FRANCE Law and Practice Contributed by: Fernand Arsanios, Delphine Guillotte, Guillaume Chaboureau, Houda Idaroussi and El Sayegh, King & Spalding
unilaterally modify an irregular clause in the contract, provided that the clause is separable from the other provisions of the contract and that the judge has the authority to annul or terminate only these clauses, thereby preserving the integrity of the remainder of the contract. 8.3 Governing Law The same principles as those described in 6.2 Foreign Law and Jurisdiction and 6.3 Foreign Court Judg- ments apply. 8.4 Foreign Ownership Any investment that qualifies as a foreign investment in a French company or line of business of a French company operating in a “sensitive” sector will be sub- ject to the prior approval of the Ministry of Econo- my (see 6.4 A Foreign Lender’s Ability to Enforce Its Rights ). “Sensitive” sectors include any that are essential to safeguarding the country’s national inter- ests in the fields of energy, water supply, transport, electronic communications and public health, or those connected to the operation of businesses, infrastruc- ture or facilities of “vital importance” to the country within the meaning of French law. The sectors con- cerned include, in particular, the artificial intelligence, space operations, sensitive-data storage, drones, cybersecurity, robotics and semiconductors sectors. 8.5 Structuring Deals In a typical project finance structure, a company (pro- ject company or special purpose vehicle) is usually set up specifically to design, build, and then operate the project. The most commonly used legal structure for a project company is the société par actions simplifiée because it limits the shareholders’ liability to the amount of their equity contributions and offers a high degree of flex- ibility in its governance and operations. This financing structure is usually “non-recourse” – ie, in the event of a default by the project company, lend- ers have no claim against the sponsors to recover their outstanding debt – or, alternatively, “limited recourse” (recourse against the sponsors solely during the con- struction period). Repayment of the loan is therefore based solely on the project’s expected revenues, and
a key concern is how risks are shared among the dif- ferent parties involved – such as the EPC contractor, operator, and offtaker – and what risks remain with the project company itself. To protect their interests, lenders rely on a security package, which enables them, in a worst-case sce- nario, to access the project’s assets – such as through mortgages, pledges over movable assets and receiva- bles – and to take control of the project company. 8.6 Common Financing Sources and Typical Structures Project finance in France typically follows a standard model, combining equity from the project sponsors with senior debt provided by external lenders. The amount of equity required (which is subordinated to the lenders’ claims) varies depending on the project’s risk profile and complexity. Bank loans remain the primary source of senior financing, largely because they offer the flexibility needed during the construction phase, where delays and changes in the disbursement schedule are com- mon. Banks are generally better equipped to handle these uncertainties. Indeed, investment funds usually participate in project financing through subscription of bonds. Bond financings are less flexible than bank loans in some respects, particularly when it comes to features such as revolving credit lines or adapting to irregular drawdown schedules during construction. Moreover, investment funds are typically subject to strict constraints regarding fund performance, timing, and disbursement amounts, which may not align with the borrower’s needs or the unpredictable nature of project development. However, some French alternative investment funds are now authorised to offer direct loans. New possi- bilities for structuring project finance, particularly for large or complex projects, have emerged. Notably, some investment funds now provide bridge financ- ing, which allows sponsors to secure external funding during the project’s development stage. Besides commercial banks and investment funds, the lending institutions most often involved in project finance in France include institutional lenders. Promi-
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