- The mobilization of debt, equity, hedgesand a variety of limited guarantees througha newly organized company , partnershipor contractual JV.
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”
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
Major ParticipantsSponsors Project Construction Vehicle Contractors Lenders ThirdInsurance Other Off- PartyProviders Parties Takers Operator Resource Government Supplier
Participants Found In Many But Not AllProject Finance DealsOff-taker
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.”