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Glossary

Project Finance Credit Rating

Category — Credit ratings
a rating assigned to issuers and liabilities of project finance transactions. Their features are:

1) implementation on the balance of SPV;

2) the only source of repayment of obligations under the project is the cash flow from the project;

3) distribution of risks between all participants of the project;

4) the absence of direct recourse to the state and third parties;

The assignment of ratings to project finance instruments is usually based on qualitative and quantitative analysis of different factors, separate modeling of the construction and operational stages of the project and on the calculation of the expected losses of the investor.

The investor’s expected losses are calculated using the formula:

EL = PD * LGD,

EL - the size of the expected losses of investors;

PD - project default probability;

LGD - value of losses in case of default.
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