Macedonian Gold Mines & Greek Bonds | Page 2

SKOURIES MINE FINANCE
Skouries project financing . Significant work and creativity was required to adapt a mining project financing into the Greek context and a Greek law-governed bond structure . Above and beyond this , the features of the project , the sponsors , the procurement strategy and the offtake arrangements created unique challenges to be solved in this financing .
Not enough is mentioned in project financings of the collaboration needed between borrowers , lenders , contractors and advisers to finance challenging projects , but it is essential for success . The Skouries project financing was very much marked by parties not responding to complicated points with a simple “ no ”. Instead , parties considered requests and came back with a “ how about this ” response . Without this attitude , this financing may have never taken shape .
We discuss a few of the interesting points that arose in relation to the financing , and how they were solved , below .
• Resilience & Recovery Facility – The RRF is a temporary instrument that is the centrepiece of NextGenerationEU – the EU ’ s plans to emerge from Covid stronger and more resilient . It provides lower-cost financing for certain types of investments in EU member states . The Skouries project , with its positive impact on growth , jobs , exports and the energy transition , is a prime example of the types of investments the RRF seeks to encourage . The Skouries project applied for and received € 200m of its term facility to be funded through the RRF , by far the largest RRF amount awarded to a project in Greece .
The Greek systemic banks administer the RRF on behalf of the Greek State . They are given tranches of € 200m , which must be allocated in certain proportions to investments that satisfy the pillars of the RRF scheme . Once a € 200m tranche is fully allocated to financings , the bank receives an additional tranche of € 200m . A bank cannot sign an RRF facility on behalf of the Greek State unless it has , at that time , the full amount required unallocated and available within its current tranche . Given the Skouries project would utilise € 200m of RRF , this created a challenge around ensuring each of NBG and Piraeus had the necessary RRF allocation within the relevant designated pillar at the same time . Finally , a bridge facility of € 100m with a potential duration of the entire term loan was implemented until all necessary RRF allocations were available .
• The Kassandra mines as a whole – Commonly in project financing , a project is housed within a single purpose vehicle to simplify the arrangements and requirements for financing that project . In the case of Hellas Gold , the entire Kassandra mines are covered by a single , statutory transfer arrangement . The Skouries development project could not be separated into another entity . As a result , the financing had to accommodate a contractual separation between the Skouries project including joint facilities and all other activities of Hellas Gold , including the ongoing mining operations at the Olympias mine .
The contractual separation includes different regimes and different requirements for Skouries project and non-Skouries project aspects , including different representations , warranties , undertakings , insurance requirements , budgets , bank accounts including waterfalls and levels of accountability . On the one hand , Hellas Gold retains significant flexibility to continue with its non-Skouries activities and the lenders accept the potential liabilities within the broader corporate entity , but on the other hand there is a series of checks and balances . Ultimately surpluses ( and
Skouries development project
Project Finance International October 4 2023 71