Project Finance PRI can be provided for both Equity and Debt financing structures for a Project.
The coverage consists of:
- Forced Abandonment,
- Forced Divestiture,
- Export Licence cancellation,
- Operating Licence cancellation,
- Selective Discrimination,
- Political Violence and War (including Civil War).
Project Finance PRI cover is usually applicable to projects that have no guarantee from an off-take agreement, such as a power purchase agreement (PPA) with, or direct payment/performance risk on, the relevant foreign government.
Where a foreign government does have a contractual obligation to pay monies or perform a continuing obligation (whether directly or through a government agency), then the PRI coverage would normally be extended to what is known as Extended PRI.
Extended PRI is available for Project Finance.
Project finance is the financing of a project, usually non-recourse:
- based solely on the earnings of the project as a stand-alone economic entity;
- with repayment of the debt only from the cash-flows generated by the project; and
- supported by security confined to the assets, contracts and revenues of the project.
- Project finance is used extensively for mining projects.
- If the project is in an emerging market country where the project risk is acceptable to lenders/investors but the sovereign risk is of concern, PRI can be the solution.