Project finance

As project financing came increasingly to be used, it was noted that the rigidity of the OECD rules prevented occassionally ECAs from covering project risks.

In May 1998, the participants agreed on new, more flexible guidelines for project finance operations. According to the Project Finance Agreement, the repayment schedule of a genuine project (the project cash flow is adequate to cover the repayment of the loan and the project assets are sufficient collateral) can be more flexible (can reflect the project cash flows) than in a normal export credit transaction.

The maximum repayment period of a project finance transaction is 14 years with a maximum average weighted life (AWL) of 7,25 years. As regards High-Income OECD-countries, project finance flexibilities can be applied only when combined ECA support is less than 50% of the loan syndication; if the ECA support is 35-50%, the maximum repayment period is 10 years with a maximum average weighted life of 5,25. If the ECA support is up to 35%, the maximum repayment period is 14 years.

The repayment profile of a project finance transaction must fulfil the following conditions:

• the first repayment of principal must be made no later than 2 years from the starting point of credit
• the first repayment of principal must be for not les than 2 % of the total principal sum
• the first repayment of interest must be made within 6 months from the starting point of credit; after that the interest can be repaid in annual instalments
• no single or series of repayments of principal within any 6 month period shall be more than 25% of the total principal