Presentation1 final ppt...........

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Presentation1 final ppt...........

  1. 1. PROJECT FINANCE<br />
  2. 2. Presented by…<br />
  3. 3. It’s All About Risk!<br />The key to project financing is the reallocation of any risk away from the lenders to the project.<br />
  4. 4. WHAT IS PROJECT FINANCE ?<br />
  5. 5. Project Finance involves a corporate sponsor investing in and owning a single purpose, industrial asset through a legally independent entity financed with non-recourse debt.<br />
  6. 6. The financing of long-term infrastructure, industrial projects and public services.<br />project financing is a loan structure.<br />attractive to the private sector.<br />
  7. 7. WHY PROJECT FINANCE?<br />
  8. 8. Size and cost of projects<br />Risk minimization<br />May be only way that enough funds can be raised<br />
  9. 9. FEATURE<br />
  10. 10. It is provided for a “ring-fenced” project<br />There is a high ratio of debt to equity<br />There are no guarantees<br />Lenders rely on the future cash flow <br />The main security for lenders<br />
  11. 11. ADVANTAGES<br />
  12. 12. Project financing is usually chosen by project developers in order to inter alia: <br />Eliminate or reduce the lender’s recourse to the sponsors<br />Permit an off-balance sheet treatment of the debt financing<br />Maximize the leverage of a project<br />Reduce political risks affecting a project<br />
  13. 13. Circumvent any restrictions or covenants binding the sponsors under their respective financial obligations<br />Avoid any negative impact of a project on the credit standing of the sponsors<br />Obtain better financial conditions when the credit risk of the project is better than the credit standing of the sponsors<br />
  14. 14. DISADVANTAGES<br />
  15. 15. Often takes longer to structure than equivalent size corporate finance.<br />Higher transaction costs due to creation of an independent entity can be up to 60bp<br />Project debt is substantially more expensive (50-400 basis points) due to its non-recourse nature.<br />Extensive contracting restricts managerial decision making.<br />Project finance requires greater disclosure of proprietary information and strategic deals.<br />
  16. 16. TYPES<br />
  17. 17.
  18. 18. PARTICIPANTS<br />
  19. 19. Government <br />Equity Funders<br />Nonrecourse Debt Funders<br />Operator<br />Construction/Engineering Consultants<br />Affected Communities<br />
  20. 20. Developmental projects<br />
  21. 21. ROAD:<br />L&T Transportation Infrastructure Limited(L&T-TIL) <br />construction of a 28km bypass road<br />Bypass commenced in Dec.1998 and Jan.2000 respectively<br />
  22. 22. AIRPORT:<br />Bangalore International Airport Limited (BIAL)<br />project covers construction of a 4000m runway<br />expected traffic demand of 4.1 million passengers per year<br />investment will be US$240 million (Rs.1240 crores). <br />
  23. 23. BRIDGE :<br />Narmada Infrastructure Construction Enterprise Limited (NICE)<br />The construction of a 1.4km-long bridge adjacent to the first bridge & 4.6km of approach roads<br />Service began in nov. 2000<br />
  24. 24. TRADE & EXHIBITION CENTRE:<br />Hyderabad International Trade Expositions Limited (HITEX)<br />developed on a 100-acre plot<br />eight air cooled halls of 3500 Sqm each of indoor<br />an open exhibition space (32,825 Sqm) <br />conference rooms of a total area of 4553 Sqm<br />
  25. 25. WATER SUPPLY PROJECTS<br />Vizag Industrial Water Supply Company Limited (VIWSCO)<br />Pipeline works from Rajahmundry to YLBC 56 km<br />Concession period for the project is 32 years<br />

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