Completion Assurance Investments are faster, easier, better
The following information does not constitute an offer to buy or sell securities. The following are typical project finance terms under In3’s Completion Assurance Program™ (CAP):
- Debt-to-equity ratio: Up to 100% of the project budget can be financed. No new cash (“unexpended funds”) need necessarily be invested by the developers or sponsors when using a financial (completion assurance) guarantee sent via SWIFT. However, a new option using a cash deposit (returned in lump sum with the arranged funding) may be preferred for 100% funding. CAP can be combined with senior debt or other sources in the capital stack so long as you meet our minimums. See below.
- Stage of project: Does not need to be shovel-ready (if some additional development steps are needed before construction, that may be fine). All the various uses of funds must be properly disclosed, verified, and fall within standard guidelines. See complete list of requirements.
- Size range: Minimum: $25 million ($50 million or more preferred).
Maximum per project or portfolio: $2-4 billion. Note that larger portfolios usually take longer to properly package and close. - Loan term, type and tenor: If there is a loan, it would be based on SONIA* + 2.5% “all in” APR, but since the start of 2024, most clients prefer no debt, all equity, which means there would be no accumulated interest to repay whatsoever. Equity split (see below) is subject to negotiation, but without the need for majority control, even when highly leveraged. CAP’s equity partnership offers more flexible repayment terms compared to a loan.
If there is a debt component (see above):- Loan length (tenor) can be 3-20 years or more. Repay in full at any time before maturity date without penalty.
- When there is a loan, type is most similar to mezzanine or subordinated debt with an equity carry. Technically, this investment is considered entirely “project equity” as there is no senior debt (or lien) involved. The operating project assets remain unencumbered by a lien or UCC-1 filing, and can thus be offered to a bank as collateral for subsequent Completion Assurance guarantees.
- Minority carried interest (equity stake) requested for the life of the project with an adequate financial (Completion Assurance) guarantee. This is subject to negotiation; see next item.
* SONIA has replaced short-term LIBOR; about SONIA. If the bank issuing or endorsing the financial guarantee is well rated this may result in a lower APR or no loan at all (100% financing for minority equity only — no loan interest).
- Equity carried interest: A minority equity carried interest in the project is based largely on the difference between the amount of the guarantee and the project’s total funding from our side, the rating of the bank and instrument quality, amount of preparation required from our side, and the role you wish us to play (such as whether or not we’re involved in project development, asset management, or O&M), years of coverage for a Completion Assurance Guarantee (see also below), and whether you require 100% financing and/or early stage development financing. This is negotiated on a case-by-case basis thus difficult to predict, but the guarantee coverage is the main determinant.
Note that we strive to leave as much of the “retained earnings” as possible for the company to grow and succeed. The investment is effectively a “hybrid” of debt and equity, or equity only (same split as when the rest of the funding is structured as CAP debt) and for 100% financing (no additional cash capital contribution from the developer or any other party), what’s typical is 25-49% equity to our partners with an available 50-100% SbLC, used as security just until project COD, then the instrument is allowed to expire. The exact split is a topic for discussion upon completion of our due diligence. - Timing to receive funds: Closing within 30 days and first funds arrive within (at most) 30-45 days after closing. What’s typical is 2-3 weeks. Closing follows quickly after receipt of the Standby LC (SbLC), cash deposit, or other form, with guarantee instruments sent via SWIFT MT-760 with bank RWA and Authorization to Verify (ATV) letters. Sample verbiage available here.
- Draw schedule: Funding is provided in stages, per a published and agreed-upon monthly draw schedule, to complete any remaining development, procurement, asset construction and commissioning. Consistent monthly amounts is most likely to gain approval.
- Cost: we ask for a fixed consulting fee, paid out of proceeds, for financing the project at these favorable terms, based on the project’s size and our scope of work. Our funding partner will request a letter from the developer acknowledging the agreed-upon fee. We DO NOT charge upfront fees for CAP funding when the developer is reasonably well prepared and facilitates their own guarantee or cash deposit. Note that such guarantees need not be backed by cash, and both types of completion assurance can be substantially leveraged. Some bank customers can use their balance sheet to obtain a guarantee, without a pledge of collateral to the bank, just the SWIFT fee (if there is one), which can be paid for out of proceeds or through special arrangement.
- Alternative to a guarantee: various securities are acceptable in lieu of a guarantee, such as rated/ISIN-registered bonds, Gold with SKR, MTNs, or 25%+ as cash down payment. All options
Conclusions: CAP funding is by far more flexible than traditional project finance, agnostic about stage of readiness, technology, country, and credit/execution risk, among others, and In3 offers free tools, templates, guides (see key resources), and limited coaching and advice during pre-qualification at zero cost.
In some cases, one of our registered Affiliates may be able to offer more timely assistance ahead of closing.
Got questions? See CAP’s Frequently Asked Questions If you do not see your question there, please feel free to contact us with your specific question or for more information.