“Project finance” is a method of funding in which the lender looks primarily to the revenues generated by a single project, both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive installations that might include, for example, power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure. Project finance may take the form of financing of the construction of a new capital installation, or refinancing of an existing installation, with or without improvements. In such transactions, the lender is usually paid solely or almost exclusively out of the money generated by the contracts for the facility’s output, such as the electricity sold by a power plant. The borrower is usually an SPE (Special Purpose Entity) that is not permitted to perform any function other than developing, owning, and operating the installation.
Energy Conversion Agreements for Thermal Power Plants in Iran
From mid-2015, Thermal Power Plant Holding Company (TPPH), a subsidiary of the Ministry of Energy of the Islamic Republic of Iran, has entered into negotiation with potential international investors who are interested in Iranian power industry, with the aim of satisfying ever-growing demand of electricity in Iran after Joint Comprehensive Plan of Action (JCPOA) has taken effect. In this respect, TPPH has negotiated and entered into Energy Conversion Agreements (ECAs) with Unit International Enerji A.Ș. through which 5 power plants in nominal capacity of 5,000MW are to be gradually developed, executed and operated in different regions of the country on Build, Own & Operate (BOO) basis.
Objectives
The ECAs will help satisfy the energy demand in the country for the years to come and absorb considerable foreign investments.
BABCO’s Role
- Drafting of the Energy Conversion Agreement including the Contract Agreement, General Conditions, Specific Conditions and its tables;
- Providing technical, commercial, financial and legal advisory services to TPPH/Moshanir Power Engineering Consultants during the whole process until the ECAs are signed; and
- Leading negotiations with the first-ever foreign investor for development of 5000 MW CCPP.
The Projects include:
- Zanjan 4 Combined Cycle Power Plant – 500 MW – H Class
- Neyzar Combined Cycle Power Plant – 500 MW – H Class
- Bafgh Combined Cycle Power Plant – 500 MW – H Class
- Zahedan Combined Cycle Power Plant – 880 MW – F Class
- Saveh Combined Cycle Power Plant – 1200 MW – H Class
- Ahvaz Combined Cycle Power Plant – 1200 MW – H Class
- Qasr-e-Shirin Combined Cycle Power Plant – 880 MW – F Class
- Sufian Combined Cycle Power Plant – 1200 MW – H Class