Make-up:

Where a Cashflow or capital item is deficient, the amount of such Deficiency eg an Interest Make-Up relates to the Interest amount above a ceiling percentage.

Manager:

A medium-level Participant established according to Final Take.

Mandate:

The formal appointment to advise on or arrange a Project Financing.

Margin:

The amount expressed in % p.a. above the interest rate basis or cost of funds. For hedging and futures contracts, the cash collateral deposited with a trader or exchange as insurance against default.

Market risk:

Changes to the amounts sold or the price received which impacts on gross revenue. Sometimes called sales risk.

Maturity:

The final date a Project Finance loan is repayable. The end of the Term.

Medium term:

2-6 years.

Merchant Bank:

A bank which, besides lending and deposit taking (usually not from the public), engages in trading, advisory services, and as an underwriter and funds manager of securities.

MIGA:

Multilateral Investment Guaranty Agency, the PRI arm of the World Bank.

MITI:

Ministry of International Trade and Industry of Japan.

Mine-mouth

The coal mine is beside the power station; a dedicated coal mine

MLA:

Multilateral agency such as IFC, ADB.

Monte carlo:

Simulations using random numbers.

Monetisation:

Securitisation of the gross revenues of a contract

MW:

Megawatts, one thousand kw or one million watts.

Negative Pledge:

The borrower agrees not to pledge any of its assets as security and/or not to incur further indebtedness.

Negotiable:

A financial instrument can be bought or sold by another Investor, privately or via a stock exchange / computer trading.

Non-Recourse:

The Financiers rely on the Project’s Cashflows and Collateral Security over the Project as the only means to repay Debt Service. This usually occurs after Completion.

NPV:

The periodic Net Cashflows are each discounted by the Discount Rate to a present date and the appropriate cash outflows/investment for construction or acquisition are deducted from the total.

O & M:

Operations and Maintenance.

Offtake(r)

The purchase(r) of the project’s output.

Open-Cycle:

The waste energy/exhaust from a power plant is not captured.

Operating Cashflow:

Project Revenues less (cash) Opex.

Operating risk:

Cost, technology, and management components which impact Opex and project output/throughput. Costs includes inflation.

Opex:

Operating Expenses, always expressed as cash. Therefore, depletion and depreciation are excluded.

Overrun:

The amount of Capex or Funding above the original estimate to Complete the Project.

Oversubscription:

Underwriting commitments from a Syndication exceeds the amount sought by the amount of oversubscription.

p.a.

per annum, yearly.

Pari passu:

Equal ranking of Security pro-rata to the amount owed.

Participant risk:

The credit of the participants and the risk of non-performance under the Project Contracts or Financing Agreements.

Participant:

A party to a Funding. It usually refers to the lowest rank / smallest level of Funding. Alternatively, it is one of the Parties to the Project Financing or the Project Documents

Participation:

The amount of loan/bond issue taken directly or from another direct lender/underwriter.

Partnership:

The partners agree to a proportional share of profits and losses and thus have the same tax treatment.

Payback:

The period in years to recover the investment or loan. It may be calculated on a discounted, non-discounted, leveraged, or unleveraged basis.

Performance Bond:

A bond of 5-10% of a contract payable if a project is not completed as specified. Usually part of a construction contract or supply agreement.

Physical Completion:

The Project is physically functioning, but not yet (fully) generating Cashflow.

Placement:

Securities are placed with a small group of Investors.

Point:

One percentage point on a Note or Bond.

Political risk:

Eight risks usually comprising currency Inconvertibility, expropriation, war and insurrection, terrorism, environmental activities, landowner actions, non-government activists, legal, and bureaucratic/approvals. The first three are insurable. It overlaps with the political component of Force Majeure risk.

Potential Default:

A condition where a Default would occur in time or where a notice or default event has not yet been formalised.

PPA:

Power Purchase Agreement, a long-term power supply contract.

Praecipium:

The amount of the front-end fee not distributed to the joining members of a Syndication.

Premium:

The cost of an insurance policy. The price of an option. An extra margin payable with prepayment of principal.

Prepayment:

Repayment of greater than the scheduled amount. If forced, it is referred to as a Mandatory Prepayment.

PRI:

Political Risk Insurance.

Prime Rate:

A (US) bank Interest Rate charged to prime customers for loans (in excess of $100,000).

Principal:

Generic: A principal is a party bearing an obligation or responsibility directly (as distinct from an agent).

Private Placement:

The Placement of Debt or Equity investment is not publicised and may not be tradeable.

pro rata:

Shared or divided according to a ratio or in proportion to their Participations.

Production Loan:

A Project Financing where the repayment is linked to the production, often on a $/unit basis.

Production Payment:

A defined portion of the proceeds of production up to a dollar amount. The amount is that required to repay a loan with interest and fees.

Proforma:

A financial projection based on assumptions.

Project Contracts:

The suite of agreements underlying the Project.

Project Financing:

A loan structure which relies for its repayment primarily on the Project’s Cashflow with the Project’s Assets, rights, and interests held as secondary security or Collateral.

Project:

The Asset constructed with or owned via a Project Financing which is expected to produce cashflow at a Debt Service Cover Ratio sufficient to repay the Project Financing.

Prospectus:

A formally approved document describing the business and affairs of the issuer and the terms and conditions of the security. An Offering Circular in the US filed with the SEC, e.g. for an IPO or a Rule 144a Bond Issue.

Purchasing Power Parity:

A view that differential escalation rates (in different countries) determines the systematic change in FX rates.

Put:

An option to sell (back) a Security or commodity at a set price at a given time in the future.

PV:

Present value where a stream of cashflows or accounting flows are discounted to the present at a Discount Rate.

Rating:

The ranking, usually grades of A to E, of the creditworthiness/ability to repay. The ranking of Bonds is related to its estimated percentage default rate. Countries are similarly ranked and may include an estimation of Political Risk.

Receiver:

A person/entity appointed under the legal Security documents to administer the Security on behalf of the project financiers.

Recourse:

In the event that the Project (and its associated escrows, sinking funds, or cash reserves/standby facilities) cannot service the financing or Completion cannot be achieved, then the Financiers have recourse to either cash from other Sponsor/corporate sources or other non-Project security.

Representations:

A series of statements about a Project, a sponsor, or the obligations under the Project Contracts or the Financing Agreements.

Reserve Account:

A separate amount of cash or L/C to service a payment requirement such as Debt Service or Maintenance.

Residual Cover:

The cashflow remaining after a Project Financing has been repaid expressed as a percentage of the original loan.

Residual Cushion:

The amount of Net Cashflow from the Project after the Project Financing has been repaid. If it is expressed as a percentage of the original loan amount, it is the "Residual Cover".

Residual:

The assumed value of an Asset at the end of a loan, Lease, or Proforma Cashflow. It is sometimes insured.

Retention:

An amount held back from construction contract payments to ensure the contractor completes the construction before the retention (5-15% of the contract price) is returned to the contractor.

Revenues:

Sales or royalty proceeds. Quantity times price realised.

Risk:

The event which can change the expected cashflow forecast for the Project Financing. "At risk" means the cash or loan. For insurance, it means the total amount or type of event insured.

Royalty:

A share of revenue or cashflow to the government or grantor of the concession or licence.

Rule 144a:

Under US SEC regulations, a Rule 144a security (usually bonds but can be equity/shares) can be placed with professional investors who are prequalified/registered and take minimum US$100,000 amounts. Less strict documentation/disclosure/due diligence is permitted than a full Prospectus.