Insurance Guarantees for Terna SPA Contracts

Change in Project Financing: Insurance Guarantees as a Strategic Lever for Terna SPA Tender Competitions

Insurance guarantees represent a type of guarantee that a company can use to participate in tender competitions, such as those organized by Terna SPA.

They are provided by insurance companies and serve to ensure that the executing company fulfills its contractual obligations.

Do you need a guarantee for TERNA contracts?

Terna SPA and the Context of Insurance Guarantees

Terna SPA, the manager of the Italian national electricity grid, regularly creates tender competitions for maintenance and development work on the electric grid. These competitions often require guarantees from participating companies to ensure the completion of the commitments taken.

These guarantees are always in the form of an Independent Guarantee Contract.

What is an independent guarantee contract?

An independent guarantee contract is a type of financial guarantee distinguished by its independence from the main contract to which it refers.

This means that the guarantor’s obligation to pay is not directly linked to the conditions or performances of the main contract. In practice, the guarantor commits to paying a certain sum of money upon the simple request of the beneficiary, without having to verify whether the conditions of the main contract have been met or not.

Main characteristics:

• Autonomy: The guarantee is autonomous with respect to the main contract. The guarantor must pay the beneficiary when requested, regardless of whether there are disputes or problems in the main contract.
• Simplicity of Execution: Unlike “accessory” guarantees (such as definitive loss guarantees), where the beneficiary must demonstrate the non-fulfillment of the principal obligor, in autonomous guarantees, the simple unjustified payment request is generally sufficient to obligate the guarantor to pay.
• Flexibility: This type of guarantee is customizable according to the specific needs of the parties, allowing a wide range of applications in different commercial and financial contexts.
• International Use: Autonomous guarantees are widely used in international trade, as they provide a high level of security for the beneficiary, regardless of jurisdiction or local laws.
• Risks for the Guarantor: The guarantor assumes significant risk, as they are required to pay upon request, even in situations of dispute of the main contract.

This type of guarantee is particularly useful in international transactions, large-scale projects, and situations where the parties want additional security that is quick and effective in execution. However, given its potentially burdensome nature for the guarantor, it is important that the activation conditions and clauses of the guarantee contract are defined with precision and clarity.

Need a quote?

 Advantages of Insurance Guarantees

The main advantage of insurance guarantees is that they do not affect the company’s bank credit lines. Unlike bank guarantees, they are not registered in the risk center, thus avoiding influencing the company’s credit rating. This aspect is crucial for companies that need to maintain their financing capacity through banks for other operations.

The Process of Obtaining Insurance Guarantees To obtain an insurance guarantee, a company must submit a request to an insurance company, which will evaluate the solvency and capacity of the company to fulfill its contractual obligations. This process can be faster and less expensive than obtaining a bank guarantee.

What is the difference between Insurance Guarantee and Bank Guarantee?

The differences between an insurance guarantee and a bank guarantee are significant and can greatly influence a company’s financial choices. Here’s a detailed comparison:

Issuance and Guarantor: Insurance Guarantee: Issued by an insurance company. Bank Guarantee: Issued by a bank.

Impact on Credit: Insurance Guarantee: Generally does not affect the company’s credit capacity, as it is not registered in the risk center. Bank Guarantee: Affects the company’s credit lines. It is registered in the risk center, influencing the company’s credit rating and potentially limiting its ability to obtain further financing.

Costs and Fees: Insurance Guarantee: May have variable costs depending on the insurance company’s tariff policy and the risk associated with the company. Bank Guarantee: Often involves bank costs and fees, which can be higher, especially if the company has a low credit rating. Issuance

Process: Insurance Guarantee: Can be simpler and faster to obtain, as insurance companies may have less stringent processes compared to banks.

Bank Guarantee: Often requires a more detailed credit analysis and can be more complex and longer to obtain.

Flexibility and Negotiation: Insurance Guarantee: Offers some flexibility, with the possibility of negotiating terms based on specific needs.

Bank Guarantee: Tends to be more rigid, with standardized conditions and terms. Risks for the Guarantor: Insurance Guarantee: The insurance company assumes the risk, but this is often calculated based on insurance risk models.

Bank Guarantee: The bank assumes the risk, which can influence its credit decisions towards the company. Purpose and Context of Use: Insurance Guarantee: Often preferred for specific projects, such as tender competitions, where a guarantee is required without weighing on credit lines.

Bank Guarantee: More common for routine commercial and financial transactions where the company already has a consolidated relationship with the bank.

In summary, the choice between insurance guarantee and bank guarantee will depend on the specific needs of the company, its financial situation, associated costs, and the speed of issuance required. While insurance guarantees offer advantages in terms of impact on credit and flexibility, bank guarantees may be preferable for companies with solid banking relationships and for more traditional financial needs.

Have more questions?

Practical Case: An Application in the Context of Terna SPA

In the context of tender competitions organized by Terna SPA, insurance guarantees allow companies to participate without weighing on their financial resources and maintaining their ability to access bank credit.

Insurance guarantees represent an important financial tool for companies participating in tender competitions, such as those of Terna SPA. They offer financial flexibility and can be an advantageous option compared to traditional bank guarantees.

How much does an insurance guarantee for a TERNA contract cost?

The cost depends a lot on the amount to be guaranteed and the duration of the insurance guarantee, usually the rate varies between 0.50 and 1.80% per year.

What documents are needed to instruct the request for an insurance guarantee for a TERNA contract?

Here are the documents to present to obtain the Final Guarantee: Award letter Contract Administrator’s document Company’s chamber of commerce registration Latest Balance Sheet with attachments

How long does it take to obtain this type of guarantee?

It depends on the amount to be guaranteed and the duration, usually it takes about 7/10 days.

Other surety policies for Contracts Surety for public contracts Provisional surety for tender competitions Sureties for complex contracts: TRENITALIA, Enel, CONSIP Surety for final payment installment Surety for release of retention guarantees CAR Insurance Policy for Contracts

Insurance Guarantees for Terna SPA Contracts

Change in Project Financing: Insurance Guarantees as a Strategic Lever for Terna SPA Tender Competitions

Insurance guarantees represent a type of guarantee that a company can use to participate in tender competitions, such as those organized by Terna SPA.

They are provided by insurance companies and serve to ensure that the executing company fulfills its contractual obligations.

Do you need a guarantee for TERNA contracts?

Terna SPA and the Context of Insurance Guarantees

Terna SPA, the manager of the Italian national electricity grid, regularly creates tender competitions for maintenance and development work on the electric grid. These competitions often require guarantees from participating companies to ensure the completion of the commitments taken.

These guarantees are always in the form of an Independent Guarantee Contract.

What is an independent guarantee contract?

An independent guarantee contract is a type of financial guarantee distinguished by its independence from the main contract to which it refers.

This means that the guarantor’s obligation to pay is not directly linked to the conditions or performances of the main contract. In practice, the guarantor commits to paying a certain sum of money upon the simple request of the beneficiary, without having to verify whether the conditions of the main contract have been met or not.

Main characteristics:

Autonomy: The guarantee is autonomous with respect to the main contract. The guarantor must pay the beneficiary when requested, regardless of whether there are disputes or problems in the main contract.

Altre polizze fideiussorie per Appalti 

• Fideiussione per appalti pubblici
• Fideiussione provvisoria per gare d’appalto 
• Fideiussioni per appalti complessi: TRENITALIA, Enel, CONSIP
• Fideiussione per rata di saldo 
• Fideiussione per svincolo ritenute a garanzia
• Polizza assicurativa CAR Appalti