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Financial and Contractual Structure of Construction Projects

•
•
S
sakibkh

The document summarizes the key financial and contractual structures and agreements involved in large-scale construction projects. It outlines the major parties and relationships in project finance arrangements. It then describes the typical sequence of contracts and legal instruments over the stages of project development, from initial feasibility studies through design, construction, and long-term agreements. It identifies some potential areas of ethical concern regarding international construction projects in developing countries.

BusinessEconomy & Finance
1 of 40
Construction Project Financial and Contractual Structure An Independent Study Project Spring Semester 2007 Sakib Khan SEAS ’07 Advised by Professor Nicola Chiara
My Goals: ,[object Object],[object Object],[object Object]
Objectives: ,[object Object],[object Object],[object Object]
Source Texts: ,[object Object],[object Object]
My Grand Diagram
Project Company Investors Equity Lenders Feasibility Study Pledges Local Government Permits Permissions Exceptions Obligations Intent to develop Organized Labor Union deal Engineers Environmental Impact Statement Completion Agreement Purchaser Product Guaranteed Sales Contract General Contractor Contracts Design Debt Profit GC financing Operator Input Supplier Off-taker Not studied: Collateral
Notes on Sequence A sketch of possible key documents over the development of a typical project
Stage 1: Financing the Project
[1] Subscription Agreement ,[object Object],[object Object],[object Object],[object Object]
[2] Feasibility Study ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[3] Offering Memorandum ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[4] Commitment Letter ,[object Object],[object Object],[object Object],[object Object]
[5] Intercreditor Agreement ,[object Object],[object Object]
[6] Mortgage or Indentured Trust ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[7] Security Agreement ,[object Object],[object Object],[object Object],[object Object],[object Object]
Investors Guarantees ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[10] Completion Agreement ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[11] Sales Contracts ,[object Object],[object Object],[object Object],[object Object],[object Object]
Stage 2: Structuring the Project
[12] Retain local counsel ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[13] Letter of Intent ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[14] Incorporation of legal entities ,[object Object],[object Object],[object Object],[object Object],Investing Parent Company Investing Parent Company Wholly-Owned Subsidiary Wholly-Owned Subsidiary Foreign jurisdiction Project Company
Structures and Agreements for Project Company and Investors ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Stage 3: Government Agreements, Concessions and Obligations
[16] Government’s Obligations ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[17] Exchange Control Consents and/or Exemptions ,[object Object],[object Object],[object Object],[object Object]
[18] Project Company’s Obligation to Construct ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[18] Project Company’s Obligation to Construct (cont’d) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
PC’s Protection from Government ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Utilities Purchase Agreements ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Transportation Access Agreements ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Tax Agreements and Exemptions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Labor Related Agreements ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Political Risk Insurance ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Stage 4: Design and Construction
[29] Retain Design Professional ,[object Object],[object Object],[object Object]
[30] Environmental Impact Statement ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Site Acquisition, Zoning and Engineering ,[object Object],[object Object],[object Object],[object Object]
[35] Retain General Contractor ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Moral Issues ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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Financial and Contractual Structure of Construction Projects

  • 1. Construction Project Financial and Contractual Structure An Independent Study Project Spring Semester 2007 Sakib Khan SEAS ’07 Advised by Professor Nicola Chiara
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  • 6. Project Company Investors Equity Lenders Feasibility Study Pledges Local Government Permits Permissions Exceptions Obligations Intent to develop Organized Labor Union deal Engineers Environmental Impact Statement Completion Agreement Purchaser Product Guaranteed Sales Contract General Contractor Contracts Design Debt Profit GC financing Operator Input Supplier Off-taker Not studied: Collateral
  • 7. Notes on Sequence A sketch of possible key documents over the development of a typical project
  • 8. Stage 1: Financing the Project
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  • 19. Stage 2: Structuring the Project
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  • 24. Stage 3: Government Agreements, Concessions and Obligations
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  • 35. Stage 4: Design and Construction
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