Question 1: (7 marks) Indicate if the following statements are true of false. Motivate your answer in ONE sentence. (7) In the event where the output of a power plant does not fully meet the contractually agreed performance standards by the commercial operating date, all performance guarantees should be called in from the contractor, and another contractor should be appointed to improve the performance. (1) Increasing the gearing (debt : equity) of a particular project by 10% will result in a higher project IRR, compared to increasing the interest rate on senior debt ( by a similar margin). (1) Institutional investors (e.g. pension and insurance funds) generally don't have a problem to take on construction risk, and therefore can invest either before or after the final completion certificate of a project has been issued. (1) During the financing phase of the project, the sponsors should endeavor to get as many as possible debt funders involved. This will reduce the maximum exposure per lender and shorten the time to financial close. (1) Generally, value added tax are not included in financial models, as it has no effect on the profitability, return calculations, or funding requirement of the company. (1) The cash flow waterfall layout is subject to the relationship between each of the different lenders, the letter which is formalized in the credit facilities agreement. (1) The inclusion of subordinated, or quasi equity facilities in the capital structure of a project could potentially reduce the value at risk for the senior debt funders, and increase equity returns. (1)