Project Financing Guarantee requirements and conditions
What does a Project Financing Guarantee cost?
The project company pays a premium for an EKF guarantee. We calculate the premium based on the overall risk of the specific export transaction:
- The banks involved
- Term of the guarantee
- The foreign buyer's circumstances
- The political situation in your buyer's country
- Risk profile of the project
- Security package
- Input and output risk, i.e. sales analysis
In general, projects are difficult to compare. They are often complex and involve many different players, sponsors and banks. Consequently, it will not serve any purpose to offer indicative prices. Instead, please contact our advisors for assistance.
Who is eligible for a Project Financing Guarantee?
Danish companies who make deliveries to a project in a foreign country are eligible for a Project Financing Guarantee. EKF must rate the foreign project as creditworthy before issuing any guarantee.
What is the limit on a Project Financing Guarantee?
EKF applies no fixed limits when it comes to the scale of the project. However, the project must be large enough to balance the project's costs in relation to its value. As a rule of thumb, the amount is usually in the multimillions.
In principle, EKF offers risk coverage for up to 14 years. However, risk coverage can be extended for up to 18 years for projects involving renewable energy.
What does EKF cover?
A Project Financing Guarantee covers non-payment under the loan agreement. EKF pays out compensation to the banks in the event that problems arise with the project due to of commercial, political or documentation risks.
- Commercial risk occurs when the project company is unable to pay due to liquidation, insolvency, cancellation of the contract or because the project is unwilling to pay.
- Political risk occurs when you do not receive payment for your products due to impediments in the country you are exporting to. Such impediments include war (external armed conflict and domestic political violence), currency shortage, restrictions on use of currency, import or export bans and interventions by local authorities that make it impossible to receive payment for the products.
EKF typically covers between 30 and 80 per cent of the risk on the loan granted by the bank. This means that the project's bank will be liable for at least 20 per cent of the risk.
Business plan and due diligence requirements
EKF requires the project to be based on a solid and well-conceived business plan. Before the final loan agreement is concluded between the project owner and the bank, an independent due diligence process must be effected. The due diligence process covers legal and financial circumstances as well as matters relating to the environment, human rights and business.