Commercial Finance

Question 1

Reviewing contract clauses

Answer 1

spotting the No Go (Clauses in the contract that GE cannot accept)
Goal is to protect GE during the execution of the project

Question 2

Exemple of No Go

Answer 2

Exemple of No Go : Rating clause in the bonds (propose a list of bank instead of changing bank and issue a new bonds of the rate of the bank is lower than triple A).

Assignment clause : assign the contract to a supplier or a third party si forbidden

Question 3

Exemple of Mitigation

Answer 3

FX hedging : propose an FX clause : we convert the selling price on the day the client is signing the contract, in order to minimize FX exposure

Propose to bid in multicurrency, to match the SP currency with the currency of the costs (reduce the FX exposure)

Question 4

TCS check

Answer 4

check that all the costs are correctly put in the TCS
check that the costs are reflecting the contract (duration and % of the bonds, payment milestones)

Check the cash curve (no negative cash during the project, otherwise adjust the cash in milestones, increase the DP%)

Question 5

help on FX hedging

Answer 5

Treasury should provide some provision to protect GE in case of FX exposure

I had to send to treasury a template with the cash in and cash out for all the currencies, then Treasury came back to me with the amount of provision to include in the TCS.

Question 6

continuous improvement on firming

Answer 6

in the framework of an firming workout, goal were to forecast more accurately the firming provision.
New provision spreading trough the components (split between Transport Road/Sea).

Before the workout : labour firming calculating on the basis of the currency that had the higher proportion in the costs, so they decided to spread the firming on each currency that we use to pay the worforce.