Category 1

Category 2

Category 3

Category 4

Factor: financial strength

Few competing suppliers or substantial and durable advantage in location, cost, or technology. Demand is strong and growing.

Few competing suppliers or better than average location, cost, or technology but this situation may not last. Demand is strong and stable.

Project has no advantage in location, cost, or technology. Demand is adequate and stable.

Project has worse than average location, cost, or technology. Demand is weak and declining.

Strong financial ratios considering the level of project risk; very robust economic assumptions.

Strong to acceptable financial ratios considering the level of project risk; robust project economic assumptions.

Standard financial ratios considering the level of project risk

Aggressive financial ratios considering the level of project risk.

The project can meet its financial obligations under sustained, severely stressed economic or sectoral conditions.

The project can meet its financial obligations under normal stressed economic or sectoral conditions. The project is only likely to default under severe economic conditions.

The project is vulnerable to stresses that are not uncommon through an economic cycle, and may default in an economic downturn.

The project is likely to default unless conditions improve soon.

Amortising debt without bullet repayment

Amortising debt with no or insignificant bullet repayment

Amortising debt repayments with limited bullet payment

Bullet repayment or amortising debt repayments with high bullet repayment

There is no or very limited exposure to market or cycle risk since the expected cashflows cover all future loan repayments during the tenor of the loan and there are no significant delays between the cashflows and the loan repayments.

There is no or very low refinancing risk.

The exposure to market or cycle risk is limited since the expected cashflows cover the majority of future loan repayments during the tenor of the loan and there are no significant delays between the cashflows and the loan repayments.

There is low refinancing risk.

There is moderate exposure to market or cycle risk since the expected cashflows cover only a part of future loan repayments during the tenor of the loan or there are some significant delays between the cashflows and the loan repayments.

Average refinancing risk.

There is significant exposure to market or cycle risk since the expected cashflows cover only a small part of future loan repayments during the tenor of the loan or there are some significant delays between the cashflows and the loan repayments.

High refinancing risk.

There is no foreign exchange risk because there is no difference in the currency of the loan and the income of the project or because the foreign exchange risk is fully hedged.

There is no foreign exchange risk because there is no difference in the currency of the loan and the income of the project or because the foreign exchange risk is fully hedged.

There is a difference in the currency of the loan and the income of the project, but the foreign exchange risk is considered low because the exchange rate is stable or because the foreign exchange risk is hedged to a large extent.

There is a difference in the currency of the loan and the income of the project, and the foreign exchange risk is considered high because the exchange rate is volatile and the foreign exchange risk is not hedged to a large extent.

Factor: political and legal environment

Very low exposure; strong mitigation instruments, if needed

Low exposure; satisfactory mitigation instruments, if needed

Moderate exposure; fair mitigation instruments

High exposure; no or weak mitigation instruments

No or very low exposure to force majeure risk’

Limited exposure to force majeure risk

Significant exposure to force majeure risk which is not sufficiently mitigated

Significant exposure to force majeure risk which is not mitigated

Project of strategic importance for the country (preferably export-oriented). Strong support from Government.

Project considered important for the country. Good level of support from Government.

Project may not be strategic but brings unquestionable benefits for the country. Support from Government may not be explicit.

Project not key to the country. No or weak support from Government.

Favourable and stable regulatory environment over the long term

Favourable and stable regulatory environment over the medium term

Regulatory changes can be predicted with a fair level of certainty

Current or future regulatory issues may affect the project

Strong

Satisfactory

Fair

Weak

Contracts, collateral and security are enforceable.

Contracts, collateral and security are enforceable.

Contracts, collateral and security are considered enforceable even if certain non-key issues may exist.

There are unresolved key issues in respect if actual enforcement of contracts, collateral and security.

Factor: transaction characteristics

Fully proven technology and design

Fully proven technology and design

Proven technology and design – start-up issues are mitigated by a strong completion package

Unproven technology and design; technology issues exist and/or complex design.

All permits have been obtained

Some permits are still outstanding but their receipt is considered very likely

Some permits are still outstanding but the permitting process is well defined and they are considered routine.

Key permits still need to be obtained and are not considered routine. Significant conditions may be attached.

Fixed-price date-certain turnkey construction EPC (5) (engineering and procurement contract)

Fixed-price date-certain turnkey construction EPC

Fixed-price date-certain turnkey construction contract with one or several contractors

No or partial fixed-price turnkey contract and/or interfacing issues with multiple contractors

It is almost certain that the project will be finished within the agreed time horizon and at the agreed cost.

It is very likely that the project will be finished within the agreed time horizon and at the agreed cost.

It is uncertain whether the project will be finished within the agreed time horizon and at the agreed cost.

There are indications that the project will not be finished within the agreed time horizon and at the agreed cost.

Substantial liquidated damages supported by financial substance and/or strong completion guarantee from sponsors with excellent financial standing

Significant liquidated damages supported by financial substance and/or completion guarantee from sponsors with good financial standing

Adequate liquidated damages supported by financial substance and/or completion guarantee from sponsors with good financial standing

Inadequate liquidated damages or not supported by financial substance or weak completion guarantees

Strong

Good

Satisfactory

Weak

Strong long-term O&M contract (8), preferably with contractual performance incentives (9), and/or O&M reserve accounts (10), although an O&M contract is not strictly necessary to perform the required maintenance because the O&M activities are straightforward and transparent.

The O&M activities are relatively straightforward and transparent, and there is a long-term O&M contract, and/or O&M reserve account.

The O&M activities are complex and an O&M contract is necessary. There is a limited long-term O&M contract and/or reserve account.

The O&M activities are complex and an O&M contract is strictly necessary. There is no O&M contract. There is therefore the risk of high operational cost overruns beyond mitigants.

Very strong, or committed technical assistance of the sponsors

Strong

Acceptable

Limited/weak, or local operator dependent on local authorities

Excellent robustness of the revenues

Good robustness of the revenues

Acceptable robustness of the revenues

The revenues of the project are not certain and there are indications that some of the revenues may not be obtained.

Excellent creditworthiness of off-taker; strong termination clauses; tenor of contract comfortably exceeds the maturity of the debt.

Good creditworthiness of off-taker; strong termination clauses; tenor of contract exceeds the maturity of the debt.

Acceptable financial standing of off-taker; normal termination clauses; tenor of contract generally matches the maturity of the debt.

Weak off-taker; weak termination clauses; tenor of contract does not exceed the maturity of the debt.

Project produces essential services or a commodity sold widely on a world market; output can readily be absorbed at projected prices even at lower than historic market. growth rates.

Project produces essential services or a commodity sold widely on a regional market that will absorb it at projected prices at historical growth rates.

Commodity is sold on a limited market that may absorb it only at lower than projected prices.

Project output is demanded by only one or a few buyers or is not generally sold on an organised market.

Long-term supply contract with supplier of excellent financial standing.

Long-term supply contract with supplier of good financial standing.

Long-term supply contract with supplier of good financial standing – a degree of price risk may remain.

Short-term supply contract or long-term supply contract with financially weak supplier – a degree of price risk definitely remains.

Independently audited, proven and developed reserves well in excess of requirements over lifetime of the project.

Independently audited, proven and developed reserves in excess of requirements over lifetime of the project.

Proven reserves can supply the project adequately through the maturity of the debt.

Project relies to some extent on potential and undeveloped reserves.

Factor: strength of sponsor (including any public private partnership)

Strong sponsor with high financial standing

Good sponsor with good financial standing

Sponsor with adequate financial standing

Weak sponsor with clear financial weaknesses

Sponsor with excellent track record and country/sector experience

Sponsor with satisfactory track record and country/sector experience

Sponsor with adequate track record and country/sector experience

Sponsor with no or questionable track record or country/sector experience

Strong. Project is highly strategic for the sponsor (core business – long-term strategy).

Good. Project is strategic for the sponsor (core business – long-term strategy).

Acceptable. Project is considered important for the sponsor (core business).

Limited. Project is not key to sponsor’s long-term strategy or core business.

Factor: security package

Fully comprehensive

Comprehensive

Acceptable

Weak

First perfected security interest (17) in all project assets, contracts, permits and accounts necessary to run the project

Perfected security interest in all project assets, contracts, permits and accounts necessary to run the project

Acceptable security interest in all project assets, contracts, permits and accounts necessary to run the project

Little security or collateral for lenders; weak negative pledge clause (18)

Strong

Satisfactory

Fair

Weak

Covenant package is strong for this type of project.

Project may issue no additional debt.

Covenant package is satisfactory for this type of project.

Project may issue extremely limited additional debt.

Covenant package is fair for this type of project.

Project may issue limited additional debt.

Covenant package is Insufficient for this type of project.

Project may issue unlimited additional debt.

Longer than average coverage period, all reserve funds fully funded in cash or letters of credit from highly rated bank

Average coverage period, all reserve funds fully funded

Average coverage period, all reserve funds fully funded

Shorter than average coverage period, reserve funds funded from operating cash flows