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Our 'Contract' financing model allows Project Owners
(seller) using a Design, Build, Own and Operate concept to obtain non-recourse financing for their projects by utilizing a Commodity Off-Take Agreement (COTA) with a qualified Off-Take Purchaser (
buyer). A qualified Off-Take Purchaser must have an investment-grade credit rating of BBB- or better. This financing model provides significant benefits to both the Project Owner and the Off-Take Purchaser since the Program has an established Source of Capital (
funding organization) in place for the project financing with no dollar limit on project size.
The financing model relies on commitments from the Project Owner
(seller), the Off-Take Purchaser (
buyer) and the Source of Capital (
funding organization). The Project Owner guarantees delivery of enough product volume to cover payments to be made by the Off-Take Purchaser. The Off-Take Purchaser must guarantee the transaction with an irrevocable cash stream assigned to the Source of Capital. The Source of Capital then
provides 100% of the project funding to the Project Owner.
This financing model is adaptable to projects where the Off-Take Purchaser is not the end user. For most projects, it is anticipated that the Off-Take Purchaser will have some connection to the product as a Marketer, Distributor or End User but the Off-Take Purchaser only needs to provide the credit enhancements for the funding of the project. In this case, the incentives to the Off-Take Purchaser include increasing market share by locking in supply from the project under a long term COTA for the production and/or sharing in the potential profits of the project as negotiated with the Project Owner on a project-by-project basis and appropriate to the risks being taken by the Off-Take Purchaser.
The main criteria for project funding through our Contract financing program are as follows:- The Take-Off Purchaser, whether it is commercial, industrial or municipal must have an investment-grade credit rating (BBB- or better).
- The Commodities Off-Take Agreement must contain a "hell or high water clause" providing for an irrevocable payment stream that fully amortizes the amount funded. It is also necessary that this cash stream be assignable.
- The amount to be funded must be at least $5,000,000 (no maximum).
Funding under this financing model is generally available for up to a twenty-eight (28) year term and is available for global and domestic projects.