Use Case: A Solar Farm Financed By JOLTIFY
Hypothetically, the sponsors create a project holding company Solar Power Plant LLC via an equity shareholder agreement. Solar Power Plant is the operational entity. There are three elements of the business:
- Preparation: Which, involves dealing with the host government legal system, property rights, permits, concession agreements and many other elements that must be outlined whilst performing the investments due diligence.
- Daily operation: construction, equipment, operation and maintenance contracts.
- Major business strategy decisions: off-take agreement (PPA).
In a Power Purchase Agreement (PPA), a solar purchaser or “off-taker” buys power from a project developer at a negotiated rate for a specified term without taking ownership of the system.
The intention of this agreement is to provide the project company with stable and sufficient revenue to pay its project debt obligation, covering the operational costs and providing an assured revenue stream that can be returned to the sponsors and factored into the agreement.
Once the off-take agreement is done, it is assumed that there will be cash flow that is guaranteed within the project. This project company Solar Power Plant LLC can work with an asset originator(AO), which normally will be a funds company specialized in project finance. This AO company will set up a special purpose vehicle (SPV) company. The purpose of the special purpose vehicle, is for risk-sharing, securitization. Just by creating a Special Purpose Vehicle, the lender can separate the loans from the other obligations it has in the securities. This SPV, therefore, allows its investors to receive monetary benefits before any other debtors or stakeholders of the company.
Now the SPV can tokenize this real world asset, the expected cash flow guaranteed by the off-take agreement of the Solar Power Plant LLC via NFT is used as collateral. The NFT is minted based on the document created and shared in the JOLTIFY Chain. The price of the NFT, financing fees and financing amount is determined by the on-chain pricing mechanism or off-chain mechanism, e.g. "Oracles". Once these terms are determined, the SPV can get access to the financing from JOLTIFY investors via locked NFT. At the repayment of the financing, the NFT is unlocked and transferred back to SPV/Asset Originator.