Question
What is the maximum limit to the cost overrun arising on
account of extension in DCCO, being funded by a Standby Credit Facility, sanctioned at the time of initial financial closure of the project?Solution
In cases where lenders have specifically sanctioned a ‘ Standby Credit Facility (SBCF) at the time of initial financial closure to fund cost overruns arising on account of extension in DCCO, they may fund cost overruns as per the agreed terms and conditions up to a maximum of 10% of the original project cost. However, in cases where SBCF was not sanctioned at the time of financial closure or sanctioned but not renewed subsequently, lenders may fund cost overruns arising on account of extension in DCCO as per the agreed terms and conditions, up to a maximum of 10% of the original project cost (excluding IDC), provided the additional funding shall be priced at a premium to what would have been applicable on a pre-sanctioned SBCF. Lenders shall ensure that the loan-contracts shall ab-initio specify the additional risk premium to be charged on such SBCF, which may be revised upwards based on actual risk assessment at the time of sanction of such facilities. The additional risk premium shall be subject to a floor of 1.00 per cent .
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