Completion Guarantees: Cutting Construction Risk and Opening the Debt Window
$1.3 tn
Global build-stage pipeline 2025 (IJGlobal)
80–150 bp
Average margin drop once a completion guarantee lands
12–24 m
Typical guarantee duration
93 %
Share of lenders that require sponsor cover on greenfield deals
1. What is a completion guarantee?
A completion guarantee is a legally binding promise—usually from the project sponsor or a strong parent—that construction will finish on time, within budget, and to the specs the lenders approved. If delays or overruns pop up, the guarantor injects extra cash or steps in to finish the build. Lenders sleep better, pricing comes down, and the debt quantum often climbs.
2. Why lenders get nervous without one
During construction, cash flow is negative and collateral is half-baked concrete or steel. Balance-sheet lenders hate that exposure. A completion guarantee moves the risk from the project vehicle to a creditworthy backer. That shift widens the lender pool: commercial banks, DFIs, even certain debt funds suddenly join the table.
3. Key commercial points we negotiate
| Clause |
Market ask |
Our target |
| Cost overrun cap |
Unlimited |
15–20 % of EPC value |
| Long-stop date |
Scheduled COD + 18 m |
COD + 12 m with force-majeure carve-out |
| Equity top-up timing |
Immediate on notice |
Staggered, tied to revised draw schedule |
| Release conditions |
Six months of DSCR tests |
Mechanical completion plus first revenue |
4. Our advisory path
Scoping.
We review EPC terms, PPA milestones and contingency buffers, then model worst-case overruns.
Term-sheet shaping.
Soft quotes from banks and DFIs arrive inside forty-eight hours, each showing spread, tenor and guarantee language side by side.
Paper-chase management.
We guide sponsors through board resolutions, lawyer drafts and CP checklists while you keep building.
Close and monitor.
Once the guarantee is live, we track drawdowns and milestone tests, stepping in early if slippage threatens the release date.
5. A quick win in numbers
A Southeast Asian data-center project carried a price tag of USD 120 million. Initial bank term sheet: SOFR + 575 bp, 65 % debt. After we inserted a parent completion guarantee capped at 18 % of EPC value, pricing tightened to SOFR + 430 bp and leverage climbed to 75 %. Equity IRR jumped nearly 300 bp. The sponsor called it a life-saver.
6. Pitfalls we flag early
- Expiry mis-match between guarantee and tax holiday. We sync dates to avoid last-minute extensions.
- Trigger events tied to immovable long-stop dates despite force-majeure risk. We build relief days into the schedule.
- Ambiguous cure language that lets lenders accelerate before overruns are confirmed. Our wording removes the grey zone.
7. Learn more or start today
Deep-dive* wording samples live in our corporate-guarantee guide. Project sponsors can compare wrap alternatives on the credit-enhancement hub. Ready for numbers? Share your EPC budget, and we will return with indicative pricing within two business days.