Project Finance Glossary

A complete glossary of terms used in the Project Finance Modelling Handbook.

This is a draft chapter from my forthcoming book - The Project Finance Modelling Handbook. I'm publishing drafts of every chapter online to get as much feedback and input from fellow professionals as possible. My goal is to publish the most useful book on Project Finance Modelling available.

I am adding to this Glossary as I refer to terms in other chapters of the book. It is, therefore, an incomplete work in progress. Like we all are.

Availability period. This is the period during which the Project Company may draw on its loan facilities. It is usually in the period during which the asset is being constructed.

COD. [To follow]

Conditional Precedent. (Often referred to as "CP's"). In a Project Finance loan agreement, the borrower must satisfy these conditions before it may request a drawdown, and the lender is obliged to lend.

EPC. [To follow]

Financial Close. This is the date on which all conditions precedent have been fulfilled, all the project documents have been executed, and all contracts come into effect. After Financial Close, drawdowns are allowed on the project debt. At this date, the financial model is frozen and becomes part of the project agreements. This date is also sometimes referred to as the "Effective Date".

Liquidated damages. (Often referred to as "LD's") Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should specific events occur. In Project Finance, we typically see two kinds of LDs:

  • Delay LDs. These are often payable by the EPC contractor to the Project Company if the asset is not completed on time. In addition, the Project Company may be required to pay LDs to the off-taker in case of a delay.
  • Performance LDs. These are payable by the equipment supplier if the asset is complete and operating but fails to perform at the expected level, causing the project to deviate from its expected financial performance.

Offtaker. [To follow]

Repayment period. This is the period after construction completion when the debt has been fully drawn, and the Project Company is now required to repay the debt.

Rolled up interest. Interest or fees on a loan facility added to the outstanding balance of the debt rather than being paid directly to the bank. This typically happens during the availability period in a Project Finance transaction.


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