project finance lawyers

project finance lawyers

The Role and Importance of Project Finance Lawyers in Infrastructure Development

1. Introduction to Project Finance and Infrastructure Development

This essay assesses the important and changing role that project finance lawyers play in facilitating the development of a diverse range of infrastructure assets. Project development can run the gamut from greenfield construction to the refinancing of completed assets. This essay illustrates the key role that lawyers play, highlights interdisciplinary issues that lawyers managing project finance deals face, and shares some of the key lessons from the case studies. The experiences described by the author are international and frequently involve emerging markets where project finance, and the presence of developed structures and expert local professionals in the project finance constellation, is most pronounced. The main findings point to the more subtle issue of shifting roles that bankers and other professional conflict partners such as structural/corporate finance lenders and bond investors play. Many of the observations will not be easily found in the existing literature, and the case studies illustrate numerous risks, structural problems, and solutions that emanate from actual deals. The author brings an emerging market perspective to the project finance experience, which is potentially novel, especially for legal and business students training to enter this important and lucrative field.

2. Key Responsibilities and Expertise of Project Finance Lawyers

Many aspects of this work will be dedicated to shaping and implementing paths to practical solutions, taking into account not only the possible challenges of each stakeholder but also the broader policy objectives of the transaction. Each of these functions, and the many others that a project finance lawyer has to perform in connection with a project, demand specific skills and knowledge.

Structure and standardise contractual documents, including concession, construction, and supply contracts, and financing and security documentation. Interface and negotiate with multiple stakeholders such as project sponsors and shareholders, host and other governments, contractors, equipment suppliers, banks and other financiers, and other parties such as insurers. Address with the counterparties any issue that could affect financing arrangements or construction, completion, or operation of the project. Ensure project and financing contracts are tailored to the needs of the project, sponsors, and financiers, while meeting international standards. Navigate through the complex local and loan laws in connection with securing financings and providing certain financing packages. Seek to define and allocate as much as possible transaction, financial, and operational risks. Negotiate terms to be contained in documents and agreements between project companies and other stakeholders, including construction contracts, equipment supply contracts, operation and maintenance contracts, off-take and fuel supply agreements, supply contracts, and even the potential merger and acquisition contracts. Interface with government authorities with the purpose of obtaining any concession, licence, permit, or regulatory approval (along with other stakeholders) that may be required or beneficial.

3. Challenges and Opportunities in Project Finance Law

Another set of obstacles that lawyers, the public sector, and even project sponsors face in this context is related to matters of project finance law enforceability. For instance, foreign lenders investing in the form of bonds in Africa continue to grapple with the legal enforceability of security as the priority rule on a project financed by the sponsor. The complexities of enforcing international contracts on state to resolve conflicts are hardly less formidable or contentious, particularly in derivative financing arrangements such as single currency financing structures and other financial arrangement defaults.

No doubt faced with limited balance sheet resources and domestic currency credit controls, project finance always gives rise to peculiar issues of equity and risk management among lenders, investors, and sponsors. Moreover, the participants in project finance have distinct risk preferences and different risk-reward interests over and liabilities of “sharing” of the venture with other stakeholders including equity shifts, lender violations of lender duty or priority rule, subjecting the lender’s guarantees and trustee appointment to LLC’s preferred equity governed by federal tax.

Some of the key challenges and opportunities in project finance law include: (i) Equity management and risk/reward allocation; (ii) Dealing with inter-creditor risks; (iii) Enforceability and choice of law concerns; (iv) Extent of investment protections and contract sanctity; and (v) Related party transactions, fairness, and weighing the contribution of all stakeholders/contracting parties.

4. Case Studies and Best Practices in Project Finance Law

Asia: The Star Energy Geothermal Case; Benefiting the Host State and Managing Environmental Concerns Once your project has successful financing and the funds are committed, you are ready to advise the client to drawdown the funds while a host of financial accountants and others maintain a watchful eye on every action taken by the borrower. What if… they do not drawdown or spend the funds within 3-6 months as planned and needed or borrowers are unable to perform some required covenant? They pay a price in cash for these failures, perhaps 100 bp plus the amount unutilized or not spent within the targeted period.

Djibouti: Project Team Perspective For a law firm perspective, the IFC team’s observations on Oragroup’s role as the sponsor and the borrower, as well as case studies from various perspectives including the government who is the host state authority participant, is excerpted as a “Plug” example are as shown in the upper portion of the detailed project finance tools and techniques of section 4.3.