Most lenders to an energy project will ask to mitigate the liquidity risk. Liquidity risk describes the risk that the debt cannot be serviced if the off-taker does not pay on time. Historically, the off-taker was asked to make cash collateral available. However, utilities are increasingly reluctant to do this.
ATI offers a product to address short-term liquidity risk.
How it Works
We leverage our Regional Liquidity Support Facility (RLSF) to provide short-term liquidity support.
- ATI selects a bank that issues stand-by letters of credit to approved Independent Power Producers, with the backing of the RLSF
- The amount will enable the IPP to continue to operate for at least six months in the event of off-taker default
- The RLSF will back the lender so that the bank does not take any risk on its own
The RLSF has two components:
- Cash collateral, which the bank can use to immediately pay the Independent Power Producer (IPP) if the Letter of Credit (LC) is called. The German Government, through KfW, has made EUR 31 million available to ATI for this purpose.
- An on-demand guarantee for the same amount as the cash collateral component, provided by ATI. This is used in the event that the cash collateral is exhausted.
To be eligible for the RLSF, projects must meet these criteria:
- Power producer is located in an ATI member country, or in a non-member country in which ATI can develop necessary agreements with the government
- Have an installed capacity of up to 50 MW; in exceptional cases up to 100 MW
- Use a supported technology: solar PV, hydro, onshore wind, geothermal, biomass, or cogeneration
- Be underwritten by ATI
- Have sufficient support of the host government and the utility
Government support is crucial to the success of this product. The RLSF will operate in countries where ATI is confident that payment delays to the utility will be resolved in good time. This includes:
- Selected ATI member countries where ATI has developed a working relationship with both the central government and the off-taker. ATI has preferred-creditor status in its member countries, where ATI and the governments have contractual agreements and resolution processes
- Selected non-member countries, in which ATI can develop a similar relationship
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