Principles of Project Finance

of “bullet” repayments of notional principal—i.e., the type of loan repayment

schedule shown in Table 9.3, which assumes none of the notional principal of

1000 is repaid until the end of the 6-year schedule shown. However, a project

finance loan cash flow, and hence notional principal repayment, is like that set

out in Table 9.4, i.e., repayment in installments over a period of time (known

as an “amortising swap”). The way the market deals with this is to quote a

weighted average rate for a series of swaps covering each repayment date, and

thus on the schedule in Table 9.4 the swap provider would quote the weighted

rate for the swaps based on 100 notional principal repaid after 1 year, 100 af-

ter 2 years, 100 after 3 years, and so on.

The swap quotation ...