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

Repayment term (years)	Standard minimum interest rates	Standard minimum interest rates	Minimum interest rates for projects with long construction periods, i.e.: — New large hydro-power projects — Appendix II Project Class A — Appendix III Adaptation Projects	Minimum interest rates for projects with long construction periods, i.e.: — New large hydro-power projects — Appendix II Project Class A — Appendix III Adaptation Projects
Repayment term (years)	Government bonds (years)	Margin (bps)	Government bonds (years)	Margin (bps)
< 11	Relevant CIRR in accordance with Article 20 of the Arrangement	Relevant CIRR in accordance with Article 20 of the Arrangement	Relevant CIRR in accordance with Article 20 of the Arrangement	Relevant CIRR in accordance with Article 20 of the Arrangement
11 to 12	7	100	7	100
13	7	120	8	120
14	8	120	9	120
15	8	120	9	120
16	9	120	10	125
17	9	120	10	130
18	10	120	10	130

8. ELIGIBLE CURRENCIES

The currencies that are eligible for official financing support are those which are fully convertible and for which data are available to construct the minimum interest rates mentioned in Article 7 of this Sector Understanding, and in Article 20 of the Arrangement for repayment terms less than 11 years.

9. LOCAL COSTS

• (a) For officially supported export credits relating to contracts of a value of at least SDR 10 million, official support provided for local costs shall not exceed 30 % of the export contract value.

• (b) For officially supported export credits relating to contracts of a value of less than SDR 10 million:

• (1) For the sectors listed in Appendix I of this Sector Understanding, official support provided for local costs shall not exceed 45 % of the export contract value.

• (2) For the sectors listed in Appendix II and for water projects defined in Article 4 of this Sector Understanding, official support provided for local costs shall not exceed 30 % of the export contract value.

• (c) Where official support for local cost exceeds 15 % of the export contract value, such official support shall be subject to prior notification, pursuant to Article 10 of this Sector Understanding, specifying the nature of the local costs being supported.

CHAPTER III

PROCEDURES

10. PRIOR NOTIFICATION

• (a) A Participant intending to provide support in accordance with the provisions of this Sector Understanding, shall give prior notification at least ten calendar days before issuing any commitment, in accordance with:

• (1) Article 48 of the Arrangement if the support is extended pursuant to Article 1, 2 or 4 of this Sector Understanding;

• (2) Article 47 of the Arrangement if the support is extended pursuant to Article 3 of this Sector Understanding.

• (b) For projects falling in the Project Classes listed in Appendix II of this Sector Understanding, such notifications shall include an enhanced description of the project in order to demonstrate how the project complies with the criteria for support, as set out in Article 2(b) of this Sector Understanding.

• (c) For projects supported in conformity with Appendix III of this Sector Understanding, such notification shall include:

• (1) An enhanced description of the project in order to demonstrate how the project complies with the criteria for support, as set out in Article 3(b) of this Sector Understanding, and

• (2) Access to the outcome of the independent third-party review required in Appendix III.

• (d) Notwithstanding paragraph (a)(1) above, if the notifying Participant intends to provide support with a repayment term in excess of 15 years and/or in accordance with Article 6(c) of this Sector Understanding, it shall give prior notification at least ten calendar days before issuing any commitment in accordance with Article 47 of the Arrangement.

• (e) A Participant shall inform all other Participants of its final decision following a discussion, to facilitate the review of the body of experience.

CHAPTER IV

MONITORING AND REVIEW

11. FUTURE WORK

The Participants agree to examine the following issues:

• (a) Term-adjusted risk-premia.

• (b) Conditions for low emission/high energy efficiency fossil fuel power plants including definition of CCS-readiness.

• (c) Net zero energy buildings.

• (d) Fuel cell projects.

12. MONITORING AND REVIEW

• (a) The Secretariat shall report annually on the implementation of this Sector Understanding.

• (b) The Participants shall regularly review the scope and other provisions of this Sector Understanding and at the latest by the end of 2017.

• (c) Appendix II of this Sector Understanding shall be reviewed at regular intervals, including upon the request of a Participant, with the view to assessing whether any Project Class and/or Type should be added to, or removed from, or whether any thresholds should be changed in, that Appendix. Proposals for new Project Classes and/or Types shall be supported by information on how projects within such a Class/Type should fulfil the criteria set out in Article 2(b) and shall follow the methodology set out in Appendix IV of this Sector Understanding.

• (d) The Participants shall undertake a review of Appendix III of this Sector Understanding no later than by 30 June 2018, with a view to assessing the international initiatives related to adaptation, market conditions, and the body of experience developed from the notification process to determine if the definitions, project criteria, terms and conditions should be continued and or amended.

• (e) After 31 December 2018, the terms and conditions related to Appendix III shall be discontinued unless the Participants agree otherwise.

‘Appendix I

Renewable energies sectors

The following renewable energies sectors shall be eligible for the financial terms and conditions set out in this Sector Understanding provided that their impacts are addressed in accordance with the 2012 Recommendation on Common Approaches on Officially Supported Export Credits and Environmental and Social Due Diligence [^ntr32-L_2018037EN.01007401-E0001] (as subsequently amended by Members of the OECD Working Group on Export Credits and Credit Guarantee (ECG) and adopted by the OECD Council):

• (a) Wind energy [^ntr33-L_2018037EN.01007401-E0002].

• (b) Geothermal energy.

• (c) Tidal and tidal stream power.

• (d) Wave power.

• (e) Osmotic power.

• (f) Solar photovoltaic power.

• (g) Solar thermal energy.

• (h) Ocean thermal energy.

• (i) Bio-energy: all sustainable landfill gas, sewage treatment plant gas, biogas energy or fuel derived from biomass energy installations. “Biomass” shall mean the biodegradable fraction of products, waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste.

• (j) Hydro power.

• (k) Energy efficiency in Renewable Energies projects.

‘Appendix II

Climate change mitigation sectors

PROJECT CLASS	DEFINITION	RATIONALE	STANDARDS USED	REPAYMENT TERMS
PROJECT CLASS A: CARBON CAPTURE AND STORAGE	PROJECT CLASS A: CARBON CAPTURE AND STORAGE	PROJECT CLASS A: CARBON CAPTURE AND STORAGE	PROJECT CLASS A: CARBON CAPTURE AND STORAGE	PROJECT CLASS A: CARBON CAPTURE AND STORAGE
TYPE 1: Fossil Fuel Power Plants with Operational Carbon Capture and Storage (CCS)	A process consisting of the separation of CO2 stream from the emissions produced by fossil fuel generation sources, transport to a storage site, for the purposes of environmentally safe and permanent geological storage of CO2.	To achieve low carbon emission levels for fossil fuel power sources.	Carbon intensity shall achieve a level equal to or less than 350 metric ton CO2 per GWh vented to atmosphere[^ntr34-L_2018037EN.01007501-E0001]; Or In the case of all projects, a capture and storage rate that would reduce the plant's carbon emissions by 65 % or greater; Or The capture rate has to be at least 85 % of CO2 emitted by the equipment included in the application for officially supported export credits. The 85 % is to apply at normal operating conditions.	18 years
TYPE 2: CCS Projects as such	A process consisting of the separation of CO2 from industrial or energy generation sources, transport to a storage site, for the purposes of environmentally safe and permanent geological storage of CO2.	To significantly reduce carbon emissions from existing sources.	In the case of all projects, a capture and storage rate that would reduce the industrial or energy generation carbon emissions by 65 % or greater; Or The capture rate has to be at least 85 % of CO2 emitted by the equipment included in the application for officially supported export credits. The 85 % is to apply at normal operating conditions.	18 years
PROJECT CLASS B: FOSSIL FUEL SUBSTITUTION	PROJECT CLASS B: FOSSIL FUEL SUBSTITUTION	PROJECT CLASS B: FOSSIL FUEL SUBSTITUTION	PROJECT CLASS B: FOSSIL FUEL SUBSTITUTION	PROJECT CLASS B: FOSSIL FUEL SUBSTITUTION
TYPE 1: Waste to Energy	Unit dedicated to generating energy by thermal treatment (including gasification) of mixed stream solid waste.	To offset GHG emissions from the use of conventional power and by reducing future GHG such as methane that would normally emanate from the waste.	In the case of a steam cycle, a boiler (or steam generator) energy conversion efficiency of at least 75 % based on low heating value (LHV)[^ntr35-L_2018037EN.01007501-E0002]. In the case of gasification, a gasifier efficiency of at least 65 % LHV[^ntr36-L_2018037EN.01007501-E0003].	15 years
TYPE 2: Hybrid Power Plants	A power plant that generates electric power from both a renewable energy source and a fossil fuel source.	To meet the requirement of plant availability, a fossil fuel generating source is required for those periods when power from the renewable energy source is not available or sufficient. The fossil fuel source enables the usage of renewable energy in the hybrid plant, thereby achieving a significant carbon reduction compared with standard fossil fuel plant.	Model 1: Two separate generation sources: one Renewable Energy and one fossil fuel. Project shall be designed such that at least 50 % of its projected total annual energy output originates from the plant's renewable energy source. Model 2: Single generation source using the combination of renewable and fossil fuel. The project shall be designed such that at least 75 % of the useful energy produced is derived from the renewable source.	15 years
PROJECT CLASS C: ENERGY EFFICIENCY	PROJECT CLASS C: ENERGY EFFICIENCY	PROJECT CLASS C: ENERGY EFFICIENCY	PROJECT CLASS C: ENERGY EFFICIENCY	PROJECT CLASS C: ENERGY EFFICIENCY
TYPE 1: Combined Heat & Power projects	Simultaneous generation of multiple forms of energy (electrical, mechanical and thermal) in a single integrated system. Output of the CHP plant shall include electric or mechanical energy and heat for commercial industrial and/or residential use.	Up to two thirds of the primary energy used to generate electricity in conventional thermal power plants is lost in the form of heat. Combined heat and power (CHP) generation can therefore be an effective GHG mitigation option. CHP is possible with all heat machines and fuels (including biomass and solar thermal) from a few kW-rated to 1 000  MW steam-condensing power plants[^ntr37-L_2018037EN.01007501-E0004].	Overall efficiency of at least 75 % based on low heating value (LHV)[^ntr38-L_2018037EN.01007501-E0005].	15 years
TYPE 2: District heating and/or cooling	Network which carries/distributes thermal energy from energy producing unit to end use.	To improve the efficiency of heating of districts by building piping networks for steam and/or hot water with substantial thermal efficiency, both by minimising losses of piping and converters, and by increasing the amount of utilisation of waste heat. District cooling is an integrative technology that can make significant contributions to reducing emissions of carbon dioxide and air pollution and to increasing energy security e.g. via substitution of individual air-conditioners.	The district piping thermal conductivity shall be less than 80 % of the relevant thermal conductivity required by the European standard EN253:2009 (to be reviewed when this standard is updated).	15 years
TYPE 3: Smart Grids	Integrated, technologically advanced electricity networks with improved dynamic capabilities to monitor and control the input and output of all their constituent technical components (such as power generation, Network Management Solutions, High Voltage Direct Current (HVDC) converters and systems, Flexible Alternating Current Transmission Systems (FACTS), Special Power Systems (SPS), transmission, distribution, storage, Smart Grid Power Electronics Solutions, consumption reduction, metering, distributed energy resources). ICT according to internationally agreed industry standards such as NIST-SGIP and ETSI-CEN-Cenelec.	To enable network operators, transmission and distribution system operators, grid users, storage owners, metering operators, applications and service providers or power exchange platform operators to create economical, environmentally-friendly, balanced and sustainable power systems with reduced transmission losses and optimised levels of supply quality, safety, grid stability, reliability, renewable power collection and cost-efficiency by supporting supply contracts involving predominantly export of state-of-the-art, innovative technologies and services.	Standards 1, 2 (a or b) and 3 shall be met. 1. The total cost of the project includes at least 20 % for eligible information and communication technology (ICT) upgrades. 2a. An estimated minimum 10 % reduction in the amount of CO2 emissions from fossil fuel will result from the project or application, or 2b. Demonstrated significant CO2 emission reductions will be enabled through either: — reductions in energy losses within the electricity grid served by the Smart Grid application or project by at least 5 %, or — reductions in aggregate electricity consumption by loads served by the Smart Grid application or project by at least 5 %, or — intermittent feed-in of renewable energies, including from subordinate voltage levels, representing at least an additional 10 % of the total energy fed into the grid where the smart grid technologies are applied. 3. Prior to authorisation, an independent, qualified third party will review the project and prepare a report that describes the characteristics of the proposed Smart Grid application or project and verifies whether the project or application will meet standards 1 and 2 (a or b). For projects using the 2b standard, estimated CO2 emissions reductions enabled by the project will be included in the report. Such report will be shared with Participants prior to any authorisation of financial support and authorisation will be conditional on the report positively verifying that standards 1 and 2 (a or b) will be met by the proposed Smart Grid project or application. Standards will be measured by comparing the estimated emissions or energy use from an Area Served by the Grid if the proposed Smart Grid technologies are applied to emissions or energy use of that same area if the proposed Smart Grid technologies were not applied. The Participants shall undertake a review of these standards no later than by 30 June 2017, with a view to assess the projects financed under these standards, and, if necessary, to determine if the definitions, rationale, or project criteria should be continued and/or amended.	15 years

‘Appendix III

Eligibility criteria for climate change adaptation projects

A project is eligible for the financial terms and conditions set out in this Sector Understanding if:

• (a) Climate change adaptation is the principal objective of the project, and it is explicitly indicated and explained as such in the project plan and supporting documents, as being fundamental to the design of the project.

• (b) The project's proposal shall include an analysis and identification of specific and relevant climate change-related risks and vulnerabilities, and how the proposed measures or technologies will directly address them.

• (c) There is an independent third-party review conducted on the project, either separately or as an integral part of the project plan which is made publicly available, such as published on the website of the national authority. The review shall evaluate the specific and relevant climate change-related risks and vulnerabilities and how the proposed measures contained within the project will directly address them.

• (d) The useful life of the project exceeds 15 years.

‘Appendix IV

Methodology to be used when determining the eligibility of sectors relating to Article 2 of this Sector Understanding

When proposing that Project Class or Type be added to Appendix II of this Sector Understanding, Participants shall provide a detailed description of the proposed Project Class or Type and information on how such projects fulfil the criteria set out in Article 2(b) of this Sector Understanding; such information shall include:

• (a) An evaluation of the direct contribution of the Project Class or Type to climate change mitigation, including a comparison of the sector performance, based on measurable data regarding carbon emissions or CO2 equivalent and/or in high energy efficiency, with conventional and in-use newer technological approaches; this comparison shall, in all cases, be based on quantitative measures, such as a decrease in emissions per unit produced.

• (b) A description of the technical and performance standards of the Project Class or Type proposed sector, including information on any relevant, existing Best Available Techniques (BAT); if appropriate, this description shall explain how the technology is an improvement on the existing BAT.

• (c) A description of the financial barriers in the proposed Project Class or Type, including any financial needs and market conditions, and identify the provisions under this Sector Understanding that are expected to enable such projects to proceed.

‘Appendix V

List of definitions

Area Served by the Grid: A system of synchronised power providers and consumers connected by transmission and distribution lines and operated by one or more control centres.

Best Available Techniques: as per the definition of EU Directive 96/61/EC (Article 2.1), “Best Available Techniques” shall mean the most effective and advanced stage in the development of activities and their methods of operation which indicate the practical suitability of particular techniques for providing in principle the basis for emission limit values designed to prevent and, where that is not practicable, generally to reduce emissions and the impact on the environment as a whole:

• (a) “techniques” shall include both the technology used and the way in which the installation is designed, built, maintained, operated and decommissioned.

• (b) “available” techniques shall mean those developed on a scale which allows implementation in the relevant industrial sector, under economically and technically viable conditions, taking into consideration the costs and advantages, whether or not the techniques are used or produced inside the Member State in question, as long as they are reasonably accessible to the operator.

• (c) “best” shall mean most effective in achieving a high general level of protection of the environment as a whole.

Greenhouse Gases: greenhouse gases are defined to include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.

Large Hydro Power Project: as per the definition of the International Commission on Large Dams (ICOLD). ICOLD defines a large dam as a dam with a height of 15 m or more from the foundation. Dams that are between 5 and 15 m high and have a reservoir volume of more than 3 million m³ are also classified as large dams.

‘ANNEX V

SECTOR UNDERSTANDING ON EXPORT CREDITS FOR RAIL INFRASTRUCTURE

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

This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts for rail infrastructure assets essential to operating trains, including rail control (e.g. signalling and other rail IT), electrification, tracks, rolling stock, and related construction work.

CHAPTER II

PROVISIONS FOR EXPORT CREDITS

2. MAXIMUM REPAYMENT TERMS

• (a) For officially supported export credits relating to contracts included within the scope of application of this Sector Understanding, the maximum repayment term is set out as follows:

• (1) For contracts in Category I countries (as defined in Article 11 of the Arrangement): 12 years.

• (2) For contacts in Category II countries (as defined in Article 11 of the Arrangement): 14 years.

• (b) To qualify for the repayment terms set out in paragraph (a) above, the following conditions shall apply:

• (1) The transaction shall involve an overall contract value of more than SDR 10 million; and

• (2) The repayment terms shall not exceed the useful life of the rail infrastructure asset financed; and

• (3) For transactions in Category I countries, the transaction involves/is characterised by:

• — Participation in a loan syndication with private financial institutions that do not benefit from Official Export Credit Support, whereby:

• (i) The Participant is a minority partner with pari passu status throughout the life of the loan; and

• (ii) Official export credit support provided by the Participants comprises less than 50 % of the syndication.

• — Premium rates for any official support that do not undercut available private market financing and that are commensurate with the corresponding rates being charged by other private financial institutions that are participating in the syndication.

• (c) A Participant may request a waiver of the condition set out in paragraph (b)(3) above, through use of a Common Line, in accordance with Articles 58 to 63 of the Arrangement. In such cases, the Participant proposing the Common Line shall provide, either in the proposed Common Line or in each individual transaction thereafter notified, a comprehensive explanation for the support, including specific data on pricing, and a rationale for the need to waive the provisions of paragraph (b)(3) above.

3. REPAYMENT OF PRINCIPAL AND INTEREST

The repayment of principal and interest shall be provided according to Article 14 of the Arrangement except that the maximum weighted average life of the repayment period under paragraph (d)(4) of that Article shall be:

• (a) For transaction in a Category I countries, six-and-a-quarter years; and

• (b) For transaction in a Category II countries, seven-and-a-quarter years.

4. MINIMUM FIXED INTEREST RATES

A Participant providing official financing support for fixed rate loans shall apply, as minimum interest rates:

• (a) For repayment terms of up to and including 12 years, the relevant Commercial Interest Reference Rates (CIRRs) constructed in accordance with Article 20 of the Arrangement.

• (b) For repayment terms in excess of 12 years, the relevant Commercial Interest Reference Rates (CIRRs) constructed in accordance with Article 20 of the Arrangement, to which a surcharge of 20 basis points shall be added for all currencies.

CHAPTER III

PROCEDURES

5. PRIOR NOTIFICATION

• (a) A Participant shall give prior notification in accordance with Article 47 of the Arrangement at least ten calendar days before issuing any commitment if it intends to provide support for a transaction in a Category I country. Such notifications shall include a comprehensive explanation for the official support, including specific data on pricing.

• (b) A Participant shall give prior notification in accordance with Article 48 of the Arrangement at least ten calendar days before issuing any commitment if it intends to provide support for:

• (1) A transaction in a Category II country; or

• (2) A transaction supported pursuant to a Common Line set out in accordance with Article 2(c) of this Sector Understanding. Such prior notification may be made concurrently with, and subject to the approval of, the Common Line proposal.

6. VALIDITY OF COMMON LINES

Notwithstanding the provisions of Article 63(a) of the Arrangement, all agreed Common Lines shall cease to be valid on 31 December 2018, unless the Participants agree to the extension of this Sector Understanding in accordance with Article 7(d) of this Sector Understanding.

CHAPTER IV

MONITORING AND REVIEW

7. MONITORING AND REVIEW

• (a) The Secretariat shall report annually on the implementation of this Sector Understanding.

• (b) After 31 December 2017, and subject to paragraph (c) below, the less than 50 % syndication requirement set out in subparagraph (ii) of the first tiret of Article 2(b)(3) of this Sector Understanding shall be replaced by a maximum 35 % syndication requirement unless the Participants agree otherwise.

• (c) The Participants shall undertake a review of this Sector Understanding by no later than 30 June 2017 with a view to assessing the market conditions and other factors to determine whether the terms and conditions should be continued and or amended.

• (d) After 31 December 2017, the terms and conditions of this Sector Understanding shall be discontinued unless the Participants agree otherwise.

‘ANNEX VI

SECTOR UNDERSTANDING ON EXPORT CREDITS FOR COAL-FIRED ELECTRICITY GENERATION 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

• (a) This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts for coal-fired electricity generation projects, for:

• (1) The export of new coal-fired electricity generation plants or parts thereof, for the grid and for industrial use, located in plants without operational carbon capture and storage or carbon capture and utilisation technology, comprising all components, equipment, materials and services (including the training of personnel) directly required for the construction and commissioning of such plants. The addition of a new coal-fired electricity generation unit to an existing plant is deemed to be a new coal-fired electricity generation plant.

• (2) The modernisation of, or supply of equipment to, existing coal-fired electricity generation plants, for the grid and for industrial use.

• (b) This Sector Understanding does not apply to items located outside the coal-fired electricity generation project 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 coal-fired electricity generation project; and

• (2) The terms and conditions for sub-stations, transformers and transmission lines with a minimum voltage threshold of 100 kV located outside the coal-fired electricity generation project site boundary shall not be more generous than those for the coal-fired electricity generation project.

• (c) If a coal-fired electricity generation project falls within the scope and meets the conditions of Appendix II of the Sector Understanding on Export Credits for Renewable Energy, Climate Change Mitigation and Adaptation, and Water Projects, the financial terms and conditions applicable to such project shall be those set out in the said Sector Understanding.

CHAPTER II

PROVISIONS FOR EXPORT CREDITS

2. MAXIMUM REPAYMENT TERMS

• (a) For officially supported export credits for goods and services covered by the provisions of Article 1(a)(1) of this Sector Understanding, the maximum repayment term is set out as follows in Table 1 below:

Table 1

Maximum repayment terms

PLANT UNIT SIZE (gross installed capacity)	Unit > 500 MW	Unit ≥ 300 to 500 MW	Unit < 300 MW
Ultra-supercritical (i.e., with a steam pressure > 240 bar and ≥ 593 °C steam temperature), OR Emissions < 750 g CO2/kWh	12 years[^ntr39-L_2018037EN.01008501-E0001]	12 years[^ntr39-L_2018037EN.01008501-E0001]	12 years[^ntr39-L_2018037EN.01008501-E0001]
Supercritical (i.e., with a steam pressure > 221 bar and > 550 °C steam temperature), OR Emissions between 750 and 850 g CO2/kWh	Ineligible	10 years, and only in IDA-eligible countries[^ntr39-L_2018037EN.01008501-E0001] [^ntr40-L_2018037EN.01008501-E0002] [^ntr41-L_2018037EN.01008501-E0003]	10 years, and only in IDA-eligible countries[^ntr39-L_2018037EN.01008501-E0001] [^ntr40-L_2018037EN.01008501-E0002] [^ntr41-L_2018037EN.01008501-E0003]
Subcritical (i.e., with a steam pressure < 221 bar), OR Emissions > 850 g CO2/kWh	Ineligible	Ineligible	10 years, and only in IDA-eligible countries[^ntr39-L_2018037EN.01008501-E0001] [^ntr41-L_2018037EN.01008501-E0003]

• (b) For the purpose of the implementation of Table 1 above:

• (1) With respect to eligible subcritical units, official support shall be limited to two co-located units in a given plant, not to exceed an aggregate gross installed capacity of 500 MW, except if the alternatives analysis referred to in Article 4(b)(1) of this Sector Understanding examines the possibility of one larger unit in a higher efficiency category, and demonstrates that this approach is not viable; in this case, official support shall be limited to two units, not to exceed an aggregate gross installed capacity of 600 MW.

• (2) With respect to eligible supercritical units, official support shall be limited to no more than two co-located units in a given plant, except if the alternatives analysis referred to in Article 4(b)(1) of this Sector Understanding examines the possibility of achieving the same capacity through one or two larger units, and demonstrates that this approach is not viable.

• (3) IDA-eligible countries are defined as countries eligible for International Development Association (IDA) resources (including IDA-only and IDA blend countries) at the time the relevant completed application for export credit is received.

• (c) For officially supported export credits for goods and services covered by Article 1(a)(2) of this Sector Understanding, the maximum repayment term shall be determined by Article 12 of the Arrangement.

• (d) Project Finance transactions are transactions of goods and services covered by this Sector Understanding that also meet the criteria set out in Appendix I of Annex VII. For such transactions, a Participant applying the relevant repayment term allowed by Table 1 of this Sector Understanding, shall also apply the other terms and conditions set out in Annex VII, subject to the provisions of Article 3 of this Sector Understanding.

3. REPAYMENT OF PRINCIPAL AND INTEREST

• (a) Subject to the provisions of paragraph (b) below, the repayment of principal and interest shall be provided in accordance with:

• (1) Article 14 of the Arrangement, or

• (2) For transactions of goods and services covered by this Sector Understanding that also meet the criteria set out in Appendix I of Annex VII, Article 3 of that Annex.

• (b) The weighted average life of the repayment period supported shall not exceed half of the repayment period plus one quarter of a year.

CHAPTER III

PROCEDURES

4. PRIOR NOTIFICATION

• (a) A Participant shall give prior notification in accordance with Article 48 of the Arrangement at least ten calendar days before issuing any commitment if it intends to provide support in accordance with the provisions of this Sector Understanding.

• (b) Such notification shall:

• (1) Indicate that an evaluation of less carbon-intensive energy alternatives has been carried out and such alternatives are demonstrated as not viable, and

• (2) Include a demonstration that the project is compatible with the host country's national energy policy and climate mitigation policy and strategy, which is supported by a targeted policy to expand renewables and/or to enhance energy efficiency.

• (3) For projects qualifying under Footnote 2, an explanation of how the supported project helps address energy poverty.

• (c) A Participant notifying a transaction under “Project Finance” in compliance with Article 2(d) of this Sector Understanding shall, in addition to the reporting requirements set out above, report the information required in accordance with Annex VII.

CHAPTER IV

MONITORING, REVIEW AND REVISION

5. MONITORING

The Secretariat shall report annually on the implementation of this Sector Understanding.

6. REVIEW AND MONITORING

• (a) This Sector Understanding shall be reviewed by no later than 30 June 2019 with the objective of further strengthening its terms and conditions in a second phase beginning no later than 1 January 2021, in order to contribute to the common goal of addressing climate change and to continue phasing down official support for coal-fired power plants, including with a view to reducing the use of less efficient coal-fired power plants.

• (b) The review shall take into account:

• (1) The most recent reports on climate science and the implications for global infrastructure investment decisions of remaining on the path to limit global warming to below 2 degrees Celsius higher than pre-industrial levels;

• (2) Advancements in technology concerning coal-fuelled power plants, including Integrated Gasification Combined Cycle (IGCC);

• (3) Availability of carbon capture and storage technology;

• (4) The evolution of regulatory frameworks in both exporting and buying countries with regard to coal-fuelled power plants;

• (5) The evolution of market conditions, in various countries, including commercial feasibility of, and operational experience with, various coal-fuelled power plant technologies;

• (6) Developments in the export credit financing policies and practices of non-OECD countries, especially the major exporting countries of coal-fuelled power plants, recognising the important role that Participants can play in encouraging the Participation of non-OECD countries in this area; and

• (7) How the present Sector Understanding has affected energy poverty and the National Electrification Rate.

7. TRANSITIONAL ARRANGEMENTS

The terms and conditions of this Sector Understanding are applicable to final commitments for goods and services covered by this Sector Understanding as of 1 January 2017, with the exception of those projects for which a request for proposals was issued prior to 1 January 2017, on the basis of a fully completed technical feasibility study and environmental and social impact assessment, and provided that an application for export credit support for any such project is submitted and acted upon expeditiously.

‘ANNEX VII

TERMS AND CONDITIONS APPLICABLE TO PROJECT FINANCE TRANSACTIONS

CHAPTER I

GENERAL PROVISIONS

1. SCOPE OF APPLICATION

• (a) This Annex sets out terms and conditions that Participants may support for project finance transactions that meet the eligibility criteria set out in Appendix 1.

• (b) Where no corresponding provision exists in this Annex, the terms of the Arrangement shall apply.

CHAPTER II

FINANCIAL TERMS AND CONDITIONS

[^ntr42-L_2018037EN.01008901-E0001]

2. MAXIMUM REPAYMENT TERMS

The maximum repayment term is 14 years, subject to the provisions of the Sector Understanding on Export Credits for Coal-Fired Electricity Generation Projects for projects falling within its scope.

3. REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST

The principal sum of an export credit may be repaid in unequal instalments, and principal and interest may be paid in less frequent than semi-annual instalments, as long as the following conditions are met:

• (a) 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.

• (b) The first repayment of principal shall be made no later than 24 months after the starting point of credit and no less than 2 % of the principal sum of the credit shall have been repaid 24 months after the starting point of credit.

• (c) 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.

• (d) The weighted average life of the repayment period shall not exceed seven-and-a-quarter years.

• (e) The Participant shall give prior notification according to Article 5 of this Annex.

4. MINIMUM FIXED INTEREST RATES

Where Participants are providing official financing support for fixed rate loans:

• (a) For repayment terms of up to and including 12 years, Participants shall apply the relevant Commercial Interest Reference Rates (CIRRs) constructed in Accordance with Article 20 of the Arrangement.

• (b) For repayment terms in excess of 12 years, a surcharge of 20 basis points on the CIRR shall apply for all currencies.

CHAPTER III

PROCEDURES

5. PRIOR NOTIFICATION FOR PROJECT FINANCE TRANSACTIONS

A Participant shall notify all Participants of the intent to provide support according to the terms and conditions of this Annex at least ten calendar days before issuing any commitment. The notification shall be provided in accordance with Annex VIII of the Arrangement. If any Participant requests an explanation in respect of the terms and conditions being supported during this period, the notifying Participant shall wait an additional ten calendar days before issuing any commitment.

‘Appendix 1

Eligibility criteria for project finance transactions

I. BASIC CRITERIA

The transaction involves/is characterised by:

• (a) The financing of a particular economic unit in which a lender is satisfied to consider the cash flows and earnings of that economic unit as the source of funds from which a loan will be repaid and to the assets of the economic unit as collateral for the loan.

• (b) Financing of export transactions with an independent (legally and economically) project company, e.g. special purpose company, in respect of investment projects generating their own revenues.

• (c) Appropriate risk-sharing among the partners of the project, e.g. private or creditworthy public shareholders, exporters, creditors, off-takers, including adequate equity.

• (d) Project cash flow sufficient during the entire repayment period to cover operating costs and debt service for outside funds.

• (e) Priority deduction from project revenues of operating costs and debt service.

• (f) A non-sovereign buyer/borrower with no sovereign repayment guarantee (not including performance guarantees, e.g. off-take arrangements).

• (g) Asset-based securities for proceeds/assets of the project, e.g. assignments, pledges, proceed accounts;

• (h) Limited or no recourse to the sponsors of the private sector shareholders/sponsors of the project after completion.

II.   ADDITIONAL CRITERIA FOR PROJECT FINANCE TRANSACTIONS IN HIGH INCOME OECD COUNTRIES

The transaction involves/is characterised by:

• (a) Participation in a loan syndication with private financial institutions that do not benefit from Official Export Credit Support, whereby:

• (1) The Participant is a minority partner with pari passu status throughout the life of the loan; and

• (2) Official export credit support provided by the Participants comprises less than 50 % of the syndication.

• (b) Premium rates for any official support that do not undercut available private market financing and that are commensurate with the corresponding rates being charged by other private financial institutions that are participating in the syndication.

‘ANNEX VIII

INFORMATION TO BE PROVIDED FOR NOTIFICATIONS

The information listed in Section I below shall be provided for all notifications made under the Arrangement (including its Annexes). In addition, the information specified in Section II shall be provided, as appropriate, in relation to the specific type of notification being made.

I. INFORMATION TO BE PROVIDED FOR ALL NOTIFICATIONS

(a) Basic Information

	1.	Notifying country
---	---	---
	2.	Notification date
---	---	---
	3.	Name of notifying authority/agency
---	---	---
	4.	Reference number
---	---	---
	5.	Original notification or revision to previous notification (revision number as relevant)
---	---	---
	6.	Tranche number (if relevant)
---	---	---
	7.	Reference number of credit line (if relevant)
---	---	---
	8.	Arrangement Article(s) under which the notification is being made
---	---	---
	9.	Reference number of notification being matched (if relevant)
---	---	---
	10.	Description of support being matched (if relevant)
---	---	---
	11.	Destination Country

(b) Buyer/Borrower/Guarantor Information

	1.	Buyer Country
---	---	---
	2.	Buyer Name
---	---	---
	3.	Buyer Location
---	---	---
	4.	Buyer Status
---	---	---
	5.	Borrower Country (if different from the buyer)
---	---	---
	6.	Borrower Name (if different from the buyer)
---	---	---
	7.	Borrower Location (if different from the buyer)
---	---	---
	8.	Borrower Status (if different from the buyer)
---	---	---
	9.	Guarantor Country (if relevant)
---	---	---
	10.	Guarantor Name (if relevant)
---	---	---
	11.	Guarantor Location (if relevant)
---	---	---
	12.	Guarantor Status (if relevant)

(c) Information on Goods and/or Services Being Exported and the Project

	1.	Description of the goods and/or services being exported
---	---	---
	2.	Description of the project (if relevant)
---	---	---
	3.	Location of the project (if relevant)
---	---	---
	4.	Tender closing date (if relevant)
---	---	---
	5.	Expiry date of credit line (if relevant)
---	---	---
	6.	Value of contract(s) supported, either the actual value (for all lines of credit and project finance transactions or for any individual transaction on a voluntary basis) or according to the following scale in millions of SDRs: Category From To I: 0 1 II: 1 2 III: 2 3 IV: 3 5 V: 5 7 VI: 7 10 VII: 10 20 VIII: 20 40 IX: 40 80 X: 80 120 XI: 120 160 XII: 160 200 XIII: 200 240 XIV: 240 280 XV: 280 [^ntr*2-L_2018037EN.01009201-E0001]
---	---	---
	7.	Currency of contract(s)

(d) Financial Terms and Conditions of the Official Export Credit Support

	1.	Credit value; the actual value for notifications involving lines of credit and project finance transactions or for any individual transaction on a voluntary basis, or according to the SDR scale
---	---	---
	2.	Currency of credit
---	---	---
	3.	Down payment (percentage of the total value of the contracts supported)
---	---	---
	4.	Local Costs (percentage of the total value of the contracts supported)
---	---	---
	5.	Starting point of credit and reference to the applicable subparagraph of Article 10
---	---	---
	6.	Length of the repayment period
---	---	---
	7.	Interest rate base
---	---	---
	8.	Interest rate or margin

II.   ADDITIONAL INFORMATION TO BE PROVIDED, AS APPROPRIATE, FOR NOTIFICATIONS MADE IN RELATION TO SPECIFIC PROVISIONS

(a) Arrangement, Article 14(d)(5)

	1.	Repayment profile
---	---	---
	2.	Repayment frequency
---	---	---
	3.	Length of time between the starting point of credit and the first repayment of principal
---	---	---
	4.	Amount of interest capitalised before the starting point of credit
---	---	---
	5.	Weighted average life of the repayment period
---	---	---
	6.	Explanation of the reason for not providing support according to Article 14 paragraphs (a) through (c)

(b) Arrangement, Articles 24, 27, 30 and 31

	1.	Country risk classification of the obligor's country
---	---	---
	2.	Selected buyer risk category of the obligor
---	---	---
	3.	Length of the disbursement period
---	---	---
	4.	Percentage of cover for political (country) risk
---	---	---
	5.	Percentage of cover for commercial (buyer) risk
---	---	---
	6.	Quality of cover (i.e. below standard, standard, above standard)
---	---	---
	7.	MPR based on the country risk classification of the obligor's country absent any third party guarantee, involvement of a multilateral/regional institution, risk mitigation and/or buyer risk enhancements
---	---	---
	8.	Applicable MPR
---	---	---
	9.	Actual premium rate charged (expressed in MPR format as a percentage of the principal)

(c) Arrangement, Article 24(c)

	1.	Accredited CRA foreign currency rating(s) of the obligor/guarantor
---	---	---
	2.	Accredited CRA foreign currency rating(s) of the sovereign
---	---	---
	3.	Corresponding TCMB MPR based on the best available Accredited CRA foreign currency rating of the obligor/guarantor
---	---	---
	4.	Corresponding TCMB MPR based on the best available Accredited CRA foreign currency rating of the sovereign, where the risk classification proposed for an obligor/guarantor equals or exceeds the best available Accredited CRA rating for the sovereign
---	---	---
	5.	In the case of classifying an obligor/guarantor at a rating better than the best rating available by an Accredited CRA or equal to or better than the best rating for the sovereign available by an Accredited CRA, the notification shall provide a justification for the classification
---	---	---
	6.	In the case of syndicated loan/guarantee pricing, a detailed description of the methodology used to derive the premium based on the all-in pricing
---	---	---
	7.	In the case of loan benchmark, a detailed description of the methodology used to derive the premium based on all-in pricing
---	---	---
	8.	In the case of Name Specific bond or CDS pricing, a detailed description of the methodology used to derive the pricing, detailed information on why the pricing is relevant, including whether the pricing relates to the actual obligor or a Related Entity, and if the later, outline how the criteria of a Related Entity have been met

(d) Arrangement, Article 27(e)

	1.	Selected buyer risk category of the obligor
---	---	---
	2.	Accredited CRA foreign currency rating(s)
---	---	---
	3.	Rationale for buyer risk category better than accredited CRA rating

(e) Arrangement, Article 30

	1.	Country risk mitigation technique used
---	---	---
	2.	Confirmation that the criteria listed in Annex XIII have been met
---	---	---
	3.	For Technique 1, the applicable country risk classification resulting from the use of the technique.
---	---	---
	4.	For Technique 2: — the local currency used — the value of the LCF applied

(f) Arrangement, Article 31

	1.	The BRCE(s) applied
---	---	---
	2.	The CEF applied for each credit enhancement
---	---	---
	3.	The total CEF to be applied

(g) Arrangement, Articles 49 and 50

	1.	Form of tied aid (i.e. development aid or premixed credit or associated finance)
---	---	---
	2.	Overall concessionality level of the tied and partially untied aid financing calculated in accordance with Article 40
---	---	---
	3.	DDR used for concessionality calculation
---	---	---
	4.	Treatment of cash payments in the calculation of the concessionality level
---	---	---
	5.	Restrictions on use of credit lines

(h) Annex I, Article 5(e)

	1.	Indication of: — The date of the first payment of interest, if later than six months after the starting point of credit — The frequency of payment of interest, if less frequent than every six months

(i) Annex II, Article 8

	1.	Enhanced description of the export contract, i.e. new nuclear power station, modernisation of an existing nuclear power plant, supply of nuclear fuel and enrichment, or provision of spent fuel management.
---	---	---
	2.	Repayment of principal and payment of interest according to: Article 3(a)(1), Article 3(a)(2) or Article 3(c) of Annex II.
---	---	---
	3.	Where official support is provided in accordance with Article 3(c) of Annex II, please provide: — Repayment profile — Repayment frequency — Length of time between the starting point of credit and the first repayment of principal — Amount of interest capitalised before the starting point of credit — Weighted average life of the repayment period — Explanation of the reason for not providing support in accordance with Articles 3(a) and (b) of Annex II.
---	---	---
	4.	Minimum interest rate applied in accordance with Article 4 of Annex II.

(j) Annex IV, Article 10

	1.	Enhanced description of the project: — New renewable energies and water plant, or modernisation of an existing renewable energies and water plant, including the specific sector as listed in Appendix I of Annex IV, or — If a hydro-power project, whether a new large hydro-power project (as defined in Appendix IV of Annex IV), or — For projects falling in the Project Classes listed in Appendix II of Annex IV, a demonstration of how the project complies with the criteria for support, as set out in Article 2(b) of Annex IV, or — For projects supported in conformity with Appendix III of Annex IV: — An enhanced description of the project in order to demonstrate how the project complies with the criteria for support, as set out in Article 3(b) or (c) respectively of Annex IV, and — Access to the outcome of the independent third-party review required in Appendix III of Annex IV.
---	---	---
	2.	Repayment profile of principal and payment of interest according to: Article 6(a)(1), Article 6(a)(2) or Article 6(c) of Annex IV.
---	---	---
	3.	Where official support is provided in accordance with Article 6(c) of Annex IV, please provide: — Repayment profile — Repayment frequency — Length of time between the starting point of credit and the first repayment of principal — Amount of interest capitalised before the starting point of credit — Weighted average life of the repayment period — Explanation of the reason for not providing support in accordance with Articles 6(a) and (b) of Annex IV.
---	---	---
	4.	Minimum interest rate applied in accordance with Article 7 of Annex IV.

(k) Annex V, Article 5

	1.	Comprehensive explanation for the terms and conditions of the official support provided, including: — Explanation of why the Rail Infrastructure terms and conditions are being provided — How the repayment terms offered do not exceed the useful life of the rail infrastructure financed
---	---	---
	2.	For transactions in Category I countries: — Total debt syndication amount for the project, including official and private lenders — Total amount of the debt syndication from private lenders — Percentage of the debt syndication provided by the Participants — Confirmation that the Participant is involved in a loan syndication with private financial institutions that do not benefit from official export credit support, whereby (i) the Participant is a minority partner with pari passu status throughout the life of the loan and (ii) official export credit support provided by the Participants comprises less than 50 % of the syndication — Specific data on pricing to explain how premium rates charged for official support do not undercut available private market financing and are commensurate with the corresponding rates being charged by other private financial institutions that are participating in the syndication.

(l) Annex VI, Article 4

	1.	Indicate that an evaluation of less carbon-intensive energy alternatives has been carried out and such alternatives are demonstrated as not viable, and
---	---	---
	2.	Include a demonstration that the project is compatible with the host country's national energy policy and climate mitigation policy and strategy, which is supported by a targeted policy to expand renewables and/or to enhance energy efficiency.
---	---	---
	3.	For projects qualifying under Footnote 2 of Annex VI, an explanation of how the supported project helps address energy poverty.

(m) Annex VII, Article 5

	1.	Explanation of why project finance terms are being provided
---	---	---
	2.	Contract value in relation to turnkey contract, portion of sub-contracts, etc.
---	---	---
	3.	Enhanced project description
---	---	---
	4.	Type of cover provided prior to the starting point of credit
---	---	---
	5.	Percentage of cover for political risk prior to the starting point of credit
---	---	---
	6.	Percentage of cover for commercial risk prior to the starting point of credit
---	---	---
	7.	Type of cover provided after the starting point of credit
---	---	---
	8.	Percentage of cover for political risk after the starting point of credit
---	---	---
	9.	Percentage of cover for commercial risk after the starting point of credit
---	---	---
	10.	Length of the construction period (if applicable)
---	---	---
	11.	Length of the disbursement period
---	---	---
	12.	Weighted average life of the repayment period
---	---	---
	13.	Repayment profile
---	---	---
	14.	Repayment frequency
---	---	---
	15.	Length of time between the starting point of credit and the first repayment of principal
---	---	---
	16.	Percentage of principal repaid by the mid-point of credit
---	---	---
	17.	Amount of interest capitalised before the starting point of credit
---	---	---
	18.	Other fees received by the ECA, e.g. commitment fees (optional, except in the case of transactions with buyers in High Income OECD Countries)
---	---	---
	19.	Premium rate (optional, except in the case of projects in High Income OECD Countries)
---	---	---
	20.	Confirmation (and explanation as necessary) that the transaction involves/is characterised by: — The financing of a particular economic unit in which a lender is satisfied to consider the cash flows and earnings of that economic unit as the source of funds from which a loan will be repaid and to the assets of the economic unit as collateral for the loan. — Financing of export transactions with an independent (legally and economically) project company, e.g. special purpose company, in respect of investment projects generating their own revenues. — Appropriate risk-sharing among the partners of the project, e.g. private or creditworthy public shareholders, exporters, creditors, off-takers, including adequate equity. — Project cash flow sufficient during the entire repayment period to cover operating costs and debt service for outside funds. — Priority deduction from project revenues of operating costs and debt service. — A non-sovereign buyer/borrower with no sovereign repayment guarantee. — Asset-based securities for proceeds/assets of the project, e.g. assignments, pledges, proceed accounts. — Limited or no recourse to the sponsors of the private sector shareholders/sponsors of the project after completion.

(n) Annex VII, Article 5, for projects in High Income OECD Countries

	1.	Total debt syndication amount for the project, including official and private lenders
---	---	---
	2.	Total amount of the debt syndication from private lenders
---	---	---
	3.	Percentage of the debt syndication provided by the Participants
---	---	---
	4.	Confirmation that: — In respect of participation in a loan syndication with private financial institutions that do not benefit from official export credit support, the Participant is a minority partner with pari passu status throughout the life of the loan. — The premium rate reported under item (m)19 above does not undercut available private market financing and is commensurate with the corresponding rates being charged by other private financial institutions that are participating in the syndication.

‘ANNEX IX

CALCULATION OF THE MINIMUM PREMIUM RATES

MPR Formula

The formula for calculating the applicable MPR for an export credit involving an obligor/guarantor in a country classified in Country Risk Categories 1-7 is:

MPR = {[(ai * HOR + bi) * max (PCC, PCP)/0,95] * (1 – LCF) + [cin * PCC/0,95 * HOR * (1 – CEF)]}* QPFi * PCFi * BTSF

where:

—   ai= country risk coefficient in country risk category i (i = 1-7)

—   cin= buyer risk coefficient for buyer category n (n = SOV+, SOV/CCO, CC1-CC5) in country risk category i (i = 1-7)

—   bi= constant for country category risk category i (i = 1-7)

—   HOR= horizon of risk

—   PCC= commercial (buyer) risk percentage of cover

—   PCP= political (country) risk percentage of cover

—   CEF= credit enhancements factor

—   QPFi= quality of product factor in country risk category i (i = 1-7)

—   PCFi= percentage of cover factor in country risk category i (i = 1-7)

—   BTSF= better than sovereign factor

—   LCF= local currency factor

Applicable Country Risk Classification

The applicable country risk classification is determined according to Article 24(e) of the Arrangement, which in turn determines the country risk coefficient (ai) and constant (bi) that are obtained from the following table:

	1	2	3	4	5	6	7
a	0,090	0,200	0,350	0,550	0,740	0,900	1,100
b	0,350	0,350	0,350	0,350	0,750	1,200	1,800

Selection of the Appropriate Buyer Risk Category

The appropriate buyer risk category is selected from the following table, which provides the combinations of country and buyer risk categories that have been established and the agreed concordance between buyer risk categories CC1-CC5 and the classifications of accredited CRAs. Qualitative descriptions of each buyer risk category (SOV+ to CC5) have been established to facilitate the classification of obligors (and guarantors) and are provided in Annex XII.

Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category
1	2	3	4	5	6	7
SOV+	SOV+	SOV+	SOV+	SOV+	SOV+	SOV+
SOV/CC0	SOV/CC0	SOV/CC0	SOV/CC0	SOV/CC0	SOV/CC0	SOV/CC0
CC1 AAA to AA-	CC1 A+ to A-	CC1 BBB+ to BBB-	CC1 BB+ to BB	CC1 BB-	CC1 B+	CC1 B
CC2 A+ to A-	CC2 BBB+ to BBB-	CC2 BB+ to BB	CC2 BB-	CC2 B+	CC2 B	CC2 B- or worse
CC3 BBB+ to BBB-	CC3 BB+ to BB	CC3 BB-	CC3 B+	CC3 B	CC3 B- or worse
CC4 BB+ to BB	CC4 BB-	CC4 B+	CC4 B	CC4 B- or worse
CC5 BB- or worse	CC5 B+ or worse	CC5 B or worse	CC5 B- or worse

The selected buyer risk category, in combination with the applicable country risk category determines the buyer risk coefficient (cin) that is obtained from the following table:

Buyer Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category
Buyer Risk Category	1	2	3	4	5	6	7
SOV+	0,000	0,000	0,000	0,000	0,000	0,000	0,000
SOV/CC0	0,000	0,000	0,000	0,000	0,000	0,000	0,000
CC1	0,110	0,120	0,110	0,100	0,100	0,100	0,125
CC2	0,200	0,212	0,223	0,234	0,246	0,258	0,271
CC3	0,270	0,320	0,320	0,350	0,380	0,480	n/a
CC4	0,405	0,459	0,495	0,540	0,621	n/a	n/a
CC5	0,630	0,675	0,720	0,810	n/a	n/a	n/a

Horizon of Risk (HOR)

The Horizon of Risk (HOR) is calculated as follows:

For standard repayment profiles (i.e. equal semi-annual repayments of principal): HOR = (length of the disbursement period * 0,5) + the length of the repayment period

For non-standard repayment profiles: HOR = (length of the disbursement period * 0,5) + (weighted average life of the repayment period – 0,25)/0,5

In the above formulas, the unit of measurement for time is years.

Percentage of Cover for Commercial (Buyer) Risk (PCC) and Political (Country) Risk (PCP)

The Percentages of Cover (PCC and PCP) expressed as a decimal value (i.e. 95 % is expressed as 0,95) in the MPR formula.

Buyer Risk Credit Enhancements

The value of the credit enhancement factor (CEF) is 0 for any transaction that is not subject to any buyer risk credit enhancements. The value of the CEF for transactions that are subject to buyer risk credit enhancements is determined according to Annex XIII, subject to the restrictions set out in Article 31(c) of the Arrangement and may not exceed 0,35.

Quality of Product Factor (QPF)

The QPF is obtained from the following table:

Product Quality	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category
Product Quality	1	2	3	4	5	6	7
Below Standard	0,9965	0,9935	0,9850	0,9825	0,9825	0,9800	0,9800
Standard	1,0000	1,0000	1,0000	1,0000	1,0000	1,0000	1,0000
Above Standard	1,0035	1,0065	1,0150	1,0175	1,0175	1,0200	1,0200

Percentage of Cover Factor (PCF)

The PCF is determined as follows:

For (max(PCC, PCP) ≤ 0,95, PCF = 1)

For (max(PCC, PCP) > 0,95, PCF = 1 + ((max(PCC, PCP) – 0,95)/0,05) * (percentage of cover coefficient)

The percentage of cover coefficient is obtained from the following table:

	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category	Country Risk Category
	1	2	3	4	5	6	7
Percentage of cover coefficient	0,00000	0,00337	0,00489	0,01639	0,03657	0,05878	0,08598

Better than Sovereign Factor (BTSF)

When an obligor is classified in the “better than sovereign” (SOV+) buyer risk category, BTSF = 0,9, otherwise BTSF = 1.

Local Currency Factor (LCF)

For transaction making use of local currency country risk mitigation, the value of the LCF may not exceed 0,2. The value of the LCF for all other transactions is 0.

‘ANNEX X

MARKET BENCHMARKS FOR TRANSACTIONS IN CATEGORY ZERO COUNTRIES

Un-covered Tranche of Export Credits or the non-ECA Covered Part of a Syndicated Loan

The price indicated by private banks/institutions with respect to the uncovered tranche of the export credit in question (or sometimes as the non-ECA covered part of a syndicated loan) may represent the best match to ECA cover. Pricing on such un-covered portions or non-covered parts should only be used if provided on commercial terms (e.g. this would exclude IFI funded portions).

Name-Specific Corporate Bonds

Corporate bonds reflect name specific credit risk. Care should be used in matching in terms of the ECA contract characteristics, such as term of maturity, and currency denomination, and any credit enhancements. If primary corporate bonds (i.e. all-in yield upon issuance) or secondary corporate bonds (i.e. the option adjusted spread over the appropriate curve, which is usually the relevant currency swap curve) are used, those for the obligor should be used in the first instance; if not available, primary or secondary corporate bonds from Related Entities may be used.

Name-Specific Credit Default Swaps

Credit Default Swaps (CDS) are a form of protection against default. The CDS spread is the amount paid per period by the buyer of the CDS as a percentage of notional principal, and is usually expressed in basis points. The CDS buyer effectively buys insurance against default by making payments to the seller of the CDS for the life of the swap, or until the credit event occurs. A CDS curve for the obligor should be used in the first instance; if not available, CDs curves from Related Entities may be used.

Loan Benchmarks

Primary loan benchmarks (i.e. pricing upon issuance) or secondary loan benchmarks (i.e. the current yield on the loan expected by the financial institution purchasing the loan from another financial institution). All fees must be known for primary loan benchmarks so that the all-in yield can be calculated. If loan benchmarks are used, those for the obligor should be used in the first instance; if not available, those from related entities may be used.

Benchmark Market Curves

Benchmark market curves reflect the credit risk of a whole sector or class of buyers. This market information may be relevant when name specific information is not available. In general, the quality of the information inherent to these markets depends upon their liquidity. In any case, one should look for market instruments that provide the closest match in terms of the ECA contract characteristics, such as date, credit rating, term of maturity, and currency denomination.

‘ANNEX XI

CRITERIA AND CONDITIONS GOVERNING THE APPLICATION OF A THIRD PARTY REPAYMENT GUARANTEE AND THE CLASSIFICATION OF MULTILATERAL OR REGIONAL INSTITUTIONS

PURPOSE

This Annex provides the criteria and conditions that govern the application of third party repayment guarantees, including the repayment guarantee of a classified multilateral or regional institution according to Article 24(e) of the Arrangement. It also provides the criteria by which multilateral or regional institutions should be assessed when determining if an institution should be classified in connection with Article 28 of the Arrangement.

APPLICATION

Case 1: Guarantee for the Total Amount at Risk