Principles of Project Finance

as an input fuel or raw material, there is a risk that these natural resources may not

be extracted as expected.

Lenders commonly ask their advisers to classify the estimated hydrocarbons or

minerals reserves in the ground into “proven” reserves, which also have to be eco-

nomically recoverable—further classified into “P90” and “P50” (i.e., reserves

that have a 90% possibility of recovery, and those that have a 50% possibility)—

and “possible” reserves. Lending is only against proven reserves, and primarily

against the P90 reserves, taking into account the geology of the project and hence

the difficulty of extraction.

Lenders also only take into account a proportion of the proven reserves, and re-

quire a reserve “tail” (cf. §12.9.5), i.e., lenders usually ...