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FRETUTORIAL
TUTORIAL
PROJECT FINANCE DOCUMENTS
Introduction Project documents
In project finance risks are allocated and then mitigated to The project company works with other parties to develop the
those parties best able to accommodate them. A key project. Project documents must be consistent and must work
instrument in assigning these risks are the numerous contracts together as a whole. Lenders must assess the various and
that underpin contractual and financial arrangements during generally complex interrelations among project contracts to
both the construction and operational period. These risks and clearly understand who is assuming what risk, when and if
the financing arrangements are underpinned by they are suitable to accept it, e.g. Lenders may request a
“Documentation”. When a Project Finance transaction is being completion guarantee or demand certain type of performance
structured the vast majority of developers and financier’s time bond if the contractor’s obligations under the construction
aside from due-diligence is spent negotiating and agreeing the contract does not give sufficient comfort.
contents of these documents.
Generally project documents comprise of
Documentation contains the ‘rules’ by which a project operates  Concession agreement
when business is working smoothly but also it caters for when  Construction contract
there are problems either in Construction or Operations by  Operations and maintenance agreement
governing what should happen and in what order during those  Off-take agreement
situations.  Supply agreement

The Engineering and Procurement Contract (“EPC”) for Various factors influence the duration of the project
example assigns responsibility to the construction company for documents. The term of the debt financing generally is the
engineering, procurement, performance, testing, and relief primary guideline.
under force majeure events. Another example of this allocation
via documentation is a Power Purchase Agreement (“PPA”)
which dictates payment for and supply of electrical power
Finance documents
between the off-taker and generator during operations. The transaction may well involve more than one debt facility
and financing party. Agreement needs to be entered to govern
This learning document introduces typical documentation the relationship among the lenders in respect of borrower’s
found in project finance transactions. We will cover key project obligations.
contracts and financing documents required to structure a
project. This introduction is then put into context with a case The financing documents for the project financing typically
study of an Indonesian coal-fired power project. As with all include the following:
aspects of Project Finance, there is no single correct way and  Financier mandate letter (loosely defined as a Document)
the following explanations are provided for general information  Term Sheet
only.  Facility / Loan Agreement)
 Inter-creditor agreement
 Security document
Legal Framework  Tripartite deed (or Direct agreement)
Project financings are complex – it may take a much longer
period of time to structure, negotiate and document a project
financing than say an M&A or leveraged finance transaction. Other project documentation
We will look at typical documentations for project finance In larger project financings, lenders will generally look to a
transactions, which can be segregated into four main types: Project Advisor for co-ordination of independent commercial
 Shareholder / sponsor documents and technical information related to the project. The
 Project documents independent reports from these experts will help lenders to
 Finance documents identify risks and mitigation. These would include:
 Other project documentations  Environmental impact assessment and compliance
 Technical report from Independent Engineer (IE)
 Adviser’s report on the off-take market
Shareholder / sponsor documents  A similar market report on fuel or raw material supplies
A special purpose vehicle is established in the jurisdiction of  Legal advisers report, summarising the legal aspects
and pursuant to the laws of the host country for the purpose of  A report on insurances from the insurance adviser
project development (the “Project Company”).  Financial Model audit Opinion Letter
 And many more!
The sponsors generally consist of one or maybe more
companies with specific interest in the development of a
project based upon their respective areas of specialization or Navigator’s project advisory services include
business strategy. The agreement between the project
sponsors are documented in the Shareholder / Sponsor  Project risk analysis  Preparation of IM
documents. The determination of the best type of legal entity  Debt sourcing and sizing  Shadow credit ratings
for the project company, e.g. corporation, joint venture,  Bank negotiation  Valuations
partnership, trust, etc. is usually dependent upon proportion of  Due diligence  Financial modelling
investments, tax considerations, accounting rules, existing
assets such as land, local knowledge or local incorporation.

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Shareholders agreement
Key points
Parties Typical terms for concession agreement include the following.
The agreement between the project sponsors to form a special  Project company obligation:
purpose company (“SPC”) in relation to the project The project company is obliged to complete the project to an
development. This is the most basic of structure held by the agreed specification by an agreed back-stop date.
sponsors in project finance transaction.  Contracting authority’s obligation:
The contracting authority makes available the land and rights of
Key points way required for the concession.
 Ownership:
This is an agreement between the sponsors and deals with: Ownership of the project facilities remains with the public
 Injection of share capital sector, i.e. a Build, Operate Transfer (BOT) project.
 Voting requirements  Term and termination:
 Resolution of disputes The concession is generally granted for a fixed period of time.
 Dividend policy But although the maximum term of the concession is fixed, if
 Management of the SPV the debt is repaid and the investors have attained an agreed
 Disposal and pre-emption rights rate of return, the concession may be terminated at that point.

Alternative shareholding structures found in project finance

transaction include Joint Venture Agreement, Partnership Construction contract
Agreement, or Limited Partnership Agreement.
Parties
Well thought through and agreed documentation is a key An agreement between project company and one or more
factor in the success of a Project, not only when business construction companies and/or equipment supplies (the
is running smoothly but as importantly when the business contractor)
is facing operational challenges.
Nick Crawley, Managing Director
Description
In a project finance transaction, engineering, procurement and
construction turnkey contract (the EPC contract) is the most
common form of construction contract.

Concession Deed An EPC contract generally provides for the obligation of the
contractor to build and deliver the project facilities on a turnkey
basis, i.e. at a certain pre-determined fixed price, by a certain
Parties date, in accordance with certain specifications, and with
Agreement between the project company and a public-sector certain performance warranties. EPC contract is quite
entity (the contracting authority) complicated in terms of legal issue therefore the project
company the EPC contractor shall have enough experiences
Description and knowledge about the nature of project in order to avoid
their faults and minimize the risks during the contract
The concession agreement concedes the use of a government execution.
asset (such as a plot of land or river crossing) to the Project
Company for a specified period of time. Other alternative forms of construction contract are project
management approach and alliance contracting.
A concession deed would be found in most projects which
involve Government such as in infrastructure projects. The
concession agreement may be signed by a national / regional Key points
government, a municipality, or a special purpose entity set up A turnkey EPC contract usually consists of terms and
by the state to grant the concession. provisions as described below.
 Description:
Examples of concession agreements include contracts for the EPC covers engineering, equipment procurement, construction
following. management, project testing and performance guarantees for
 A toll-road or tunnel for which the concession agreement giving the project.
a right to collect tolls / fares from public or where payments are  Price:
made by the contracting authority based on usage by the Based on certain pre-determined fixed-price
public.  Payment:
 A transportation system (e.g. a railway / metro) for which the The payment is paid in installments upon achievement of
public pays fares to a private company) certain specified construction milestones and in some cases a
 Utility projects where payments are made by a municipality or bonus incentive payable for early completion.
by end-users.  Completion date:
 Ports and airports where payments are usually made by The EPC contractor is responsible for the time for completion
airlines or shipping companies. and the quality of design and work and achievement of
 Other public sector projects such as schools, hospitals, performance guarantees.
government buildings, where payments are made by the  Completion guarantee and LDs:
contracting authority. The EPC contractor is obliged to pay certain liquidated
damages (LDs) resulting from unexcused delay in achieving
provisional acceptance by the guaranteed completion date.

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 Performance guarantee and LDs: expenses outside the operator’s control such as procurement
LDs will also be paid if the plant is not in compliance with of supplies.
defined standard, e.g. the emission limits or not achieving  Other fee provision:
minimum electrical output. Incentives (bonus) and penalties provisions depending on the
 Cap under LDs: operating performance are also included.
Contractor’s liability under the LDs is almost always capped at
some percentage of the construction contract price. For longer-
gestation and technically complicated coal-fired power projects Off-Take agreement
they may be as high as 35-40%.
Parties
In certain cases, the responsibility of the EPC contractor is
guaranteed by its parent company. As such, the project An agreement between the project company and the offtaker
company will also enter a contract guarantee agreement under (the party who is buying the product / service the project
which the parent company guarantees the obligations of the produces / delivers).
EPC contractor under the EPC contract.
Description
Operation and Maintenance agreement In a project financing the revenue is often contracted (rather to
the sold on a merchant basis). The off-take agreement
governs mechanism of price and volume which make up
Parties revenue.
An agreement between the project company and the operator.
The intention of this agreement is to provide the project
company with stable and sufficient revenue to pay its project
This information is covered in more detail in our 3 day debt obligation, cover the operating costs and provide certain
International Project Finance course held regularly in required return to the sponsors.
Sydney, Singapore and London. You will learn about
these documents in more detail via up to date case
studies.
When the market for the product of a project is not highly
Nick Crawley, Managing Director liquid, reliable and accessible(compare a specialized
metal plant to a Gold project) the structure and credit
quality of the off-take contract and counterparty is vital.
The project company delegates the operation, maintenance
and often performance management of the project to a Nick Crawley, Managing Director
reputable operator with expertise in the industry under the
terms of the Operations and Maintenance (O&M) agreement.
The operator could be one of the sponsors of the project
company or third party operator. Types
In other cases the project company may carry out by itself the Off-take contracts can take various forms which determine
operation and maintenance of the project and may eventually project’s exposure to the output volume / price or both.
arrange for the technical assistance of an experienced
company under a technical assistance agreement. Take-or-pay contract
 Frequently the off-take agreement in project finance transaction
is structured on a take-or-pay basis.
Key Points  Under this contract the off-taker – on an agreed price basis – is
The O&M agreement is put in place to ensure the project is obligated to pay for product on a regular basis whether or not
properly operated and maintained and risk is allocated the off-taker actually takes the product.
between the operator and other project parties. O&M  Power purchase agreement (PPA a form of off-take agreement
agreement includes among others the following provisions. commonly used in power projects in emerging markets. The
 Services: purchasing entity is usually a government entity.
The project operator agrees to perform for a fee all operation,
management, maintenance and repaid services for a project in Take-and-pay contract
accordance with prudent operating industry practices and in a  The off-taker only pays for the product taken on an agreed
manner consistent with the project requirements. price basis.
 Operator responsibility:  The contract provides no long-term certainty that the product
The operator usually assumes residual project operating risks will be purchased.
under normal circumstances other than force majeure,
technical/market risk and unavailability of supplies. Long-term sales contract
 Provision regarding services:  The off-taker agrees to take agreed-upon quantities of the
O&M agreement describes the general services to be provided product from the project.
by the operator including performing day-to-day operation,  The price is however paid based on market prices at the time of
management and maintenance activities, preparation of budget purchase or an agreed market index, subject to certain floor
for the operation and maintenance of the project. (minimum) price.
 Liquidated damages (LDs):  This type of contract is commonly used in mining, oil and gas,
The operator is also taking responsibility for liquidated and petrochemical projects where the project company wants
damages and other obligations assumed by experienced to ensure that its product can easily be sold in international
operators. markets, but off-takers not willing to take the price risk
 Fee provision:
O&M agreement spells out an initial fixed price, usually fixing of Hedging contract
all costs within the operator’s control such as labor and general  Hedging contracts are found in the commodity markets such as
expenses and pass-through provisions regarding all operating in an oilfield project.

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 Various kinds of hedging contracts entered with market traders Types
such as: A long term forward sale of the commodity at a fixed
The degree of commitment by the supplier can vary.
price (effectively the same as a take-or-pay agreement), A
contract that if the commodity’s price falls below a certain floor
Fixed or variable supply
level the product can be sold at this floor price and if the price
does not fall to this level the product is sold in the open market.  The supplier agrees to provide a fixed quantity of supplies to
the project company on an agreed schedule, or a variable
Contract for Differences supply between an agreed maximum and minimum.
 Under this financial contract, the project company sells its  The supply may be under a take-or-pay or take-and-pay.
product into the market and not to the off-taker or hedging
counterpart. Output / reserve dedication
 If however the market price is below an agreed level, the off-  The supplier dedicates the entire output from a specific source,
taker pays the difference to the project company, and vice e.g. a coal mine, its own plant.
versa if it is above an agreed level.  However the supplier may have no obligation to produce any
 Long-term Contract for Difference mechanisms have been output unless agreed otherwise. The supply can also be under
used in the electricity market in some countries rather than a a take-or-pay or take-and-pay
PPA because all power produced has to be sold into the
electricity pool. Interruptible supply
 Some supplies such as gas are offered on a lower cost
Throughput contract interruptible basis – often via a pipeline also supplying other
 This is used e.g. in a pipeline / transmission project. users.
 Under this agreement a user of the pipeline agrees to use it to
Tolling contract
carry not less than a certain volume of product and to pay a
minimum price for this.  In a tolling contract, the supplier has no commitment to supply
at all, and may choose not to do so if the supplies can be used
more profitably elsewhere. However the availability charge
Navigator’s project advisory services include must be paid to the project company.

 Project risk analysis  Preparation of IM

 Debt sourcing and sizing  Shadow credit ratings
Mandate letter
 Bank negotiation  Valuations
 Due diligence  Financial modelling Parties
Between the sponsors, the project company and the lead
arrangers
Supply agreement
Description
Parties Agreement which sets out the respective rights and obligations
An agreement between the project company and the supplier of the parties prior to financial close, i.e. the execution of the
of the required feedstock / fuel. definitive finance documentation

Description Key points

Fuel / raw materials are likely to be the main operating cost for  Mandate letter refers to the main terms of the debt.
a project selling an output product (as opposed to providing a  A copy of the agreed term sheet will usually therefore be
service like a toll road), whether under an off-take contract or attached to the mandate letter.
into the open market. Security of the supplies on certain  The lead arrangers will expect to be appointed on a sole and
pricing basis is usually achieved through a long-term supply exclusive basis in relation to the funding for the project.
contract.  The critical part of the mandate letter for the sponsors and the
project company is the degree of commitment accepted by the
If a project company has an off-take contract, the supply lead arrangers to underwrite the debt summarized in the
contract is usually structured to match the general terms of the attached term sheet.
off-take contract such as the length of the contract, force  Essentially the mandate letter covers appointment, arranging of
majeure provisions, etc. finance, commitment of lenders, market flex, material adverse
change, clear markets, due diligence requirements, payment of
The volume of input supplies required by the project company is fees, etc.
usually linked to the project’s output. Example under a PPA the
power purchaser who does not require power can ask the project to
shut down the power plant and continue to pay the capacity payment Term sheet
– in such case the project company needs to ensure its obligations
to buy fuel can be reduced in parallel.
Parties
Agreement between the borrower and the lender for the cost,
provision and repayment of debt.
The availability, price, escalation and quality of the supply
of fuel / feedstock is an essential component for any
project which requires a raw material to produce its Description
salable output. Our Project Advisory team can help you The term sheet outlines the key terms and conditions of the
assess and structure your Supply Agreement. financing.
Nick Crawley, Managing Director
The term sheet provides the basis for the lead arrangers to
complete the credit approval to underwrite the debt, usually by

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signing the agreed term sheet. Generally the final term sheet is  Common terms
attached to the mandate letter and is used by the lead  Order of drawdown
arrangers to syndicate the debt.  Cashflow waterfall
 Limitation on ability of creditors to vary their rights
The commitment by the lenders is usually subject to further  Voting rights
detailed due diligence and negotiation of project agreements  Notification of defaults
and finance documents including the security documents. The  Order of applying the proceeds of debt recovery
next phase in the financing is the negotiation of finance
 If there is a mezzanine funding component, the terms of
documents and the term sheet will eventually be replaced by
subordination and other principles to apply as between the
the definitive finance documents when the project reaches
senior debt providers and the mezzanine debt providers.
financial close.

Loan agreement Security Documents

Most lenders to project finance will create a security package
Parties which includes fixed and floating charges. A Security trust
An agreement between the project company (borrower) and deed governs relationship between lenders and the security
trustee acting on their behalf. The project finance loan typically
the lenders.
will be secured by multiple forms of collateral including:
 Charge over project facilities / assets
Description  Assignment of operating revenues
Loan agreement governs relationship between the lenders and  Pledge of project accounts
the borrowers. It determines the basis on which the loan can  Assignment of any letters of credit or performance or
be drawn and repaid, and contains the usual provisions found completion bonds relating to the project under which borrower
in a corporate loan agreement. It also contains the additional is the beneficiary
clauses to cover specific requirements of the project and  Assignment of insurance proceeds
project documents.  Assignment of all project agreements
 Pledge of stock in project company or assignment of
The syndicate bank loan represents the primary source of debt partnership interests
funding for project finance. Many of provisions found in the  Assignment of any patents, trademarks or other intellectual
syndicated term loan agreement will also be found in projects property
funded by a capital markets issue and/or a multi-lateral or  Share pledge from sponsors
export credit agency. However, the capital markets will tend to
take a lighter approach to the covenant package.
Tripartite deed (Direct agreement)
Key points A project company enters into project contracts with various
counterparties as discussed above. The financiers will usually
Basic terms of a loan agreement include the following
require that a direct relationship between itself and the
provisions.
counterparty to that contract be established which is achieved
 General conditions precedent through the use of a tripartite deed (sometimes called a
 Conditions precedent to each drawdown consent deed, direct agreement or side agreement).
 Availability period, during which the borrower is obliged to pay
a commitment fee The tripartite deed sets out the circumstances in which the
 Drawdown mechanics financiers may “step in” under the project contracts in order to
 An interest clause, charged at a margin over base rate remedy any default.
 A repayment clause
 Financial covenants - calculation of key project metrics / ratios A tripartite deed would normally contain the following
and covenants provision.
 Dividend restrictions  Acknowledgement of security:
 Representations and warranties A confirmation by the contractor or relevant party that it
 The illegality clause consents to the financier taking security over the relevant
project contracts.
 Notice of default:
Intercreditor agreement An obligation on the relevant project counterparty to notify the
lenders directly of defaults by the project company under the
Parties relevant contract.
Between the main creditors of the project company  Step-in rights and extended periods:
This is to ensure that the lenders will have sufficient notice /
Description period to enable it to remedy any breach by the borrower.
Intercreditor agreement performs an important role in any  Receivership:
project financing where funding involves different types of debt An acknowledgement by the relevant party regarding the
from a variety of debt providers. appointment of a receiver by the lenders under the relevant
contract and that the receiver may continue the borrower’s
This is the agreement between the main creditors in performance under the contract
connection with the project financing. The main creditors often  Sale of asset:
enter into the Intercreditor Agreement to govern the common Terms and conditions upon which the lenders may transfer the
terms and relationships among the lenders in respect of the borrower’s entitlements under the relevant contract.
borrower’s obligations.
Tripartite deed can give rise to difficult issues for negotiation
Key points but is a critical document in project financing.
Intercreditor agreement will specify provisions including the
following.

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likely to also include an uninsured cost-overrun supports and
Case study uninsured working capital facility.

Project commercial and ownership structure is shown in the

Description screenshot.
PLN (Perusahaan Listrik Negara) – the Indonesian state
owned government utility – ran an international competitive
bidding for the right to build coal-fired power plants throughout
Indonesia in order to boost electricity generation capacity.

A consortium led by Sun Power (a Japanese Power Company)

has recently won a tender to build, own and operate a 600MW
coal-fired electric generation facility, a transmission line and
related facilities located in Java, Indonesia.

The special purpose company (SPC) was then formed as an

independent power producer (IPP) that sells electricity to be
generated by the project to PLN under a 30-year power
purchase agreement (PPA). This project will be the first
international independent power project in Indonesia to be
signed since the 1997 financial crisis.

Sponsors
Sun Power – a Japanese Power Company (40% ownership).
Sun Power is an experienced IPP and enjoys a strong
relationship with PLN. Sun Power is rated BBB (stable outlook)
by Standard & Poors.

Korea Power Co – a South Korean Power Company (30% Screenshot: Project commercial structure
ownership). Korea Power Co is responsible for c. 15% of
Korea’s power supply and is 100% owned by Korea Electric Project documents
Power Corporation, which is rated A+ (negative outlook) by
Project documentations for a power project in this case study
Standard & Poors.
will likely to include the following.
PT Engineers, an Indonesian construction and engineering
Project Documents Description
company (20% ownership). PT Engineers is an affiliated
company of Sun Power and Korea Power Co. PT Engineers
has demonstrated capacities and experiences in design and Shareholders agreement Between the project sponsors.
build independent power/ cogeneration projects in Indonesia. Concession deed Between SPC and Government
of Indonesia. Include in the
PT Coal A, an Indonesian coal company (10% ownership). PT concession deed is certain
Coal is not rated. compensation regarding
Construction expenses related to the
EPC contract will be awarded to PT Engineers who is transmission line.
responsible for engineering, equipment procurement and EPC contract Between SPC and PT Engineers
construction for the project. The responsibility of PT Engineers (EPC contractor).
is to be guaranteed by Sun Power and Korea Power. Contract guarantee Sun Power and Korea Power to
guarantee the obligations of PT
Operations Engineers under the EPC
Sun Power will be responsible for operating the project. contract.
Technical and management support will be provided under an O&M agreement Between SPC and Sun Power
arms length operating and maintenance agreement. (the project operator).
Power purchase Between SPC and PLN, 100%
Coal supply agreement (PPA) offtaker of the electricity produced
The power station will be fuelled by 3 million tones per annum by the project.
of thermal coal from local coal mine. In order to secure a Coal supply agreements Between the SPC and PT Coal A
reliable coal contract at an attractive price, the SPC will enter / PT Coal B (the two Indonesian
into coal supply agreements with two Indonesian suppliers. coal suppliers.)
One of the suppliers will be with PT Coal A (member of the Loan agreements Include the loan agreements for
consortium) and the other will be with PT Coal B. PLN has each debt facility:
approved the two suppliers. JBIC term loan agreement
Commercial term loan agreement
Financing plan Uninsured cost-overrun loan
The sponsors have agreed to a 70/30 debt/equity ratio target agreement (standby facility)
and would like to maximize the tenor of the debt. With project Uninsured working capital facility
costs estimated at 700m, the funding works out to be USD agreement
490m in debt and USD 210m in equity. Intercreditor agreement Between the main creditors, i.e.
JBIC, the Facility agent, the
Discussions with JBIC have indicated that they are willing to Intercreditor agent, the Trustee
provide up to 60% of the debt in the form of a direct loan (USD Security documents Depending on the security
294m) and an ERPG for a commercial loan to cover the package
remaining 40% (USD 196m). The debt financing packages will Tripartite deed Between the lenders and various

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counterparties  Satisfactory insurances
Other project Include the following: during operations
documentations Environmental report
IE report (Opinion on the EPC
contractor, power plant Fuel supply Fuel supply  Pass-through for fuel
technology, EPC contract price, risk (Risk in agreement price under PPA.
performance test in the EPC price PPA  Contracts with two coal
contract, force majeure events, escalation Fuel adviser’s suppliers.
etc.) and coal opinion  Fuel adviser’s opinion the
Fuel adviser report (Opinion on supplies) reliability of coal supply
the reliability of coal supply plan, and alternative supplies.
quality of the coal suppliers, Financial Loan  Market /technical
alternative supplies, etc.) projection agreement assumptions to be verified
Insurance adviser report risk Opinion from by independent advisers.
Table: Principal project documents (uncertainties advisers  Sensitivity/scenario
regarding analysis.
various  Requirement of debt
Risk analysis assumptions service reserve account
used in the (DSRA) to cover potential
Table below demonstrates examples on project risk allocations financial cashflow shortages.
addressed by project documents. model)

Risk Relevant Risk-mitigation measures Collateral Intercreditor  Careful and clear drafting
Documents enforcement agreement of the terms under these
Construction EPC contract  The EPC contract is / cross- Security documents.
risk Insurances based on pre-determined default risk documents
(the risk that IE report fixed-price and date-
the project Cost-overrun certain basis. Country JBIC extended  Strength of the extended
will not be loan  Generous contingencies (political) risk political risk political risk guarantee
completed on agreement in the construction guarantee package from JBIC
time, on budget.  Strong underlying
budget and  Satisfactory LDs from rationale for the project.
potential delay under EPC Table: Risk analysis and mitigation
cost- contract.
overruns.)  Guarantee by the
sponsors on obligations Navigator’s project advisory services include
of PT Engineers.
 Insurances such as  Project risk analysis  Preparation of IM
Construction All Risk,  Debt sourcing and sizing  Shadow credit ratings
force majeure insurance.  Bank negotiation  Valuations
 Opinion from IE’s report  Due diligence  Financial modelling
 A standby contingent
facility available for
funding project cost
overruns

Currency risk PPA  US dollar indexation of

(the revenue JBIC extended PLN’s US dollar-
received in political risk denominated payments
local guarantee under the PPA.
currency and  Political cover from
pay debt JBIC will cover the
obligations in currency inconvertibility
foreign issue.
currency)

Operating O&M  Responsibility of the

risk agreement operator under the
(breakdown PPA O&M agreement.
or failure of IE report  Satisfactory LDs and
equipment, Insurances penalty provisions
plant relation to the
performance operator’s
below responsibility.
expected  Pass-through of
levels) estimated operating
and maintenance costs
under the PPA.
 Opinion from IE’s
report - The plant is to
use proven technology.

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