ITALY Law and Practice Contributed by: Francesco Dialti, Vincenzo Cimmino, Valentina Bombino and Lucrezia Ghezzi, CBA Studio legale e tributario
8.6 Common Financing Sources and Typical Structures In the vast majority of cases, project financing in Italy is implemented by means of a non-recourse/limited recourse banking loan facility. More recently, the capital markets have become an alternative to standard project financing, through pro- ject bonds or so-called mini-bonds. However, such instruments are not used as frequently as loans, due to the flexibility that a limited syndicate of creditors gives to the sponsor when having to amend or waive a specific term of the financing. Usually, the main parties involved in a project financ- ing are the following. • The SPV that owns the main assets relating to the project (authorisations, permits, real estate rights, etc). The SPV acts as borrower under the facility agreement. • The lenders. • The sponsors/shareholder(s) of the SPV, which are usually required to make equity contributions. The shareholder(s) usually grant a first ranking pledge over the shares/quotas representing the entire corporate capital of the borrower. • The counterparties of the borrower under the pro- ject contracts (engineering, procurement and con- struction (EPC), and operation and maintenance (O&M) contractors). 8.7 Natural Resources The Italian state has title to minerals and other natural resources under Article 822 et seq of the Italian Civil Code. The state can grant a licence/concession to private operators for the exploitation of natural resources, such as mines and gas fields. Foreign companies can acquire rights to the concession for the exploitation of the state-owned asset. There are some exceptions under special laws and these matters should be sub- ject to specific due diligence on a case-by-case basis. 8.8 Environmental, Health and Safety Laws Environmental regulations are largely issued by regional authorities and will therefore be case-specif- ic, based on the location of the project.
• citizens (natural or legal persons) of EU member states, as well as citizens of EEA countries (Ice- land, Liechtenstein and Norway); and • citizens (natural or legal persons) of those countries with which Italy has concluded bilateral agree- ments on the promotion and protection of invest- ments (bilateral investment treaties). 8.5 Structuring Deals Issues to be considered when structuring a project SPVs are normally incorporated in the form of a joint stock company ( società per azioni ) or limited liability company ( società a responsabilità limitata ). In PPP contracts, the concession agreement is often executed between the grantor and a temporary asso- ciation of companies ( associazione temporanea di imprese ) (ATI) following a tender procedure. Under the Public Contracts Code, the ATI which has been awarded the concession must incorporate the project company (the SPV), which will the replace the ATI in the concession agreement. Restrictions on Foreign Investment The foreign direct investments regime in Italy, the so-called Golden Power regime, allows the Italian government to scrutinise transactions that concern “strategic” industrial sectors, and grants it the power to apply conditions to such transactions or even veto them in the case of a threat to the national economy or security. The regime was introduced in 2012 and has been subsequently reinforced and expanded. This also applies to the energy sector. Cons for borrowers Cons for borrowers include: • complex financial documentation, which involves multiple parties and lengthy negotiations; • strict subordination undertakings, distribution blocks and cash sweep covenants; and • covenants and reserved discretions granted to lenders under the financial documentation. financing deal include the following. Legal Form of the Project Company
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