Example of project finance

In December 2001 – following a financial planning mandate - UBS Structured Finance organized project financing of CHF 125 million for AVAG KVA AG for the construction of a waste incineration plant. The project credit runs for 16 years. Credit Suisse, Dexia Crédit Local and HVB Bank Ireland are participating in the financing.
AVAG in Jaberg collects and disposes of waste for the 150 communities of the AVAG region in its collection area. As a result of the ban on storing combustible waste, which took effect in 2000, AVAG decided to build a waste incineration plant in Thun. The planned incineration plant is based on the amount of combustible waste in the AVAG region. It will probably go into operation in 2004. The total cost of the waste incineration plant is approx. CHF 190 million.
As part of its financial planning mandate, Structured Finance together with AVAG defined a group and contractual structure which allows for bank financing of the project company under private law. AVAG KVA AG, a subsidiary of AVAG, was set up as the project company.
Project financing of CHF 125 million can be utilized as a building loan by AVAG KVA AG during the 3-year construction period. After the plant is in operation, the financing is to be repaid in full in 13 years from the company's operational cash flow.