SPAIN Law and Practice Contributed by: Miguel Cases, Toni Barios, Joaquín Fabré and David Navarro, Cases & Lacambra
Notwithstanding, it is necessary to bear in mind that in project financing, the most relevant jurisdiction is the one where the project is physically located, and in areas of public law, the courts of the jurisdiction where the project is located will assert jurisdiction in matters of private law affecting public interest. In the case of project documents related to Spanish real estate, infrastructure or energy projects, project documents are usually governed by local law and dis- putes resolved in local courts, although it is not unu- sual to have cross-border PPAs governed by foreign law containing arbitration clauses. 8.4 Foreign Ownership Please review the references to the suspension of the liberalisation regime of direct foreign investments in Spain referred to in 3.4 Restrictions on the Borrow- Structuring project financing deals requires a thorough analysis of the project costs and the revenue that will be generated by the project once it operates, which will need to cover the operating costs and the debt service and generate investment returns to the project sponsors. A careful environmental, technical, financial and legal due diligence exercise, and the input of insurance advisers is of the essence to determine the viability of the project, the risks involved, its allocation and potential mitigators. er’s Use of Proceed s. 8.5 Structuring Deals The debt-to-equity ratio (ie, third-party debt-to-equity injected by the sponsors) will be adjusted considering the overall project costs, the risk profile of the project and the sponsors’ experience. To the extent that project financing is structured as non-recourse (or limited-recourse) financing, it will be crucial for the parties (i) to determine a structure that is sustainable through the entire life cycle of the project, to ensure that the project will be built and ready to operate as planned and (ii) to set up a robust project contractual matrix, payment waterfall and security package that will assist the parties in case any construction delays, cost overruns or any other
difficulties or contingencies arise during the operation of the project. 8.6 Common Financing Sources and Typical Structures The typical financing source for project financing is the use of bank debt by the special purpose vehicle (SPV), the separate legal entity that the sponsors of the project will incorporate (to ring-fence the project from the rest of the businesses of the sponsors) and into which they will inject the equity. Project bonds are not a frequent source for project financing in Spain, mainly because Spanish banks have structured and devoted teams of project finance bankers specialised in the infrastructure, energy and real estate sectors that have been able to understand and assist Spanish sponsors, traditionally more inclined towards bank debt, in structuring and clos- ing successful project financing. In recent years, alternative credit providers have increased their interest towards Spanish projects and also provide funding to complete projects in Spain, mainly through mezzanine loans to the SPVs or equity loans to the sponsors. 8.7 Natural Resources There are no relevant natural resources projects in Spain. The export of natural resources remains mini- mal. Spain has highly negative net exports of mineral fuels, including oil. 8.8 Environmental, Health and Safety Laws This section will assess the impacts of the applica- ble environmental, health and safety laws in terms of authorisations and obligations of the SPV, the legal entity created by the project sponsors. The Spanish Constitution establishes the right to enjoy the environment and the duty to preserve it, and that public authorities shall safeguard rational use of all natural resources, without prejudice to the obliga- tion to repair any damages caused and the criminal or administrative sanctions that may be imposed. The Spanish environmental legal framework compris- es laws regulating particular industries and activities,
578 CHAMBERS.COM
Powered by FlippingBook