Commission Delegated Regulation (EU) 2018/179 of 25 September 2017 amending Regulation (EU) No 1233/2011 of the European Parliament and of the Council on the application of certain guidelines in the field of officially supported export credits

	6.	Subject to the provisions of Article 15 of this Appendix, the List may be updated on an ad hoc basis in the event that either a Participant signals, in any form, its intention to apply another risk classification than that on the List, or a Participant needs a risk classification for a buyer/borrower that is not yet on the List [^ntr21-L_2018037EN.01004801-E0001] [^ntr22-L_2018037EN.01004801-E0002].
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	7.	Any Participant shall, before any use of an alternative or new risk classification, send a request to the Secretariat for updating the List on the basis of an alternative or new risk classification. The Secretariat will circulate this request to all Participants within two working days, without mentioning the identity of the Participant who submitted the request.
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	8.	A period of ten [^ntr23-L_2018037EN.01004801-E0003] working days is allowed for interested Participants either to agree to or to challenge any proposed change to the List; a failure to respond within this period is considered as an agreement to the proposal. If at the end of the ten-day period, no challenge has been made to the proposal, the proposed change in the List is deemed to have been agreed. The Secretariat will modify the List accordingly and send an OLIS message within five working days; the revised List shall be binding from the date of that message.

III.   RESOLUTION OF DISAGREEMENTS

	9.	In the event of a challenge to a proposed risk classification, interested Participants shall, at an expert level, make their best efforts to come to an agreement on the risk classification within a further period of ten working days after notification of a disagreement. All means necessary to resolve the disagreement should be explored, with the assistance of the Secretariat if necessary (e.g. conference calls or face-to-face consultations). If interested Participants agree to a risk classification within this ten working-day period, they shall inform the Secretariat of the outcome upon which the Secretariat will update the List accordingly and send an OLIS message in the following five working days. The adjusted List shall be binding from the date of that message.
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	10.	In case the disagreement is not resolved among the experts within ten working days, the issue will be referred to the Participants for decision on an appropriate risk classification, in a period that shall not exceed five working days.
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	11.	In the absence of a final agreement, a Participant may have recourse to a CRA to determine the risk classification of the buyer/borrower. In such cases, the Chairman of the Participants shall address a communication on behalf of the Participants to the buyer/borrower, within ten working days. The communication shall include the terms of reference for the risk assessment consultation as agreed among the Participants. The resulting risk classification will be registered in the List and become binding immediately following the Secretariat's OLIS message to finalise the update procedure within five working days.
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	12.	Unless otherwise agreed, the cost of such recourse to a CRA shall be borne by the interested buyer/borrower.
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	13.	During the procedures set out in Articles 9 to 11 of this Appendix, the prevailing risk classification (when available on the List) shall remain applicable.

IV.   VALIDITY PERIOD OF CLASSIFICATIONS

	14.	The valid risk classifications are the prevailing risk classifications as recorded in the List maintained by the Secretariat; indications and commitments of premium rates shall only be made in accordance with those risk classifications.
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	15.	Risk classifications have a 12-month maximum validity period from the date recorded in the List by the Secretariat for the purpose of the Participants providing indication and final commitments of premium rates; the validity period for a specific transaction may be extended by an additional 18 months once a commitment or a final commitment has occurred and premium holding fees are charged. Risk classifications may be subject to revision during the 12-month validity period in case of material changes to the risk profile of the buyer/borrower, such as a modification of a rating delivered by a CRA.
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	16.	Unless any Participant requests its update, at least 20 working days before the end of the relevant risk classification validity period, the Secretariat shall remove that risk classification from the next succeeding updated List. The Secretariat will circulate this update request to all Participants within two working days, without mentioning the identity of the Participant who submitted the request, and the procedures set out in Articles 9 to 11 of this Appendix shall apply.

V. BUYER/BORROWER RISK CLASSIFICATION REQUEST

	17.	If, at the campaign stage, a buyer/borrower requests an indication of its risk classification and if it is not yet on the List, that buyer/borrower may ask for an indicative risk classification from a CRA at its own expense. This risk classification shall not be included in the List; it may be used by the Participants as a basis for their own risk assessment.

SECTION 2

Minimum premium rates for new and used aircraft

I. ESTABLISHMENT OF THE MINIMUM PREMIUM RATES

	18.	Articles 19 to 61 of this Appendix set out the minimum premium rates corresponding to the risk classification of a buyer/borrower (or, if a different entity, the primary source of repayment of the transaction).
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	19.	The Participants may provide official support at or above the minimum premium rate provided that all the conditions below are fulfilled: (a) The transaction is asset-backed, meeting all of the following criteria: (1) A first priority security interest on or in connection with the aircraft and engines. (2) In the case of a lease structure, assignment and/or a first priority security interest in connection with the lease payments. (3) Cross default and cross collateralisation of all aircraft and engines owned legally and beneficially by the same parties under the proposed financing, whenever possible under the applicable legal regime. (b) The transaction is structured to include, as a minimum, risk mitigants as set out in Table 1 below: Table 1 Risk Mitigants ASU Risk Category Risk Ratings Risk Mitigants TOTAL Of which at least “A” 1 AAA to BBB- 0 0 2 BB+ and BB 0 0 3 BB- 1 1 4 B+ 2 1 5 B 2 1 6 B- 3 2 7 CCC 4 3 8 CC to C 4 3
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	20.	For purposes of Article 19 of this Appendix: (a) The Participants may select from the following risk mitigants: “A” risk mitigants: (1) Reduced advance rate: each reduction of five percentage points from the advance rates referred to in Articles 10(a) and (b) of this Sector Understanding is equivalent to one “A” risk mitigant. In this case, the Participant shall not provide official support in any form in excess of the reduced advance rate. (2) Straight line amortisation: repayment of principal in equal instalments is equivalent to one risk mitigant. (3) Reduced repayment term: a repayment term which does not exceed 10 years is equivalent to one risk mitigant, irrespective of the maximum repayment term allowed. “B” risk mitigants: (1) Security deposit: each security deposit in an amount equal to one quarterly instalment of principal and interest is equivalent to one risk mitigant. The security deposit can be in the form of cash or a standby letter of credit. (2) Lease payments in advance: lease payments in an amount equal to one quarterly instalment of principal and interest shall be paid one quarter in advance of each repayment date. (3) Maintenance reserves in a form and amount reflective of market best practices. (b) Subject to a prior notification, up to one of the “A” risk-mitigants may be replaced by a 15 % surcharge on the applicable minimum premium rate.
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	21.	Minimum premium rates to be applied to a transaction can be set prior to delivery, either at commitment, final commitment or otherwise at the commencement of a premium holding period with a defined duration. Final upfront premium rate, per annum spread, or a combination thereof to be applied to the transaction will comply with the minimum premium rate so established as well as mandatory risk mitigants prescribed in Article 19(b) of this Appendix as of the date on which the minimum premium rates were set. Such terms shall apply for the full length of the premium holding period and may only be revised following the expiry of that period, at which time the minimum premium rates and mandatory risk mitigants prescribed by the ASU then in force will apply and may be set for a subsequent premium holding period.
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	22.	Pursuant to Article 11 of this Sector Understanding, the minimum premium rates to be applied are composed of minimum risk-based rates (RBR) to which a market reflective surcharge (MRS) shall be added, in accordance with Articles 23 to 36 below.
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	23.	As of the entry into force of this Sector Understanding, the RBRs are: Table 2 Risk-Based Rates ASU Risk Category Spreads (bps) Upfront (%) 1 89 4,98 2 98 5,49 3 116 6,52 4 133 7,49 5 151 8,53 6 168 9,51 7 185 10,50 8 194 11,03
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	24.	The RBRs rates shall be reset on an annual basis, based on 4-year moving average of the annual Moody's Loss Given Default (LGD). The appropriate LGD for this reset is based on the 1st Lien Senior Secured Bank Loans, and shall be calculated as follows: Table 3 LGD Mapping 4-year Moving Average LGD Considered ≥ 45 % 25 % ≥ 35 % < 45 % 23 % ≥ 30 % < 35 % 21 % < 30 % 19 %
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	25.	A RBR adjustment factor shall be determined as follows: Image omitted; see official source
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	26.	The RBR adjustment factor shall be multiplied by the RBRs set out in Table 2 above, in order to determine the reset RBRs.
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	27.	The first reset process will take place in the first quarter of 2012 and the resulting RBRs will become effective as of 15 April 2012.
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	28.	The RBRs resulting from subsequent reset processes will be effective as of 15 April of each following year. Once the RBRs resulting from the annual reset have been determined, the Secretariat shall inform immediately all Participants of the applicable rates and make them publicly available.
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	29.	For each risk category, a Market Reflective Surcharge shall be calculated as follows: MRS = B * [(0,5 * MCS) – RBR] where: — B is a blend coefficient varying from 0,7 to 0,35 according to each risk category as per Table 4 below. — MCS is a 90-day moving average of Moody's Median Credit Spreads (MCS) with an average life of 7 years.
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	30.	Where risk categories include more than one risk rating, the spreads shall be averaged. In risk category 1, the BBB- spread shall be used.
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	31.	The MCS spreads shall be discounted by 50 % to account for the asset-security. The MCS discounted spreads shall then be adjusted by a blend factor ranging from 70 % to 35 % as per Table 4 below, applied on the difference between the MCS discounted spreads and the RBR. Any negative spreads resulting from the blending shall not be deducted. Table 4 Blend Factors Risk-Ratings ASU Risk Category Blend Factor (%) AAA 1 70 AA 1 70 A 1 70 BBB+ 1 70 BBB 1 70 BBB- 1 70 BB+ 2 65 BB 2 65 BB- 3 50 B+ 4 45 B 5 40 B- 6 35 CCC 7 35 CC 8 35 C 8 35
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	32.	The MRS shall be updated on a quarterly basis, as follows: — The first update process shall take place in the first quarter of 2011 and the resulting MCS shall become effective as of 15 April 2011; however, until 15 April 2012, the outcome of updates of the MRS applying to Risk Category 1 shall become effective only if they result in an increase of such MRS. — The subsequent update processes shall take place in the second, third and fourth quarters of 2011 (and thereon) and the resulting MCS shall become effective respectively on 15 July 2011, 15 October 2011 and 15 January 2012, and thereon. — Following each update, the Secretariat shall inform immediately all Participants of the applicable MRS and the resulting minimum rates and make them publicly available prior to the date these rates become effective.
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	33.	The MRS shall be applied only if and when it is positive and exceeds 25 basis points.
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	34.	The increase in minimum premium rates resulting from the MRS update shall not exceed 10 % of the previous quarterly minimum premium rates. The minimum premium rates (which result from adding the risk-based rates and the market reflective surcharge) shall not exceed the risk-based rates by more than 100 %.
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	35.	In order to determine the minimum premium rates: — The following formula shall be used: Net MPR = MPR * (1 + RTAS) * (1 + RFAS) * (1 + RMRS) * (1 – CTCD) * (1 + NABS) – CICD Where: — RTAS represents the repayment term adjustment surcharge set out in Article 12(b) of this Sector Understanding. — RFAS represents the repayment frequency adjustment surcharge set out in Articles 13(a)(1) and (2) of this Sector Understanding. — RMRS represents the risk mitigant replacement surcharge set out in Article 20(b) of this Appendix. — CTCD represents the Cape Town Convention Discount set out in Article 38 of this Appendix. — NABS represents the non-asset-backed surcharge set out in Articles 57(a)(4), 57(b) and 59(b) of this Appendix, as applicable. — CICD represents the conditional insurance coverage discount set out in Article 56(a) of this Appendix. — Premium may be paid either upfront or, over the life of the facility, as spreads expressed in basis points per annum, or in any combination of upfront rates and spreads. The upfront rates and spreads shall be calculated using the premium rate conversion model (PCM) so that the premium payable for a given transaction has the same NPV whether payable upfront, as a spread over the life of the facility, or a combination thereof. In transactions where, prior to the commencement of cover, terms are agreed or stipulated, which entail a reduction in the weighted average life, an upfront rate (calculated using the PCM) may be charged, which in terms of the resulting premium payable, corresponds to that payable in NPV terms under the spreads.
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	36.	The applicable minimum premium rates as of the initial effective date of this Sector Understanding (1 February 2011) are set out in Table 5 below. Table 5 Minimum Premium Rates (12-year repayment term, asset-backed transactions) Risk Category Risk Classification Minimum Premium Rates Per Annum Spreads (bps) Up-Front (%) 1 AAA to BBB- 137 7,72 2 BB+ and BB 184 10,44 3 BB- 194 11,03 4 B+ 208 11,85 5 B 234 13,38 6 B- 236 13,50 7 CCC 252 14,45 8 CC to C 257 14,74

II.   REDUCTIONS OF THE MINIMUM PREMIUM

	37.	Subject to the provisions of Article 38 of this Appendix, a reduction of the minimum premium rates established in accordance with sub-Section I above shall be allowed if: (a) The asset-backed transaction relates to an aircraft object within the meaning of the Cape Town Protocol on Matters Specific to Aircraft Equipment, (b) The operator of the aircraft object (and, if different, the borrower/buyer or lessor if, in the view of the Participant providing the official support, the structure of the transaction so warrants) is situated in a State which, at the time of disbursement in respect of the aircraft object, appears on the list of States which qualify for the reduction of the minimum premium rates (“Cape Town List”), and where applicable, in a territorial unit of that State that qualifies under Article 40 of this Appendix, and (c) The transaction relates to an aircraft object registered on the International Registry established pursuant to the Cape Town Convention, and the Aircraft Protocol thereto (Cape Town Convention or CTC).
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	38.	The reduction of the minimum premium rates established in accordance with sub-Section I above shall not exceed 10 % of the applicable minimum premium rate.
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	39.	In order to be included on the Cape Town List, a State shall: (a) Be a Contracting Party to the Cape Town Convention; (b) Have made the qualifying declarations set out in Annex 1 to this Appendix; and (c) Have implemented the Cape Town Convention, including the qualifying declarations, in its laws and regulations, as required, in such a way that the Cape Town Convention commitments are appropriately translated into national law.
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	40.	To qualify under Article 37 of this Appendix, a territorial unit shall: (a) Be a territorial unit to which the Cape Town Convention has been extended; (b) Be a territorial unit in respect of which the qualifying declarations set out in Annex 1 to this Appendix apply; and (c) Have implemented the Cape Town Convention, including the qualifying declarations, in its laws and regulations, as required, in such a way that the Cape Town Convention commitments are appropriately translated into national law.
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	41.	An initial agreed Cape Town List shall be provided by the Participants to the Secretariat prior to the entry into force of this Sector Understanding. Updates to the Cape Town List shall be made in accordance with Articles 42 to 54 of this Appendix.
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	42.	Any Participant or non-Participant which provides official support for aircraft may propose to the Secretariat the addition of a State to the Cape Town List. Such proposal shall include, with respect to such State: (a) All the relevant information in respect of the date of deposit of the Cape Town Convention ratification or accession instruments with the Depositary; (b) A copy of the declarations made by the State which is proposed to be added to the Cape Town List; (c) All relevant information in respect of the date on which the Cape Town Convention and the qualifying declarations have entered into force; (d) An analysis which outlines the steps that the State which is proposed to be added to the Cape Town List has taken to implement the Cape Town Convention including the qualifying declarations in its laws and regulations, as required to ensure that the Cape Town Convention commitments are appropriately translated into national law; and (e) A duly completed questionnaire, the form of which is attached at Annex 2 of this Appendix (“CTC Questionnaire”) completed by at least one law firm qualified to give legal advice in relation to the relevant jurisdiction of the State which is proposed to be added to the Cape Town List. The completed CTC Questionnaire shall specify: (i) The name(s) and office address(es) of the responding law firm(s); (ii) The law firm's relevant experience, which could include experience in legislative and constitutional processes as they relate to the implementation of international treaties in the State, and specific experience in CTC related issues including any experience in advising either a government on implementation and enforcement of the Cape Town Convention or the private sector, or enforcement of creditor's rights in the State which is proposed to be added to the Cape Town List; (iii) Whether the law firm is involved or intends to be involved in any transactions that may benefit from a reduction of minimum premium rates if the proposed State is added to the CTC list [^ntr24-L_2018037EN.01004801-E0004]; and (iv) The date on which the CTC Questionnaire has been completed.
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	43.	The Secretariat shall circulate an OLIS message within five working days containing the proposal.
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	44.	Any Participant or non-Participant which provides official support for aircraft may propose that a State be removed from the Cape Town List if they are of the view that such State has taken actions that are inconsistent with, or failed to take actions that are required by virtue of, that State's Cape Town Convention commitments. To that end, the Participant or non-Participant shall include in a proposal for removal from the Cape Town List, a full description of the circumstances that have given rise to the proposal for deletion, such as any State actions that are inconsistent with its Cape Town Convention commitments, or any failure to maintain or enforce legislation required by virtue of that State's Cape Town Convention commitments. The Participant or non-Participant who submits the proposal for removal from the Cape Town List shall provide any supporting documentation that may be available, and the Secretariat shall circulate an OLIS message within five working days containing such proposal.
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	45.	Any Participant or non-Participant which provides official support for aircraft may propose the reinstatement of a State that has been previously removed from the Cape Town List, where such reinstatement is justified by subsequent corrective actions or events. Such a proposal shall be accompanied by a description of the circumstances that gave rise to the removal of the State as well as a report of the subsequent corrective actions in support of reinstatement. The Secretariat shall circulate an OLIS message within five working days containing such proposal.
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	46.	The Participants may either agree to or challenge a proposal brought forward under Articles 42 to 45 of this Appendix within 20 working days from the date of submission of the proposal (“Period 1”).
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	47.	If at the end of Period 1, and in the case of Article 44 of this Appendix unless the proposal has been withdrawn by the proposing Participant or non-Participant providing evidence of corrective actions or events, no challenge has been made to the proposal, the proposed update to the Cape Town List is deemed to have been accepted by all Participants. The Secretariat will modify the Cape Town List accordingly and send an OLIS message within five working days. The updated Cape Town List shall take effect on the date of that message.
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	48.	In the event of a challenge to the proposed update of the Cape Town List, the challenging Participant or Participants shall, within Period 1, provide a written explanation of the basis of the challenge. Following circulation by the OECD Secretariat to all Participants of the written challenge, the Participants shall make best efforts to come to an agreement within a further ten working day period (“Period 2”).
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	49.	The Participants shall inform the Secretariat of the outcome of their discussions. If an agreement is reached during Period 2, the Secretariat will, if necessary, update the Cape Town List accordingly and send an OLIS message in the following five working days. The updated Cape Town List shall take effect on the date of that message.
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	50.	If no agreement is reached during Period 2, the Chairman of the Participants to this Sector Understanding (hereafter “the Chairman”) will make her/his best efforts to facilitate a consensus between the Participants, within twenty working days (“Period 3”) immediately following Period 2. If at the end of Period 3, no consensus is reached, a final resolution shall be achieved through the following procedures: (a) The Chairman shall make a written recommendation with respect to the proposed update of the Cape Town List. The Chairman's recommendation shall reflect the majority view emerging from the views openly expressed by at least the Participants which provide official support for aircraft exports. In the absence of a majority view, the Chairman shall make a recommendation based exclusively on the views expressed by the Participants and shall set out in writing the basis for the recommendation, including in the case of ineligibility, the eligibility criteria that were not met. (b) The Chairman's recommendation shall not disclose any information relating to Participants' views or positions expressed in the context of the process set out in Articles 42 to 51 of this Appendix, and (c) The Participants shall accept the recommendation of the Chairman.
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	51.	If, following a proposal submitted under Article 42 of this Appendix, the Participants or Chairman has determined that a State is not eligible to be added to the Cape Town List, a Participant or non-Participant may submit another proposal requesting that the Participants reconsider the State's eligibility. The proposing Participant or non-Participant shall address the reasons substantiating the original determination of ineligibility. The proposing Participant or non-Participant shall also obtain and provide an updated CTC questionnaire. This new proposal shall be subject to the process set out in Articles 46 to 52 of this Appendix.
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	52.	In the event of any change to the list of qualified countries pursuant to the procedures set out in Article 50 of this Appendix, the Secretariat shall issue an OLIS message containing the updated Cape Town List within five working days of such change. The updated Cape Town List shall take effect on the date of that message.
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	53.	The addition, withdrawal or reinstatement of a State to the Cape Town List after disbursement in respect of an aircraft shall not affect MPRs established regarding such aircraft.
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	54.	In the context of the process set out in Articles 42 to 52 of this Appendix, the Participants shall not disclose any information relating to views or positions expressed.
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	55.	The Participants shall monitor the implementation of Articles 42 to 54 of this Appendix and review it in the first half of 2012, annually thereafter or upon the request of any Participant.
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	56.	For new and used aircraft, the following adjustments to the applicable minimum premium rates may be applied: (a) A discount of five basis points (per annum spreads) or 0,29 % (up-front) to the applicable minimum premium rates may be applied for officially supported transactions in the form of conditional insurance cover. (b) The minimum premium rates shall be applied on the covered principal amount.

III.   NON-ASSET-BACKED TRANSACTIONS

	57.	Notwithstanding the provisions of Article 19(a) of this Appendix, the Participants may provide officially supported export credits for non-asset backed transactions, provided either of the following conditions is fulfilled: (a) In the case of non-sovereign transactions: (1) The maximum value of the export contract receiving official support is USD 15 million; (2) The maximum repayment term shall be 10 years; (3) No third party has a security interest in the assets being financed; and (4) A minimum surcharge of 30 % shall be applied to the minimum premium rates established in accordance with sub-Section I above. (b) In the case of a transaction with a sovereign or backed by an irrevocable and unconditional sovereign guarantee, a minimum surcharge shall, in accordance with Table 6 below, be applied to the minimum premium rates set out in accordance with sub-Section I above. Table 6 Risk Category Surcharge (%) 1 0 2 0 3 0 4 10 5 15 6 15 7 25 8 25
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	58.	The provisions of Articles 37 to 53 of this Appendix do not apply to officially supported export credits provided pursuant to Article 57 of this Appendix.

SECTION 3

Minimum premium rates for goods and services other than used aircraft covered by Part 3 of this Sector Understanding

	59.	When providing official support for all goods and services other than used aircraft covered by Part 3 of this Sector Understanding, the minimum premium rates shall be as follows: (a) In the case of asset-backed transactions, the minimum premium rates shall be equal to the prevailing minimum spreads established in accordance with sub-Section I above and, in the case of pure cover, converted to upfront fees using the conversion model and the appropriate tenor. (b) In the case of non-asset-backed transactions, the minimum premium rates shall be equal to the prevailing minimum spreads established in accordance with sub-Section I above to which a surcharge of 30 % will be added, and, in the case of pure cover, converted to upfront fees using the conversion model and the appropriate tenor.
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	60.	The provisions of Articles 37 to 53 of this Appendix shall apply to official support for asset-backed spare engines covered by Article 20(a) and (c) of this Sector Understanding and support under the first tiret of Article 21(a)(1) of this Sector Understanding.
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	61.	The provision of Article 56 of this Appendix shall also apply to official support for all goods and services other than used aircraft covered by Part 3 of this Sector Understanding.

‘ANNEX 1

QUALIFYING DECLARATIONS

	1.	For the purpose of Section 2 of Appendix II, the term “qualifying declarations”, and all other references thereto in this Sector Understanding, means that a Contracting party to the Cape Town Convention (Contracting Party): (a) Has made the declarations in Article 2 of this Annex, and (b) Has not made the declarations in Article 3 of this Annex.
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	2.	The declarations for the purpose of Article 1(a) of this Annex are: (a) Insolvency: State Party declares that it will apply the entirety of Alternative A under Article XI of the Aircraft Protocol to all types of insolvency proceeding and that the waiting period for the purposes of Article XI(3) of that Alternative shall be no more than 60 calendar days. (b) Deregistration: State Party declares that it will apply Article XIII of the Aircraft Protocol. (c) Choice of Law: State Party declares that it will apply Article VIII of the Aircraft Protocol. And at least one of the following (though both are encouraged): (d) Method for Exercising Remedies: State Party declares under Convention Article 54(2) that any remedies available to the creditor under any provision of the Convention which are not expressed under the relevant provisions thereof to require application to a court may be exercised without leave of the court (the insertion “without court action and” to be recommended (but not required) before the words “leave of the court”); (e) Timely Remedies: State Party declares that it will apply Article X of the Aircraft Protocol in its entirety (though clause 5 thereof, which is to be encouraged, is not required) and that the number of working days to be used for the purposes of the time-limit laid down in Article X(2) of the Aircraft Protocol shall be in respect of: (1) The remedies specified in Articles 13(1)(a), (b) and (c) of the Convention (preservation of the aircraft objects and their value; possession, control or custody of the aircraft objects; and immobilisation of the aircraft objects), not more than that equal to ten calendar days, and (2) The remedies specified in Articles 13(1)(d) and (e) of the Convention (lease or management of the aircraft objects and the income thereof and sale and application of proceeds from the aircraft equipment), not more than that equal to 30 calendar days.
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	3.	The declarations referred to in Article 1(b) of this Annex are the following: (a) Relief Pending Final Determination: State Party shall not have made a declaration under Article 55 of the Convention opting out of Article 13 or Article 43 of the Convention; provided, however, that, if State Party made the declarations set out under Article 2(d) of this Annex, the making of a declaration under Article 55 of the Convention shall not prevent application of the Cape Town Convention discount. (b) Rome Convention: State Party shall not have made a declaration under Article XXXII of the Aircraft Protocol opting out of Article XXIV of the Aircraft Protocol; and (c) Lease Remedy: State Party shall not have made a declaration under Article 54(1) of the Convention preventing lease as a remedy.
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	4.	Regarding Article XI of the Aircraft Protocol, for Member States of the European Union, the qualifying declaration set out in Article 2(a) of this Annex shall be deemed made by a Member State, for purposes hereof, if the national law of such Member State was amended to reflect the terms of Alternative A under Article XI of the Aircraft Protocol (with a maximum 60 calendar days waiting period). As regards the qualifying declarations set out in Articles 2(c) and (e) of this Annex, these shall be deemed satisfied, for the purpose of this Sector Understanding, if the laws of the European Union or the relevant Member States are substantially similar to that set out in such Articles of this Annex. In the case of Article 2(c) of this Annex, the laws of the European Union (EC Regulation (EC) No 593/2008 on the Law Applicable to Contractual Obligations) are agreed to be substantially similar to Article VIII of the Aircraft Protocol.

‘ANNEX 2

CAPE TOWN CONVENTION QUESTIONNAIRE

I. PRELIMINARY INFORMATION

Please provide the following information:

• 1. The name and full address of the law firm completing the questionnaire.

• 1. The law firm's relevant experience, which could include experience in legislative and constitutional processes as they relate to the implementation of international treaties in the State, and specific experience in CTC related issues including any experience in advising either a government on implementation and enforcement of the Cape Town Convention or the private sector, or enforcement of creditor's rights in the State which is proposed to be added to the Cape Town List;

• 1. Whether the law firm is involved or intends to be involved in any transactions that may benefit from a reduction of minimum premium rates if the proposed State is added to the CTC list [^ntr25-L_2018037EN.01006001-E0001];

• 1. The date on which this questionnaire was completed.

II.   QUESTIONS

1. Qualifying declarations

	1.1	Has the State [^ntr26-L_2018037EN.01006001-E0002] made each of the qualifying declarations in accordance with the requirements of Annex 1 to Appendix II of the Sector Understanding on Export Credits for Civil Aircraft (“ASU”) (each a “Qualifying Declaration”)? In particular, regarding the declarations concerning “Method for Exercising Remedies” (Article 2(d)) and “Timely Remedies” (Article 2(e)), please specify if one or both of these have been made.
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	1.2	Please describe the way in which the declarations made differ, if at all, from the requirements referred to in Question 1.1.
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	1.3	Please confirm that the State has not made any of the declarations listed in Article 3 of Annex 1 to Appendix II of the ASU.

2. Ratification

	2.1	Has the State ratified, accepted, approved or acceded to the Cape Town Convention and Aircraft Protocol (“Convention”)? Please could you state the date of ratification/accession and briefly describe the State's process of accession to or ratification of the Convention?
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	2.2	Do the Convention and Qualifying Declarations (“QD”) made have the force of law in the whole territory of the State without any further act, implementing legislation or the passing of any further law or regulation?
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	2.3	If so, please briefly explain the process that gives the Convention and QDs the force of law.

3. Effect of national and local law

	3.1	Describe and list, if applicable, the implementing legislation and regulation(s) with respect to the Convention and each QD made by the State.
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	3.2	Would the Convention and QDs made, as translated into national law [^ntr27-L_2018037EN.01006001-E0003] (“Convention and QDs”), overrule or have priority over any conflicting national law, regulation, order, judicial precedent or regulatory practice. If so, please describe the process by which this happens [^ntr28-L_2018037EN.01006001-E0004], and if not, please provide details.
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	3.3	Are there any existing gaps in the implementation of the Convention and QDs? If so, please describe [^ntr29-L_2018037EN.01006001-E0005].

4. Court and administrative decisions

	4.1	Please describe any matters, including judicial, regulatory, or administrative practice which could be expected to result in the courts, authorities or administrative bodies failing to give full force and effect to the Convention and QDs [^ntr30-L_2018037EN.01006001-E0006] [^ntr31-L_2018037EN.01006001-E0007].
---	---	---
	4.2	To your knowledge, has there been any judicial or administrative enforcement action taken by a creditor under the Convention? If so, please describe the action and indicate whether it was successful.
---	---	---
	4.3	To your knowledge, since ratification/implementation, have the courts in that State refused in any instance to enforce loan obligations of a debtor or guarantor in the State contrary to the Convention and QDs?
---	---	---
	4.4	To your knowledge, are there any other matters that may impact whether courts and administrative bodies should be expected to act in a manner consistent with the Convention and QDs? If so, please specify.

‘Appendix III

Minimum interest rates

The provision of official financing support shall not offset or compensate, in part or in full, for the appropriate premium rate to be charged for the risk of non-repayment pursuant to the provisions of Appendix II.

1. MINIMUM FLOATING INTEREST RATE

• (a) The minimum floating interest rate shall be, as appropriate, the EURIBOR, the Bank Bill Swap Rate, i.e. BBSY, the London Inter-Bank Offered Rate, i.e. LIBOR, as compiled by the British Bankers' Association (BBA) with the currency and the maturity corresponding to the frequency of interest payment of officially supported export credit, or the Canadian Dealer Offered Rate (CDOR), to which a margin benchmark calculated in accordance with Article 8 of this Appendix, shall be added.

• (b) The floating interest rate setup mechanism shall vary according to the repayment profile chosen, as follows:

• (1) When the repayment of principal and the payment of interest are combined in equal instalments, the relevant EURIBOR/BBSY/LIBOR/CDOR effective two business days prior to the loan drawdown date, according to the relevant currency and payment frequency shall be used to calculate the entire payment schedule, as if it were a fixed rate. The principal payment schedule shall then be fixed as well as the first interest payment. The second interest payment, and so on, shall be calculated based on the relevant EURIBOR/BBSY/LIBOR/CDOR effective two business days before the prior payment date over the outstanding principal balance initially established.

• (2) When the repayment of principal is made in equal instalments, the relevant EURIBOR/BBSY/LIBOR/CDOR, according to the relevant currency and payment frequency, effective two business days before the loan drawdown date and prior to each payment date shall be used to calculate the following interest payment over the outstanding principal balance.

• (c) Where official financing support is provided for floating rate loans, buyers/borrowers may have the option to switch from a floating rate to a fixed rate provided that the following conditions are fulfilled:

• (1) The option is restricted to switching to the swap rate only;

• (2) The option to switch shall only be exercised upon request, only once, and shall be reported accordingly with a reference to the reporting form initially sent to the Secretariat pursuant to Article 24 of this Understanding.

2. MINIMUM FIXED INTEREST RATE

The minimum fixed interest rate shall be either:

• (a) The swap rate, concerning the relevant currency of the officially supported export credit and with a maturity equal to the interpolated rate for the two closest available annual periods to the weighted average life of the loan. The interest rate shall be set two business days prior to each drawdown date.

OR

• (b) The Commercial Interest Reference Rate (CIRR) established according to the provisions set out in Articles 3 to 7 of this Appendix,

to which, in both cases, the margin benchmark, calculated in accordance with Article 8(f) of this Appendix, shall be added.

3. CONSTRUCTION OF CIRR

• (a) A CIRR is established for any of the eligible currencies set out in Article 9 of this Sector Understanding and calculated by adding a fixed margin of 120 basis points to one of the following three yields (the base rates):

• (1) Five-year government bond yields for a repayment term up to and including nine years,

• (2) Seven-year government bond yields for over nine and up to and including 12 years, or

• (3) Nine-year government bond yields for over 12 and up to and including 15 years.

• (b) CIRR shall be calculated monthly using data from the previous month and notified to the Secretariat, no later than five days after the end of each month. The Secretariat shall then inform immediately all Participants of the applicable rates and make them publicly available. CIRR shall take effect on the 15th day of each month.

• (c) A Participant or a non-Participant may request that a CIRR be established for the currency of a non-Participant. In consultation with the non-Participant, a Participant or the Secretariat on behalf of that non-Participant may make a proposal for the construction of the CIRR in that currency using the Common Line procedures set out in Articles 28 to 33 of this Sector Understanding.

4. VALIDITY PERIOD OF CIRR

• (a) Holding the CIRR: the CIRR applying to a transaction shall not be held for a period longer than six months from its selection (export contract date or any application date thereafter) to the credit agreement date. If the credit agreement is not signed within that limit, and the CIRR is reset for an additional six months, the new CIRR shall be committed at the rate prevailing at the date of reset.

• (b) After the credit agreement date, the CIRR shall be applied for drawing periods which do not exceed six months. After the first six-month drawing period, the CIRR is reset for the next six months; the new CIRR shall be the one prevailing at the first day of the new six-month period and cannot be lower than the CIRR originally selected (procedure to be replicated for each subsequent six-month period of drawings).

5. APPLICATION OF MINIMUM INTEREST RATES

Within the provisions of the credit agreement the borrower shall not be allowed an option to switch from an officially supported floating rate financing to a pre-selected CIRR financing, nor be allowed to switch between a pre-selected CIRR and the short term market rate quoted on any interest payment date throughout the life of the loan.

6. EARLY REPAYMENT OF FIXED INTEREST RATE LOANS

In the event of a voluntary, early repayment of a fixed interest rate loan as determined in Article 2 of this Appendix, or any portion thereof or when the CIRR applied under the credit agreement is modified into a floating or a swap rate, the borrower shall compensate the institution providing official financing support for all costs and losses incurred as a result of such actions, including the cost to the government institution of replacing the part of the fixed rate cash inflow interrupted by the early repayment.

7. IMMEDIATE CHANGES IN INTEREST RATES

When market developments require the notification of an amendment to a CIRR during the course of a month, the amended rate shall be implemented ten working days after notification of this amendment has been received by the Secretariat.

8. MARGIN BENCHMARK

• (a) A three-month LIBOR margin benchmark shall be calculated monthly in accordance with paragraph (b), using data notified to the Secretariat in accordance with paragraph (c), and shall take effect on the 15th day of each month. Once calculated, the margin benchmark shall be notified by the Secretariat to the Participants and shall be made publicly available.

• (b) The three-month LIBOR margin benchmark shall be a rate equivalent to the average of the lowest 50 % of the margins over: (i) three-month LIBOR charged for floating rate transactions and (ii) three-month LIBOR as interpolated by swapping the fixed rate issuance to a floating rate equivalent charged for fixed rate transactions or capital market issuances. In either case, the margins included in the monthly benchmark reports submitted by relevant Participants shall be those from the three full calendar months preceding the effective date set out in paragraph (a) above. Transactions/issuances that are used in the calculation of the margin benchmark shall meet the following conditions:

• (1) 100 % unconditional guarantee transactions denominated in US dollars; and

• (2) Official support provided in respect of aircraft valued at or above USD 35 million (or its equivalent in any other eligible currency).

• (c) Participants shall report a margin at the time it becomes known and that margin will remain on the Participant's margin benchmark report for three full calendar months. In the case of individual transactions with multiple pricing events, there shall be no attempt to match subsequent pricing events to ex post notifications.

• (d) Participants shall notify transactions as of the date on which the long-term margin is realised. For bank mandated deals (including PEFCO), the date on which the margin is realised would be the earliest of the following: (i) issuance of a final commitment by the Participant, (ii) setting of the margin post-commitment, (iii) loan drawdown, and (iv) setting of the long-term margin post-drawdown. In the case of several drawdowns occurring under the same bank mandate at the same margin, notification shall only be made in respect of the first aircraft. For loans funded by way of capital market issuance, the date on which the margin is realised shall be the date on which the long-term rate is set which is typically the bond issuance date. In the case of several drawdowns occurring under the same bond and at the same margin, notification shall only be made in respect of the first aircraft.

• (e) The three-month LIBOR margin benchmark shall be applicable to a floating rate transaction and shall be set at final commitment.

• (f) For a fixed rate transaction, the margin benchmark applicable to the transaction shall be determined by swapping the three-month LIBOR margin benchmark into an equivalent spread over the applicable fixed rate, as determined in Article 2 of this Appendix, on the final commitment date and shall be set as of that date.

• (g) The Participants shall monitor the margin benchmark and shall review the margin benchmark mechanism upon the request of any Participant.

‘Appendix IV

Reporting form

(a) Basic Information

	1.	Notifying country
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	2.	Notification date
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	3.	Name of notifying authority/agency
---	---	---
	4.	Identification number

(b) Buyer/Borrower/Guarantor Information

	5.	Name and country of buyer
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	6.	Name and country of borrower
---	---	---
	7.	Name and country of guarantor
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	8.	Status of buyer/borrower/guarantor, e.g. sovereign, private bank, other private
---	---	---
	9.	Risk classification of buyer/borrower/guarantor

(c) Financial Terms and Conditions

	10.	In what form is official support provided, e.g. pure cover, official financing support
---	---	---
	11.	If official financing support is provided, is it a direct credit/refinancing/interest rate support
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	12.	Description of the transaction supported, including the manufacturer, aircraft model and number of aircraft; indication of whether the transaction falls under the transitional arrangements set out in Article 39(a) or (b) of this Understanding.
---	---	---
	13.	Final commitment date
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	14.	Currency of credit
---	---	---
	15.	Credit amount, according to the following scale in USD millions: Category Credit Amount I 0-200 II 200-400 III 400-600 IV 600-900 V 900-1 200 VI 1 200 -1 500 VII 1 500 -2 000 [^ntr*1-L_2018037EN.01006501-E0001]
---	---	---
	16.	Percentage of official support
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	17.	Repayment term
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	18.	Repayment profile and frequency — including, where appropriate, weighted average life
---	---	---
	19.	Length of time between the starting point of credit and the first repayment of principal
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	20.	Interest rates: — Minimum interest rate applied, — Margin benchmark applied.
---	---	---
	21.	Total premium charged by way of: — Up-front fees (in percentage of the credit amount), or — Spreads (basis points per annum above the applied interest rate), — As appropriate, please indicate separately the 15 % surcharge applied in accordance with Appendix II Article 20(b).
---	---	---
	22.	In the case of direct credit/financing, fees charged by way of: — Arrangement/Structuring fee, — Commitment/Premium holding fee, — Administration fee.
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	23.	Premium holding period
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	24.	In the case of pure cover, premium holding fees
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	25.	Transaction structuring terms: risk mitigants/premium surcharge applied
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	26.	As appropriate, an indication of the impact of the Cape Town Convention on the premium rate applied

‘Appendix V

List of definitions

All-In Cost Equivalence: the net present value of premium rates, interest rate costs and fees charged for a direct credit as a percentage of the direct credit amount is equal to the net present value of the sum of premium rates, interest rate costs and fees charged under pure cover as a percentage of the credit amount under pure cover.

Asset-Backed: a transaction that meets the conditions set out in 19(a) of Appendix II.

Buyer/Borrower: includes (but is not limited to) commercial entities such as airlines and lessors, as well as sovereign entities (or if a different entity, the primary source of repayment of the transaction).

Buyer Furnished Equipment: equipment furnished by the buyer and incorporated in the aircraft during the manufacture/refurbishment process, on or before delivery, as evidenced by the Bill of Sale from the manufacturer.

Cape Town Convention: refers to the Cape Town Convention on International Interests in Mobile Equipment and the Protocol thereto on Matters specific to Aircraft Equipment.

Commitment: any statement, in whatever form, whereby the willingness or intention to provide official support is communicated to the recipient country, the buyer, the borrower, the exporter or the financial institution, including without limitation, eligibility letters, marketing letters.

Common Line: agreement of the Participants for a given transaction, or in special circumstances on specific financial terms and conditions for official support; such common line shall prevail over the relevant provisions of this Sector Understanding only for the transaction or in the circumstances specified in the common line.

Conditional Insurance Cover: official support which in the case of a default on payment for defined risks provides indemnification to the beneficiary after a specified waiting period; during the waiting period the beneficiary does not have the right to payment from the Participant. Payment under conditional insurance cover is subject to the validity and the exceptions of the underlying documentation and of the underlying transaction.

Conversion: A major change in the type design of an aircraft through its conversion into a different type of aircraft (including the conversion of a passenger aircraft into a water bomber, cargo aircraft, search and rescue, surveillance aircraft, or business jet), subject to certification by the responsible Civil Aviation Authority.

Country Risk Classification: the prevailing country risk classification of the Participants to the Arrangement on Officially Supported Export Credits as published on the OECD website.

Credit Rating Agency: one of the internationally reputable rating agencies or any other rating agency that is acceptable to the Participants.

Engine Kits: a set of parts introduced to improve reliability, durability and/or on-wing performance procurement through introduction of technology.

Export Credit: an insurance, guarantee or financing arrangement which enables a foreign buyer of exported goods and/or services to defer payment over a period of time; an export credit may take the form of a supplier credit extended by the exporter, or of a buyer credit, where the exporter's bank or other financial institution lends to the buyer (or its bank).

Final Commitment: a final commitment exists when the Participant commits to precise and complete financial terms and conditions, either through a reciprocal agreement or by a unilateral act.

Firm Contract: an agreement between the manufacturer and the person taking delivery of the aircraft or engines as buyer, or, in connection with a sale-leaseback arrangement, as lessee under a lease with a term of at least five years, setting forth a binding commitment (excluding those relating to then unexercised options), where non-performance entails legal liability.

Interested Participant: a Participant which (i) provides official support for airframe or aircraft engines completely or partially manufactured in its territory, (ii) has an existing substantial commercial interest or has experience with the buyer/borrower concerned, or (iii) has been requested by a manufacturer/exporter to provide official support to the buyer/borrower in question.

Interest Rate Support: can take the form of an arrangement between on the one hand a government, or an institution acting for or on behalf of a government and, on the other hand, banks or other financial institutions which allows the provision of fixed rate export finance at or above the relevant minimum fixed interest rate.

Major Modification/Refurbishing: operations of reconfiguration or upgrading of either a passenger or cargo aircraft.

Net Price: the price for an item invoiced by the manufacturer or supplier thereof, after accounting for all price discounts and other cash credits, less all other credits or concessions of any kind related or fairly allocable thereto, as stated in a binding representation by each of the aircraft and engine manufacturers — the engine manufacturer representation is required only when it is relevant according to the form of the purchase agreement — or service provider, as the case may be, and supported by documentation required by the provider of official support to confirm that net price. All import duties and taxes (e.g. VAT) are not included in the net price.

New Aircraft: see Article 8(a) of this Sector Understanding.

Non-Asset-Backed: a transaction that does not meet the conditions set out in 19(a) of Appendix II.

Non-Sovereign Transaction: a transaction that does not meet the description set out in Article 57(b) of Appendix II.

Premium Holding Period: subject to Article 37(b) of Appendix II, period(s) during which a premium rate and related mandatory risk mitigants offered for a transaction are being maintained; not to exceed 18 months from the date it has been set until the final disbursement.

Premium Rate Conversion Model: model agreed by and made available to the Participants, to be used for the purpose of this Sector Understanding in order to convert up-front premium fees into spreads and vice versa, in which the interest rate and the discount rate used shall be 4,6 %; such rate shall be reviewed regularly by the Participants.

Prior Notification: a notification made at least ten calendar days before issuing any commitment, using the reporting form set out in Appendix IV.

Pure Cover: Official support provided by or on behalf of a government by a way of export credit guarantee or insurance only, i.e. which does not benefit from official financing support.

Repayment Term: the period beginning at the Starting Point of Credit and ending on the contractual date of the final repayment of principal.

Sovereign Transaction: a transaction that meets the description set out in Article 57(b) of Appendix II.

Starting Point of Credit: for the sale of aircraft including helicopters, spare engines and parts, at the latest the actual date when the buyer takes physical possession of the goods, or the weighted mean date when the buyer takes physical possession of the goods. For services, the latest starting point of credit is the date of the submission of the invoices to the client or acceptance of service by the client.

Swap Rate: a fixed rate equal to the semi-annual rate to swap floating rate debt to fixed rate debt (Offer side), posted on any independent market index provider, such as Telerate, Bloomberg, Reuters, or its equivalent, at 11:00 am New York time, two business days prior to the loan drawdown date.

Weighted Average Life: the time it takes to retire one-half of the principal of a credit; this is calculated as the sum of time (in years) between the starting point of credit and each principal repayment weighted by the portion of principal repaid at each repayment date.

‘ANNEX IV

SECTOR UNDERSTANDING ON EXPORT CREDITS FOR RENEWABLE ENERGY, CLIMATE CHANGE MITIGATION AND ADAPTATION, AND WATER PROJECTS

The purpose of this Sector Understanding is to provide adequate financial terms and conditions to projects in selected sectors identified including under international initiatives as significantly contributing to climate change mitigation, including renewable energy, greenhouse gas (GHG) emissions' reduction and high energy efficiency projects, climate change adaptation, as well as water projects. The Participants to this Sector Understanding agree that the financial terms and conditions of the Sector Understanding, which complements the Arrangement, shall be implemented in a way that is consistent with the Purpose of the Arrangement.

CHAPTER I

SCOPE OF THE SECTOR UNDERSTANDING

1. SCOPE OF APPLICATION FOR PROJECTS IN RENEWABLE ENERGY SECTORS ELIGIBLE TO APPENDIX I

• (a) This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts in the eligible sectors listed in Appendix I of this Sector Understanding for:

• (1) The export of complete renewable energies plants or parts thereof, comprising all components, equipment, materials and services (including the training of personnel) directly required for the construction and commissioning of such plants.

• (2) The modernisation of existing renewable energies plants in cases where the economic life of the plant is likely to be extended by at least the repayment period to be awarded. If this criterion is not met, the terms of the Arrangement apply.

• (b) This Sector Understanding does not apply to items located outside the power plant site boundary for which the buyer is usually responsible, in particular, water supply not directly linked to the power production plant, costs associated with land development, roads, construction villages, power lines and switchyard, as well as costs arising in the buyer's country from official approval procedures (e.g. site permits, construction permit), except:

• (1) In cases where the buyer of the switchyard is the same as the buyer of the power plant and the contract is concluded in relation to the original switchyard for that power plant, the terms and conditions for the original switchyard shall not exceed those for the renewable energies power plant; and

• (2) The terms and conditions for sub-stations, transformers and transmission lines with a minimum voltage threshold of 60 kV located outside the renewable energies power plant site boundary shall not be more generous than those for the renewable energies power plant.

2. SCOPE OF APPLICATION FOR PROJECTS IN CLIMATE CHANGE MITIGATION SECTORS ELIGIBLE TO APPENDIX II

• (a) This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts in a sector listed in Appendix II of this Sector Understanding. This list of sectors and, when applicable, corresponding technology-neutral performance criteria used to define a project's eligibility, may be modified over time in accordance with the review provisions set out in Article 12 of this Sector Understanding.

• (b) Such contracts shall relate to the export of complete projects or parts thereof, comprising all components, equipment, materials and services (including the training of personnel) directly required for the construction and commissioning of an identifiable project, providing that:

• (1) The project should result in low to zero carbon emissions, or CO2 equivalent, and/or in high energy efficiency;

• (2) The project should be designed to meet, as a minimum, the performance standards as set out in Appendix II; and

• (3) The terms and conditions provided shall be extended only to address specific financial disadvantages encountered by a project, and shall be based on the individual financial needs and specific market conditions of each project.

3. SCOPE OF APPLICATION FOR ADAPTATION PROJECTS ELIGIBLE TO APPENDIX III

• (a) This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts for projects which meet the criteria set out in Appendix III of this Sector Understanding.

• (b) Such contracts shall relate to the export of complete projects or parts thereof, comprising all components, equipment, materials and services (including the training of personnel) directly required for the execution and commissioning of an identifiable project, providing that:

• (1) The conditions set out in Appendix III are met;

• (2) The terms and conditions provided shall be extended only to address specific financial disadvantages encountered by a project, and shall be based on the individual financial needs and specific market conditions of each project.

• (c) This Sector Understanding applies to the modernisation of existing projects, to take into consideration adaptation concerns, in cases where the economic life of the project is likely to be extended by at least the repayment period to be awarded. If this criterion is not met, the terms of the Arrangement apply.

4. SCOPE OF APPLICATION FOR WATER PROJECTS

This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts for the export of complete projects or parts thereof related to the supply of water for human use and wastewater treatment facilities:

• (a) Infrastructure for the supply of drinking water to municipalities, including to households and small businesses, i.e. water purification for the purpose of obtaining drinking water and distribution network (including leakage control).

• (b) Wastewater collection and treatment facilities, i.e. collection and treatment of household and industrial wastewater and sewage, including processes for the re-use or recycling of water and the treatment of sludge directly associated with these activities.

• (c) The modernisation of such facilities in cases where the economic life of the plant is likely to be extended by at least the repayment period to be awarded. If this criterion is not met, the provisions of the Arrangement apply.

CHAPTER II

PROVISIONS FOR EXPORT CREDITS

5. MAXIMUM REPAYMENT TERMS

• (a) For officially supported export credits relating to contracts in the sectors listed in Appendix I, and for water projects defined in Article 4 of this Sector Understanding, the maximum repayment term is 18 years.

• (b) For officially supported export credits relating to contracts of a value of at least SDR 10 million in the project classes listed in Appendix II, the maximum repayment term is set out as follows:

• (1) For contracts in Project Class A: 18 years.

• (2) For contracts in Project Class B and Project Class C: 15 years.

• (c) For officially supported export credits relating to contracts of a value of less than SDR 10 million in the project classes listed in Appendix II, the maximum repayment term is set out as follows:

• (1) For Category I countries as defined in Article 11 of the Arrangement, the maximum repayment term is five years, with the possibility of agreeing up to eight-and-a-half years when the procedures for prior notification set out in Article 10 of this Sector Understanding are followed.

• (2) For Category II countries, the maximum repayment term is 10 years.

• (3) Notwithstanding subparagraphs (1) and (2) above, for non-nuclear power plants as defined in Article 13 of the Arrangement, the maximum repayment term is 12 years.

• (d) For officially supported export credits relating to contracts of a value of at least SDR 10 million for projects supported in conformity with Appendix III, the maximum repayment term is 15 years.

6. REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST

• (a) The Participants shall apply a profile of repayment of principal and payment of interest as specified in subparagraphs (1) or (2) below:

• (1) Repayment of principal shall be made in equal instalments.

• (2) Repayment of principal and payment of interest combined shall be made in equal instalments.

• (b) Principal shall be repaid and interest shall be paid no less frequently than every six months and the first instalment of principal and interest shall be made no later than six months after the starting point of credit.

• (c) On an exceptional and duly justified basis, official support may be provided on terms other than those set out in paragraphs (a) and (b) above. The provision of such support shall be explained by an imbalance in the timing of the funds available to the obligor and the debt service profile available under an equal, semi-annual repayment schedule, and shall comply with the following criteria:

• (1) No single repayment of principal or series of principal payments within a six-month period shall exceed 25 % of the principal sum of the credit.

• (2) Principal shall be repaid no less frequently than every 12 months. The first repayment of principal shall be made no later than 18 months after the starting point of credit and no less than 2 % of the principal sum of the credit shall have been repaid 18 months after the starting point of credit.

• (3) Interest shall be paid no less frequently than every 12 months and the first interest payment shall be made no later than six months after the starting point of credit.

• (4) The maximum weighted average life of the repayment period shall not exceed 60 % of the maximum available tenor.

• (d) Interest due after the starting point of credit shall not be capitalised.

7. MINIMUM INTEREST RATES

A Participant providing official financing support for fixed rates loans shall apply the following minimum interest rates: