Comfort Letter

Letter to be issue from Ministry of finance (“Ministry”) Where a sovereign guarantee is not obtainable for projects under BOT and/or BOO, and/or PPP, the Ministry needs to execute a somewhat watered-down document with questionable enforceability, called a „comfort letter,” Such instruments cover the following matters:

Letter to be issue from Ministry of finance (“Ministry”) Where a sovereign guarantee is not obtainable for projects under BOT and/or BOO, and/or PPP, the Ministry needs to execute a somewhat watered-down document with questionable enforceability, called a „comfort letter,” Such instruments cover the following matters:

  1. Policy statement by the Ministry, acknowledging the importance of the project to the nation’s economy, and supporting foreign investments in the development, construction and operation of infrastructure projects
  2. Assurances that GTD will be able to open and maintain foreign currency accounts in any financial institution within or outside hosting country
  3. Assurances that tariff and concession regimes permitting recovery of actual project costs and a reasonable return on capital shall remain in full force and effect and shall be adjusted only to the extent necessary to guarantee the project sponsors no less than the agreed upon return on capital.
  4. Guarantee by the central bank that it will allocate hard currency towards debt service and repatriation of capital or profits and that it will also ensure free convertibility, transfer and timely remissibility of foreign exchange whether converted through normal commercial channels or otherwise.
  5. Guarantee by the Ministry of obligations of all local governmental instrumentalities (such as the central bank, the agencies responsible for furnishing water, fuel, electric power and other utilities to the project) involved in the project.
  6. Ministry assistance such as grants of real property and utilities at nominal fees, exemptions from withholding taxes, income taxes, import duties and other taxes to enhance finance ability of a project.
  7. Ministry assurances that will not expropriate (without prompt, adequate and effective compensation) the project or otherwise treat the project or the project sponsors in a discriminatory manner and that the project will be entitled to no worse benefits than any other similar project in the country.
  8. Assurances as to timely installation and completion of new ancillary infrastructure such as transportation and utilities necessary for the construction, operation and maintenance of the project
  9. Assurances that GTD or its sponsors will be free to expand its operations and business in areas related to the project as and when such new opportunities are open to the private sector.
  10. Indemnification by the Ministry for any loss sustained by any project participant by reason of the invalidity or unenforceability of any provision of any agreement, permit, instrument or other document executed or delivered by any instrumentality of the host government.
  11. Assurances that GTD will have the right to procure and purchase full insurance and other goods and services abroad if the local costs of any such goods and services exceed, which, for example, 10% of the foreign cost of an equivalent product or service.
  12. Guarantee by the Ministry of the obligations of the offtake purchaser, or in the absence of such an offtake purchase agreement, guarantee of minimum levels of use of the infrastructure that is the subject of a concession.
  13. Assurances that the Ministry will not grant any competing franchises or concessions while the project debt is outstanding.
  14. Host government is owner of land plots for the project. Host government is to either inject these plots into GTD under the BOT Concession. As an alternative option Host government may lease these land plots to GTD under a long-term lease agreement. GTD will require these land plots to build infrastructure for the project .
  15. Assurances that no change in the environmental, tax, import/export or other laws and regulatory framework will be applicable to the project if such change will have a material adverse effect on the project, or the rights of the project sponsors or the lenders in the project.
  16. Assurances that the Ministry will expeditiously grant and renew all governmental approvals and permits, including work permits, visas and other foreign worker permits for project participants and their personnel.
  17. Assurances that the Ministry will not (in connection with any privatization or otherwise) sell or otherwise transfer any interest in any primary obligor or project counterparty without taking steps to ensure that the project and the project sponsors and lenders will not suffer adversely thereby.