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Project Finance

Project Finance

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Published by mav7788

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Categories:Business/Law
Published by: mav7788 on Apr 14, 2010
Copyright:Attribution Non-commercial

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10/29/2010

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1
What is Project Finance?
A way to finance an activity using debt where the debt is repaid fromthe funds generated
by the activity.Usually, a project financing structureinvolves a number of equity investors, known as sponsors, as well asa syndicate of banks that provide loans to the operationFor example, project financing may involve issuing a bond to pay for theconstruction of a museum and repaying it from ticket sales for thatmuseum. Project
financing is often very complex and is most common in thetelecommunications, utilities, transportation, and mining industries. Very often,a company conducting project finance will set up a different corporation or other entity for the project to shield the remainder of the company from liability if thedebt goes into default.
Project financing refers to a financing in which lenders to a project look
 primarily 
to the cash flow and assets of that project as the source of payment of their loans.
PROJECT FINANCE
 
2
Why
Project Financing?
Project Owners Perspective
 ±
Size and cost of projects
 ±
Risk minimization
 ±
Preservation of borrowing capacityand credit rating
 ±
May be only way that enough fundscan be raised
 
3
T
h
e Basic Elements of a Project Financing
L
oanfundsDebtrepaymentEquityfundsReturns toinvestorsCash deficiencyagreement andother forms of credit supportEquityinvestors
L
endersSuppliersPurchasersRawmaterialsSupplycontract(s)Purchasecontract(s)OutputAssets comprising the project

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