insurers Fuel Supplier Legal Counsel Independent Engineer Power and Natural Gas Consultant Insurance Consultant Project Company Power Marketer* Power Purchaser(s) Parent Guarantor* Parent Guarantor Transmission/ Services Agreement Interconnection/ Transmission Agt** *Project company power marketer and its parent guarantor may be affiliated. **May be provided by power offtaker in tolling (energy conversion) agreement.
Typical PFI Structure Procuring Authority Project Companys Shareholders Project Company Project Companys Lenders D&B Contractor Operating Contractor Lenders Direct Agreement Loan and Security Documents Key: = contract = flow of money Project Agreement
Conclusions Estimated infrastructure needs exceed several hundred billion dollars Without suitable mitigation, structural, legal, and regulatory risks may reduce flow of private capital to infrastructure projects Governmental support central to overcoming investor concerns Existing paradigms -- structures, documents, risks -- must be adapted to accommodate market demands
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