Key Takeaways
- Financing Options: Export credit, leasing, and project financing available.
- Insurance Coverage: Transit, construction, and operational insurance.
- Currency Risk: Hedging strategies for international payments.
- Tax Considerations: Import duties, VAT, and depreciation benefits.
- Contract Structures: Turnkey, EPCM, or equipment supply options.
Table of Contents
Project Financing
A cement plant in Zambia secured 85% financing through their national development bank for our silo project. The 10-year term with 3% interest made the project cash-flow positive from day one. That experience taught us: explore financing options before assuming you need cash.
Financing sources: Export credit agencies (ECAs) offer buyer credits. Development banks finance infrastructure projects. Commercial banks provide equipment leasing. Supplier credit for established customers. Terms vary by country and project size.
Insurance Requirements
Transit insurance: Covers damage during shipping (110% of invoice value). All-risk coverage recommended. Claims paid in your currency. Required for letter of credit transactions.
Construction insurance: Builder's all-risk covers installation period. Includes third-party liability. Covers damage from natural disasters. Required by most project financiers.
Financial Risk Management
Currency risk: Quote in stable currency (USD or EUR). Hedge large payments with forward contracts. Split payments across currencies. Consider currency adjustment clause for long projects.
Payment security: Letters of credit for international payments. Documentary collections for lower risk. Open account for established relationships. Advance payment guarantees from suppliers.
Contract Structures
Turnkey contracts: Single contractor responsible for complete project. Fixed price provides budget certainty. Simplified project management. Higher price for contractor risk assumption.
EPCM contracts: Engineer, procure, construct, manage. Owner retains more control. Construction risk with owner. Lower overall cost potential. More complex project management.
Frequently Asked Questions
Q: What financing is available for small projects?
Q: How do we manage currency risk?
A: Use forward contracts to lock in exchange rates. Split payments across multiple currencies. Consider quoting in your local currency.
Need financing guidance? Manxing works with financing partners. Request Financing Information