A contractor or a developer who is involved in a privatized construction project will be exposed to several different types of documents for the project. These documents are generally divided into host government documents, project sponsor documents, project company documents, and credit documents.

Host Government Documents

If a construction project is an international project, the host government is a foreign government. It is the entity that desires the construction of a project with private funds. Once the host government has determined that the project should be constructed with private funds, the host government issues a request for proposals. The request for proposals solicits bids for the project. If the host government does not want to solicit public bids for the project, it may negotiate directly with a developer or a project sponsor. The host government and the project sponsor usually enter into a memorandum of understanding, which document provides that the project sponsor is the exclusive developer of the project and which sets forth the obligations of the parties with regard to the project.

Once the host government has entered into negotiations with the project sponsor, it usually grants a concession or a license to the project sponsor for the project. In that event, a concession agreement is entered into between the host government and the project sponsor. The concession agreement details how the project will be implemented, sets the term of the project sponsor's concession, and provides for the payments that are to be made to the host government for the concession.

The host government and the project sponsor may enter into an implementation agreement. This agreement addresses issues that are important to the lenders and the investors. It may contain an obligation by the host government to repay for lost profits as a result of a nationalization of the project by the host government or it may make provisions for default on the part of the host government or the project sponsor.

If the host government is guaranteeing any of the financing for the project, it may issue a sovereign guarantee for the project. The sovereign guarantee provides that the host government will make funds available to repay the debt. The host government may also issue a waiver of sovereign immunity, which document prohibits the host government from claiming immunity for any lawsuits that are brought against it for the project. The waiver of sovereign immunity may also include a provision for subject-matter jurisdiction and the law that is to be applied in the event of a lawsuit.

Project Sponsor Documents

The project sponsor is responsible for developing, coordinating, financing, and constructing the project. If more than one project sponsor is responsible for the project, the project sponsors enter into a joint development agreement, which agreement sets forth each project sponsor's responsibilities for developing the project.

In order to raise funds for the project, the project sponsor must prepare a prospectus or an offering memorandum for the project. The prospectus describes the project, sets forth the project sponsor's policies and plans, and provides lenders with information to make a credit determination for the project. The prospectus also sets forth the type of financing, how proceeds of the financing will be used, the projected dates for progress payments, the expected maturity, and the repayment schedule.

If the project sponsor forms a corporation in the host country, the project sponsor will execute stockholder agreements and other corporate documents. If the project sponsor plans to operate the facility under a separate entity, the project sponsor may form a limited liability company, may execute a partnership agreement, or may enter into a joint venture agreement.

Project Company Documents

If a separate company is set up to operate the facility during the project sponsor's concession, which company is generally known as a project company, the project company will enter into operating and maintenance contracts that involve the commercial operation of the project. The operating and maintenance contracts contain provisions regarding payment and allocate the risks and responsibilities for the project during the term of the concession. Payment under most operating and maintenance contracts is determined on a cost-plus basis rather than a fixed fee because of the duration of the contracts.

The project company may enter into output and supply agreements. The output agreements involve the amount of electricity, gas, or power that will be provided by the facility. The supply agreements involve the amount of supplies that will be required by the facility.

Credit Documents

Because private sources of funds are essential for the project, several credit and lending documents are involved in the project. The lender will provide a commitment letter for the project. The commitment letter sets forth the terms and conditions that must be satisfied in order for financing to be disbursed. The commitment letter also sets forth the loan amount and the payment terms. A credit agreement is also executed by the lender. The credit agreement controls the disbursement of funds for the project and sets forth the rights and remedies of the lender in the event of default. The credit agreement also sets forth the interest rate and the responsibilities of the borrower.

The lender may also require an equity contribution agreement, which agreement sets forth how and when a project sponsor will contribute equity to the project. Other credit documents include security agreements, mortgages, deeds of trust, and pledges. If there is more than one lender involved in the project, there may be agreements that are executed between the lenders.

There are many other documents that may be involved in the project. Such documents may include surety bonds, insurance documents, warranties, and guarantees.