SACE’s Role in Project Finance

SACE, Italy’s export credit agency, plays a crucial role in facilitating project finance transactions, particularly those involving Italian companies or projects of strategic importance to the Italian economy. Their involvement helps mitigate risks and attract investors, enabling the successful development of large-scale infrastructure and industrial projects globally.

What is Project Finance?

Project finance is the long-term financing of infrastructure, industrial projects, and public services based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. Typically, a special purpose entity (SPE) is created for each project, and debt and equity used to finance the project are paid back from the cash flow generated by the project.

SACE’s Guarantees and Insurance

SACE provides a range of guarantees and insurance products that can cover various risks associated with project finance transactions. These include:

• Political Risk Insurance: Covers risks such as expropriation, currency inconvertibility, and political violence.
• Commercial Risk Insurance: Protects against risks such as non-payment by project sponsors or off-takers.
• Guarantee to Banks: SACE can provide guarantees to commercial banks, enabling them to extend loans to projects that might otherwise be considered too risky. This significantly enhances the creditworthiness of the project and facilitates access to financing.
• Bond Insurance: SACE can also insure bonds issued to finance the project, improving their credit rating and attracting a wider pool of investors.

Benefits of SACE’s Involvement

SACE’s involvement brings several key benefits to project finance transactions:

• Risk Mitigation: SACE’s guarantees and insurance policies significantly reduce the risks for lenders and investors, making the project more attractive for financing.
• Enhanced Creditworthiness: SACE’s backing improves the credit rating of the project, allowing access to more favorable financing terms, such as lower interest rates and longer loan tenors.
• Access to Financing: SACE’s support can unlock financing from commercial banks and other financial institutions that may be hesitant to invest in projects without such guarantees.
• Support for Italian Companies: SACE’s mandate includes supporting Italian exporters and contractors. Their involvement often ensures that Italian companies can participate in large international projects.
• Strategic Projects: SACE prioritizes projects that are strategically important for Italy, such as those that contribute to energy security, infrastructure development, and sustainable growth.

Sectors Supported

SACE supports project finance across a wide range of sectors, including:

• Energy (Renewable and Traditional)
• Infrastructure (Transportation, Utilities)
• Oil and Gas
• Manufacturing
• Telecommunications

In conclusion, SACE plays a critical role in supporting project finance by providing guarantees and insurance that mitigate risks, enhance creditworthiness, and facilitate access to financing. Their involvement is instrumental in enabling the successful development of complex and large-scale projects, particularly those involving Italian companies and projects of strategic importance.