project finance risks associated with the jurisdiction of the collateral monica futami director –...
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Project FinanceRisks Associated with the Jurisdiction of the Collateral
Monica FutamiDirector – Structured Finance EnergyWestLB AG, New York [email protected] - +1 212 852 6185
WestLB AGNew York Branch
Structured Finance Monica Futami
Risk v. Return
Primary goal of Banks and bankers: maximize RETURN and minimize RISK
INVESTMENT GRADE
TRANSACTION Project Risk Enhancement
Country Risk Enhancement Project and Country Risk
Enhancement
Country
Risk
Project Risk
Investment Grade
Non-Investment
Grade
Investment Grade Non-Investment Grade
WestLB AGNew York Branch
Structured Finance Monica Futami
Project Risk Enhancement
Strong Security Package: pledge on the company’s or project’s hard assets, pledge of
project company’s shares, collateral accounts, Letters of Credit issued by eligible
financial institutions, Assignment of Receivables, Assignment of Project Contracts, etc. Transfer of the economic (payment) risk to an acceptable counterparty. In most
cases, however, performance risk remains uncovered.
Mitigate the risks associated with actions of governmental authorities in connection
with expropriation, nationalization and currency inconvertibility/transfer. Risk Mitigation Providers: Export Credit Agencies, Multilateral and Governmental
Agencies and private credit and political risk insurers. Future Flow Mechanisms
Country Risk Enhancement/Diversion
WestLB AGNew York Branch
Structured Finance Monica Futami
Main Obstacles - Examples
Main Obstacles when local collateral is needed:
Lack of “step-in” rights
Non-specialized and unsophisticated courts
Long foreclosure process