Principles of Project Finance

In a similar way, investors can offer a guarantee or bank L/C for the amount

that would otherwise have been placed in a Reserve Account, in return for the

lenders allowing this cash to be distributed.

§13.6 DEBT PREPAYMENTS AND REFINANCING

A cash sweep is a form of mandatory (compulsory) prepayment of the loan by

the Project Company. Other mandatory prepayments are normally required:

• If the Project Company realizes cash from the sale of assets (unless the cash

is used to replace the asset)

• If performance LDs are received from the EPC Contractor (prepayment is

made to the extent necessary to maintain the lenders’ cover ratios; any sur-

plus LDs flow into the cash flow cascade—note that delay LDs flow straight

into the cascade)

• If insurance proceeds ...