Investments in the production and especially in the infrastructure sector has increased in recent years. Traditional securities, such as sovereign guarantees or bank guarantees, may not be available. In many emerging markets these securities, although available, may not be regarded as sufficient.
Such transactions are frequently carried out on a project finance basis and do not rely on a typical "bankable" security i.e. recourse to a foreign government, financial institution, or established corporation. The main security is the anticipated cash flow, which is generated from future proceeds of the project. Project finance involves a special project company.
Structured Finance - a special form of project finance
A special form of project finance is structured finance. The approach in structured finance is to analyse all existing financing and the future financing requirements, and to structure both by pooling the project’s assets and issuing tranched liabilities against them. This type of financing too is thus primarily based on using the expected future cash flows for credit repayment. A separate project company (special purpose vehicle) is not required.
In structured financing, countertrade agreements are often concluded to serve as additional security. In countertrades, the loans obtained for the investment are serviced out of the revenues from the sale of goods during the repayment term (the credit period, or life of the loan).
The marketing and sale of the products or services are to be conducted by a trading or other company with experience in the market and the industry.
Such measures can improve the quality of companies’ balance sheets and thus make some investment projects possible that could otherwise not be financed.
OeKB's available Services and Framework Conditions
OeKB has gained experience in this complex field over the last three decades. Since 1979 OeKB‘s Department for Project Evaluation and Analysis has assessed numerous projects. Information required for the assessment of applications for project finance guarantees can be found in the Checklist.
Costs of project evalution
Costs of project evaluation including fees for consultants will be borne by the applicant.
Point of contact
Applications for guarantees should be directed to OeKB's Export Guarantees Department. On request, OeKB's Export Guarantees Department will issue preliminary indications of support also in the earlier stages of a project, always based on the regulations of the OECD Consensus for officially supported export credits which includes rules for project finance.