With regard to the first PFI projects, it was customary to have separate agreements for different phases of the project, such as. B a development agreement for the design and construction phase and an agreement to operate or manage facilities for the operating phase. Today, however, it is more common to have a single project agreement covering all aspects of the project. As a general rule, there is no debate as to whether, in principle, direct agreement should be reached. However, it is still common for certain provisions to be negotiated intensively and it often seems that disproportionate amounts of time are devoted to concentration on such a short agreement. To my knowledge, no one has ever intervened as part of a direct agreement and there would be practical difficulties, such as the reallocation of all project contracts. However, direct agreements are a common practice and a standard part of a lender`s security package. Construction contract: Projectco will enter into the construction contract with the contractor under which Projectco`s construction obligations from the project contract will be transferred to the contractor. In addition to this guarantee, project lenders generally expect direct contractual relationships with counterparties with key project documents. This goal is achieved through direct agreements.
Financing agreements: The facility agreement is the main document between lenders and Projectco and contains the terms of project financing. Lenders will also need a security package and guarantees to protect borrowed funds. The loan agreement is discussed in more detail in our separate out-law guide on key issues for lenders in project financing contracts. If necessary, a direct agreement may include clauses in which the consideration of the project document accepts the collection or transfer by the security of the rights of the project company, in accordance with the project document. Direct agreement often involves changes to the underlying project documents. This is particularly the case for concession contracts in which the project company obtains the concession before the lenders make a strong commitment. Funding often follows the award of the concession and lenders may require changes to the risk allocation in the concession contract in order to make the project bankable. Service Contracts: Projectco enters into service contracts with service providers and transmits to these contractors the service obligations imposed on them under the project agreement.
As noted above, service providers offer guarantees to the Authority and, in certain circumstances, the Authority has intervention rights, subject to the rights of lenders. The ability of lenders to terminate, during the specified period or after a failure under the facility agreement, the possibility of designating a company that will assume the rights and obligations of the project company in the project document; Partial contracts: Projectco has contracted several subcontractors to cushion the risks it takes under the project agreement.