PROJECT FINANCE- MODELLING AND ANALYSIS

A. Finance is defined as the management of money and includes activities

such as investing, borrowing, lending, budgeting, saving, and forecasting.

Finance deals with the questions of how and why an individual, company or
government acquires the money needed - called capital in the company
context - and how they spend or invest that money.

Accounting is keeping track of transactions made during receiving and

spending. This is the core difference between the finance and accounting.
The basic points required to pursue a career in finance

Skills Required for a finance professional :

1. Analysis
2. Decisiveness
3. Persuasiveness
4. Interpersonal and communicational Skills
5. Mathematical Expertise

Project finance: Project finance is the funding of long term

infrastructure, industrial projects and public services using a non
-recourse and limited recourse financial structure . the debt and equity
used to finance the project are paid back from the cashflow generated by
the project .

Project finance in simple words, financing the project on non-course

financial structure whereas the corporate finance is financing the
corporate based on their financial statements and taking collateral
(security) as their assets.
 20 terminologies related to project finance
1. Amortisation
2. Advance payments
3. Annuity
4. Commissioning
5. Contingency
6. Concession agreement
7. Deficiency agreement
8. Financial close
9. Feasibility study
10.Build Operate Transfer (BOT)
11.Working capital
12.Loan to value ratio
13.EPC contract
14.Design-Bid-Build (DBB)
15.Public- Private partnership (PPP)
16.Floating currency
17.Joint Operating Agreement (JOA)
18.Environmental Risk
19.Hedge Funds
20.Insolvency

A. Non- recourse loan is a type of loan secured by collateral. which is

usually property. I the borrower defaults the issuer can seize the collateral
but cannot seek out the borrower for any further compensation even if the
collateral doesn’t cover the full value of the defaulted amount. Non
recourse are harder to obtain and qualify for because he lender takes the
majority of Risk

Mezzanine Financing :mezzanine financing is a hybrid of debt and

equity financing that gives the lender the right to convert to an equity
interest in the company in case of default
Project finance suits:
The sectors or a project which suits the project finance
are construction of high valued buildings, mining industry, entertainment
industry like sports and other possible activities, energy industry,
highway development projects. These are suitable because these require
high amount of investment and no such high valued collaterals can be
sourced as securities, thus project finance is the only way to finance the
project and also get the repayment from the cash generated from the
project.