Service contracts: Projectco concludes service contracts with service providers and transmits to these contractors the service obligations imposed on it under the project agreement. As noted above, service providers provide guarantees to the Authority and, in certain circumstances, the Authority has registration fees, again subject to the rights of lenders. Direct agreements are also usually referred to as “tripartite agreements”, which reflects the fact that they are an agreement between three parties, i.e. the sponsor of the project: the person who plays an active role in the management of the project. The project promoter owns Projectco and obtains a profit, either due to projectco`s ownership or through management contracts, if the project is successful. The proponent often has to cover certain liabilities or risks of the project by providing guarantees or by entering into management or service contracts. Financing agreements: The facility agreement is the main document between the lenders and Projectco and contains the terms of the project financing. Lenders also need a security package and guarantees to protect the loaned funds. The credit agreement is discussed in more detail in our separate OUT-LAW guide on key issues for lenders in project finance agreements. Katie Liszka`s direct agreements are used in project finance operations to protect lenders in case of difficulties.
These are contractual mechanisms that allow lenders to follow in the footsteps of the project company (the borrower) and take over the project and/or find a replacement unit to continue the project.
