Project financing


Its mandate to promote Swiss exports and Switzerland as a business location allows SERV to react flexibly to financing requirements. Major investment projects in particular are often realised by means of project financing. SERV’s range of insurance products includes the insurance of such financing, with buyer credit insurance being the most common form.

What is project financing?

SERV assumes a case involves project financing when the following criteria are met:

1. It is an investment project with a project company (economically independent single-purpose company) set up to implement the project. The loans issued to pay a Swiss supplier’s receivables are to be repaid from the proceeds of the project;
2. The financing is therefore based on income from the project (cash-flow related lending);
3. The loans do not negatively impact on the investors’ balance sheets (off balance sheet financing);
4. The project, including both the construction and the operating phases, is new (greenfield).

Details

Object of cover

SERV also offers insurance cover for risks incurred by the exporter (manufacturing risk and non-disbursement risk) as well as for the payment risks of the financing bank where this form of financing is used.

Insurable risks

Special provisions and requirements

The financial model is a key element in SERV’s assessment of the risks involved in a project’s financing. The assumptions it is based on reveal the project’s robustness, with the debt service cover ratio being the decisive factor. SERV generally brings in an external consultant to examine the financial model, the costs of which are borne by the sponsors.

The requirements for project financing are highly project specific. SERV does, however, generally require an acceptable risk distribution that includes the following criteria:

  • Sponsors contributing equity capital to the operating company to an extent that is commensurate with the project;
  • Potentially a guarantee obligation on the part of the sponsors of the project to reduce the manufacturing risk (limited recourse financing);
  • The existence of turnkey EPC contracts (rather than simple supply contracts);
  • Ensuring operability and acceptance, if necessary with support from government authorities in the project country;
  • Despite sometimes being closely involved in the negotiations, SERV does not assume any documentation risks, even in the case of project financing;
  • As is customary, a collateral package is always a requirement for project financing.


The OECD arrangement gives these transactions a particularly broad scope via its sector agreement for project financing. Alongside a longer maximum credit period than is the case with financing with private buyer risk, it is also possible to negotiate flexible repayment profiles and a grace period.