• Question ID: 2020/0023
• Date of publication: 31/01/2020
• Subject matter: General clarifications

Question

We would like to inquire about how to report to AnaCredit financing operations, typically loans, granted to companies for investments in renewable energy (for example, in the construction of photovoltaic solar plants) under public programmes. As a form of financing protection, the bank (creditor) requests that the debtor transfer its future credit claims (stemming from the sale of energy produced in excess of the debtor’s own needs) against a government-related entity (established for the purpose of purchasing and distributing energy produced in the aforementioned way). In particular, could you clarify whether future claims assigned in this way constitute protection under AnaCredit and, if so, specify the value of the protection and which counterparty acts as the protection provider – the debtor or the government agency?

Answer

This case is an example of credit provided to a debtor that is secured through the assignment of future income to the funding bank. The future income may or may not be guaranteed.

The following general guidance applies to financing based on the assignment of future receivables.

• Such financing is considered secured insofar as the assignment of future receivables is valid in legal terms – national laws may impose restrictions in this regard, for example by requiring a certain level of determination (identification) of the receivables at the time of assignment. Notably, some jurisdictions permit the assignment of future claims as long as the debtor is known or the debt identifiable at the time of the assignment. This may include future debt from existing trade contracts or even from as yet non-existent ones. In contrast, in some jurisdictions a precise identification of the claim (value, debtor, due date, underlying contract, etc.) may be required at the time of assignment, which makes the assignment of future debt practically impossible.
• In cases where the assignment of future receivables is valid, the financing is considered to be a secured lending transaction which may be (partially) repaid from the future income which the financed assets are going to generate. Notably, secured lending differs from trade receivables.
• Depending on the contract between the bank and the customer, the type of loan instrument may be “other loans” while the repayment schedule reflects the agreed amortisation plan.
• In principle, the future sale value of energy is uncertain, although many of its aspects can be determined contractually between the debtor and the buyer of the future energy. Yet, it is presumed that the value can be estimated reasonably well (based on, amongst other things, the contractual agreement on the unit price, minimum amount, etc.), assuming that the investment is finalised and the energy is produced as expected. In particular, the protection value may be estimated by the creditor on the basis of the amount of energy that the customer is expected to sell during the lifetime of the loan and of the sale price of the energy, which can be influenced by the market conditions at the time the estimate itself is calculated. For this reason, the protection value estimate can vary over time.
• In such cases, the debtor is the protection provider (as holder of the legal title to the future receivables). For this reason, the protection is considered internal, as the protection provider is also the debtor of the secured loan.
• The type of protection could be “trade receivables” or “other” depending on specific considerations.