Project Financing Insurance

Insurance of commercial and political risks that evolve from transactions that have a project financing character.

Project financing usually relates to industrial projects or projects that concern infrastructure, such as the construction and exploration of power stations, petrochemical installations, toll roads, telecommunications and oil and gas installations. A project company is established for the development and exploration of a project, a so-called ‘Special Purpose Company’ (SPC). Repayment of credits of such projects depends on the (to be expected) revenues/cashflow generated by the project. In case of non-payment by the Debtor (the ‘project company’), the possibilities to recoup losses from the sponsors (the shareholders of SPC) are limited. Atradius therefore enables you to insure against the financing risk of such projects within a single policy.

Atradius is very experienced in the field of project financing. Various projects in different areas, such as oil and gas, infrastructure and energy, and in different parts of the world have been insured with Atradius. Since 1996, Atradius has its own ‘dedicated’ project financing team.

Project assessment

Atradius’ country policy generally applies to project financing, as in the case of export credit insurance. The policy implies that cover policy and exposure limits (maximising of liabilities) are determined per country. In some cases, projects can also be insured for countries outside Atradius’ country policy, for example, if this does not involve transfer risks and if the credit risk has largely been externalised.

Applications

With regard to project financing, it is recommended that you involve Atradius at the earliest possible stage. Based on provisional information, a letter of interest can be issued to you or the financing bank. This letter states that Atradius in principle is willing to consider the application.

Terms

In view of the basic costs of setting up project financing insurance, this structure may be a less attractive option for smaller investments. The availability of project financing insurance is conditional. It depends, for example, on a positive outcome of a due diligence investigation with regard to the risk areas that have been inspected by an external advisor. They will assess reports by banks and sponsors and will investigate your technical skills and solvency. If Atradius accepts the project financing risk, it will indicate on what terms insurance cover is possible. A promise of cover has a term of six months and may, if the risk remains acceptable, be extended by six months on a continuous basis.