Project Finance and Equator Principles

Revenue Generation from single project as repayment and security for exposure is important throughout the world. Large Complex and Expensive installations such as Power Plants, Chemical Processing Plants, Mines, Transportation, Infrastructure, environment and Telecommunication, New Capital Installation / Refinancing Existing Installation with/out improvements Lender is paid exclusively out of the money generated by the Contract Borrower is Special Purpose Entity (SPE) EP so as to ensure that the Projects Financed with social responsibility and reflecting environmental management practices Importance of Climate Change, Biodiversity and Human Rights Not to promote Projects adverse to Ecosystem, Communities and Climate

Equator Principles
Rules to improve efficiency and formalize existing practices, procedures and members responsibilities; Leading voluntary standards for managing social and environmental risks in project financing formally adopting new governing rules from 1.7.2013 PM INDIA (July 3, 2013 ET Report) Push an investment target of INR 1.15L crore infrastructure projects in 2013-14 IDFC BS of INR 71k crore responsible to bank a fifth of NH projects being constructed in PPP mode FDI quite possible Launched in June 2003 (first time) by 10 private international financial institutions alarmed by social and environmental disarray Performance Standards of International Finance Corporation and World Bank Groups Environmental Health and Safety Guidelines Applicable to projects of US$ 1o million and above 79 EPFI in 35 countries IDFC only EPFI from India

Equator Principles
1. PROJECT FINANCE ADVISORY SERVICES where project capital cost is US$ 10 million and above; 2. PROJECT FINANCE again US$ 10 million and more; 3. PROJECT RELATED CORPORATE LOANS including Export Finance in the form of Buyer Finance Majority has Effective Operational Control either direct and indirect, Aggregate Loan Amount US$ 100 million and more with individual commitment of EPFI US$ 50 million, tenure at least two years Not Applicable to Export Finance of Supplier Finance, Asset Finance, Acquisition Finance, hedging leasing, letter of credit, general corporate purpose loans and working capital expenditures for operational cost 4. BRIDGE LOANS with tenure of less than two years intended to be refinanced by 1 an 2 above along with criteria 1 & 4 EPFI to make client aware of the contents, applications and benefits of EPs to the anticipated projects

Statement of Principles
1. REVIEW AND CATEGORIZATION Internal Environmental and Social Review with due diligence to assess the magnitude of its potential environmental and social risks and impacts as categorized by IFC - Category A Significant adverse environmental and social risks with impacts diverse, irreversible and unprecedented , Category B with limited adverse environment and social risks and impacts few in number site specific, reversible and addressable through mitigation, and Category C with minimal and no adverse environmental and social risks and impacts ENVIRONMENTAL AND SOCIAL ASSESSMENT Category A and B Conduct an assessment process to address the relevant risks and their impact and document the measure to minimize, mitigate and offset the adverse impact in a manner relevant and appropriate to the nature and scale of proposed project. For other projects, a limited / focused environmental or social assessment may be carried out,

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Statement of Principles
3. APPLICABLE ENVIRONMENTAL AND SOCIAL STANDARDS Compliance with relevant host country laws and regulations and permits pertaining to environmental and social issues ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM AND EP ACTION PLAN Address issues raised in the assessment process and incorporate actions required to comply with the applicable standards intend to outline gaps and commitments to meet EPFI requirement in line with the applicable standards STAKEHOLDERS ENGAGEMENT Category A & B Effective and ongoing stakeholders engagement in a structured and culturally appropriate manner with affected communities and other stakeholders by conducting informed consultation and participation process Risks and Impact on the Project, Phase of Development, Languages preferences of the affected communities and their decision-making processes, the needs of the disadvantaged and vulnerable groups free from external manipulations, interference, coercion and intimidation

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Statement of Principles
6. GRIEVANCE MECHANISM For Category A and B Grievance Mechanism to receive and facilitate resolutions of concerns and grievances about project environment and social performance INDEPENDENT REVIEW For all Cat A and appropriate Cat B projects an independent environmental and social consultant will carry out independent review of the assessment documentation including the ESMPs, the ESMS and the Stakeholders Engagement including suitable EP action plan for compliance with EP or indicating impossibility otherwise, In case of project related corporate loans independent review for high risk impacts including adverse impacts on indigenous peoples, critical habitat impacts, significant cultural heritage impacts and large scale resettlement be covered COVENANTS Incorporation of covenants linked to compliance. In case of compliance, EPFI will work with the client on remedial actions to the extent feasible. EPFI reserves the rights to exercise remedies as considered appropriate.

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Statement of Principles
9. INDEPENDENT MONITORING AND REPORTING Ensure ongoing monitoring and reporting after financial close and project life of loan for Cat A and as appropriate Cat B by Independent ESC / qualified and experienced external experts to verify monitoring information. 10. REPORTING AND TRANSPARENCY In addition to EP 5 reporting, for Cat A and B as appropriate, online accessibility of the summary of ESIA, publically report greenhouse gases emission levels during the operational phase of the project emitting over 1 L tons of carbon dioxide equivalent annually. EPFI will report publically at least annually on transactions which have reached financial close and on its equator principles implementation processes and experiences taking into account appropriate confidentiality considerations.

CONCLUSION
The Equator Principles is a baseline and framework for developing individual,

internal environmental and social policies, procedures and practices. The

Equator Principles do not create any rights in, or liability to, any person, public or private. Financial institutions adopt and implement the Equator Principles voluntarily and independently, without reliance on or recourse to the IFC, the World Bank Group, the Equator Principles Association, or other EPFIs. In a situation where there would be a clear conflict between applicable laws and regulations and requirements set out in the Equator Principles, the local laws and regulations prevail.