Greenfield Projects

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Industrial Project Financing (IPFs)

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Greenfield Projects

  1. 1. Greenfield Industrial Project Finance<br />10 Things…<br />
  2. 2. Industrial Project Finance<br />
  3. 3. Ten things…<br />
  4. 4. Enlisting<br /><ul><li>Strategic Equity:
  5. 5. A green-field facility when backed by the same sector in the industry, its strategic equity.
  6. 6. Lenders are in comfort when a substantial investment comes for strategic equity.
  7. 7. In case of some natural calamity, strategic equity investors are considered as the defenders & supporters by the lenders.</li></li></ul><li><ul><li>Experienced Management Team:
  8. 8. A green-field project always demands for a team which has a history of success stories in the same area.
  9. 9. Proven Technology:
  10. 10. The underlying technology needs to be current & up-to-date.</li></li></ul><li><ul><li>Does/will demand increase the supply:
  11. 11. Lenders anticipate the demand to exceed the supply.
  12. 12. Lower-cost producer:
  13. 13. Its not likely that a green-field project will be shut down once its proven that the demand will exceed the supply & it’ll be a low-cost producer.</li></li></ul><li><ul><li>Merchant v/s Contract:
  14. 14. The project should remain competitive & generate attractive cash flow even if the contract relationship disappears.
  15. 15. Pledge of Shares:
  16. 16. Guarantee of shares of the operating company to the lenders.</li></li></ul><li><ul><li>Equipment, Procurement, Construction:
  17. 17. Who will be the EPC?
  18. 18. Independent engineer monitors the construction process & the budget.
  19. 19. Depending upon the construction & ramp-up risks involved contingent equity & completion guarantee is required.</li></li></ul><li><ul><li>Debt service reserve:
  20. 20. A minimum of six-months of principal & interest in a funded debt service reserve is anticipated.
  21. 21. Hedges for significant cost items:
  22. 22. Project enters hedging agreements for the project cost structure that is most significant.</li></li></ul><li>Bottom Line<br />Even in volatile capital markets, smart IPFs can get done as long as they possess the right characteristics.<br />
  23. 23. Thank You <br />In courtesy with “Go Green”<br />

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