Project Finance Contracts: The Project Agreement
The Project Contracts provide a basis for the ProjectCo’s construction and operation of the project.
Just like constitution is the main framework of a country’s legal system, The Project Agreement is the main contract which states how company operates, collaborates with multiple stakeholders and most importantly how it obtains its revenues.
Not all projects have a Project Agreement;unsurprisingly the projects that generate revenue from sales to open market do not require an agreement. Some are mining or merchant power plants. Having said that they have some form of license to allow them to do this in lieu of a project agreement.
2 main models of project agreements are
- Offtake contract – under which projectco sells its output to offtaker, hydroelectric dam
- Concession agreement – under which projectco provides a service to a public authority or general public, ie toll road