1E9Ct5D

The guarantees to be granted by FGP, whether to the private partner, or to insurance companies,financial institutions and international organizations, may be classified into the following types,considering the assets of the FGP:(i) surety, without a benefit of order to the surety;(ii) pledge of immovable property or of rights;(iii) mortgage of immovable property;(iv) chattel mortgage;(v) other agreements that produce a guarantee effect;(vi) secured or personal guarantee.Moreover, bearing in mind that, in principle, it will be up to the private partner to obtain the mostsignificant portion of the resources to finance the PPP project, the agreement may provide for theissuance of pledges relating to the obligations of the Public Administration, in favor of the financingentity, that is to say, the remuneration, directly in the name of the financing entity, and the legality ofthe financing entity to receive payments through said funds. It is a true subrogation, since, once theprivate partner has received its remuneration directly from the administration, the financing entitysucceeds to this receipt. This innovative procedure, which is unprecedented in the current Bidding Act,will give the financial entity a greater guarantee for the amortization of the amounts financed to theprivate partner. This mechanism also applies to Common Concessions under the Concession ofPublic Services Laws.The private partner may also grant guarantees to the financing entity, without prejudice to others,represented by receivables, i.e., rate revenues and remuneration originating from the public authority,as the case may be.Furthermore, the Public Administration may require from the private partner with the purpose ofguaranteeing its performance, the guarantees set forth in the Bidding Act, comprising an escrow incash or government securities, surety insurance or a bank guarantee, limited to 10% of the agreementamount, when involving works, services or substantial volume supplies, or to five percent (5%), forsmaller volume agreements.With the enactment of Law 12,024/2009, it was determined that the Union shall not grant guaranteesand make voluntary transfers to the States, Federal District and Municipalities if the sum of expensesof an ongoing nature incurred by the series of partnerships already contracted by such entities has, inthe previous year, exceeded three percent (3%) of net current revenue for the year or if the annualexpenses of the contracts in force during the ten (10) subsequent years exceed three percent (3%) ofthe net current revenues projected for the respective years.69