Project Financing Introduction

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  • 1. Project Financing
  • 2. -Introduction-Benefits & Disadvantages-Major Participants
  • 3. - The mobilization of debt, equity, hedgesand a variety of limited guarantees througha newly organized company , partnershipor contractual JV.
  • 4. Benefits & Disadvantages -Delays in financial closing-Minimizing the equity -Higher risk premium forcommitment to be associated loansdelivered to anyone -Lenders insist on havingparticular project greater oversight of the-Negotiating risk sharing project- Segregation project’s -Lenders view theliabilities from the insurance arrangementscorporate balance sheet as part of the risk-sharingfrom accounting “added cost on theperspective sponsor”
  • 5. Benefits & Disadvantages-Reducing taxes “1 entity - Documentation isnot 2” lengthy and complex-Avoiding restrictivecovenants on the corporatebalance sheet arising fromproject’s debt financing-Achieving diversification
  • 6. Major ParticipantsSponsors Project Construction Vehicle Contractors Lenders ThirdInsurance Other Off- PartyProviders Parties Takers Operator Resource Government Supplier
  • 7. Sponsor
  • 8. Project Vehicle
  • 9. ConstructionContractors
  • 10. Lenders
  • 11. Sukuk
  • 12. InsuranceProviders
  • 13. Other parties
  • 14. Participants Found In Many But Not AllProject Finance DealsOff-taker
  • 15. The entity that is single purchaser of all theproject output subject to a formal contractThe off-take agreement is designed frequently to permitthe project vehicle to hedge against certain risks“inflation-foreign exchange etc.”
  • 16. Third-PartyOperator
  • 17. Responsible for the O&M of the projectWhen a third party operator is not used in aproject, one of the sponsors may undertake thisrole.
  • 18. ResourceSupplier
  • 19. Responsible for the delivery to the project ofnecessary fuel
  • 20. Government
  • 21. In industrialized countries the central government israrely involved in project finance
  • 22. Thank you verymuch