We are discussing the guarantee terms under an EPC contract for the construction of a photovoltaic plant. The negotiation is challenging: the contractor is an investment fund, and the project financing requires substantial guarantees from the EPC contractor, including an advance payment bond of 10%, a performance bond of 20%, a warranty bond of 20%, and a 5% retention on SAL payments. By contrast, very limited guarantees are being provided to the EPC contractor. We are therefore negotiating both to reduce the guarantees required by the contractor and to obtain adequate comfort as to the contractor’s solvency and ability to meet its payment obligations.
We need to identify the best possible balance between the requirements of the project financing and the EPC contractor’s need to receive adequate guarantees for the timely payment of amounts due.
