| Instrument |
Sub Category |
Function |
Source |
| Equity |
Ordinary Shares |
Rsik capital from developer or sponsor |
Sponsor |
| Preference Shares |
Senior to ordinary shares, typically from tax investor; sometimes proviiding a cumulative dividend. |
Institutional Investors
Investment Funds
Tax Investors |
| Debt |
Subordinated Loan / Mezzanine |
Usually fixed rate, long-term and unsecured. May be considered as equity. Can be used to cover construction overruns or other guaranteed payments |
Lenders specialising in mezzaninen debt |
| Syndicated Loans |
Loan provided by two or more lenders, governed by a single loan agreement. May have different agreements for construction and operating phase of project. Provide long-term finance |
Banks |
| Senior Debt - unsecured / secured |
Large unsecured loans are only available to creditworthy corporations. Banks tend to limit their risk to 5 - 10 years. |
Commercial banks |
| Development Loan |
Financing provided during development of project to a sponsor with insuffiicient resources. |
- Lender with project experience
- World Bank (only if project can not secure borrowing at reasonable rates from any other sources)
- Vendor
|
| Intermediary Loan |
Export-Import bank lends to a financial intermediary (commercial bank), which in turns lends to the project. |
Export Credit Agency |
| Private Placement |
Direct sale of long-term debt / equity |
Sophisticated investors including insurance companies, pension funds, trading companies |
| Eurobond |
Issued in amounts averaging $100m without prior registration or approval by any particular government. Terms usually range from 10 - 15 years. Loans may be made in any currency, fewer covenant than syndicated bank loans, and accessible through a large and liquid market. However, a credit rating for the project entity is required which could be both costly and time-consuming to obtain. Also, bond issues tend not to allow changes to the underlying project. |
Capital Markets |
| Guarantee |
Exchange Rate Risk |
A commercial lender provides a loan to the project entity (the importing entity), at below market interest rates. The Export-Import bank provides compensation for the difference between commerical rate and below-market rate |
Export Credit Agency |
| Political Risk |
Limited protection against risks of sovereign non-performance and against certain Force Majeure risks. |
Word Bank |
| Tax Relief |
Tax Credits
Tax Holidays
Duty exemption
|
Individual governments may offer tax incentives |
Host governments |
