Project Finance: Practical Case Studies

world. The company’s revenues in 1996 were US$1.3 billion. It operated 36 plants with a
total capacity of 3,500 MW, including four plants in Colombia. Stewart & Stevenson’s fleet
availability over the past four years had averaged over 94 per cent, with no single plant below
92 per cent availability. In 1998, Stewart & Stevenson sold its gas turbine operation, includ-
ing the TermoEmcali O&M contract, to General Electric.
The O&M agreement provides incentives for Stewart & Stevenson to operate the plant
as efficiently and cost-effectively as possible. The PPA requires the project company to con-
tribute annually to a maintenance reserve for periodic equipment overhauls and to maintain
business interruption insurance equal to 18 months of expenses.

Financing structure

The project financing structure is shown in Exhibit 3.4. TermoEmcali Funding
Corporation, wholly owned by Leaseco, is established for the sole purpose of issuing the
notes. It is a special-purpose corporation operating under the laws of the State of Delaware
in the United States. TermoEmcali Funding lent a portion of the proceeds from issuance
of the notes to Leaseco, which used those proceeds to acquire equipment for lease to the
project company. This arrangement allows the project company to take advantage of tax
deductions for lease payments. The project company thus owns some assets and has a
leasehold interest in others.

TERMOEMCALI, COLOMBIA

Exhibit 3.4

Project financing structure

Supplier Funding Corp

Noteholders

Contractor

Financial

Institution

Leaseco* The Company

Emcali Facility

Notes

Repayment of

company loans

Participation in

company loans

Company

loans

Repayment of

Leaseco loans

Leaseco loans

Payments

under

offshore

equipment

contract

Payments

under

construction

contract

Rent

Lease of equipment

PPA tariff

payments

* Pursuant to the Leasco guarantee. Leaseco will guarantee the obligations of Funding Corp under the financing documents.