Project Financing Introduction
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Project financing involves mobilizing debt, equity, hedges and guarantees through a newly organized company or partnership to fund a project. It has benefits like minimizing equity commitment, negotiating risk sharing, and separating project liabilities from corporate balance sheets. However, it also has disadvantages like delays in closing financing, higher risk premiums, and lenders requiring greater oversight. Major participants typically include sponsors, a project vehicle, construction contractors, lenders, insurance providers, off-takers, operators, and sometimes resource suppliers or government entities.
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Project finance can be characterised in a variety of ways, while there is currently no universally adopted definition, different authors and practitioners articulate it through different definitions. Yescombe (2002 ) states that it is a method of raising long-term debt financing for major projects through “financial engineering,” based on lending against cash flow generated by the project alone: It depends on detailed evaluation of projects construction operating and revenue risks, and their allocation between investors, lenders and other parties through contractual and other agreements.
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UNIT- 4.pptx
This document discusses project financing. It begins by defining project financing as financing for long-term infrastructure projects based on a non-recourse or limited recourse structure where debt and equity are repaid from project cash flows. It then outlines the key stages in project financing including identifying the project and risks, conducting feasibility studies, arranging equity and debt, closing documentation, disbursing funds, monitoring implementation, and repayment. Finally, it provides an example project financing structure and highlights such as using a single purpose company and extensive contracting between multiple parties.
Risk Management
Lecture on the basics of project finance and risk management as part of the continuing professional development program of the Philippine Mineral Reporting Code Committee on the "Elements of Mining Feasibility Study"
Session 1 Luigi de Pierris, af db
Presentation Session 1: Luigi de Pierris
ISMED Annual Conference, Defining a Way Forward for Infrastructure Investment in the Middle-East and North Africa (MENA)
4 December 2014 - Paris, France
Surety Bonds
This document is a graduate report on surety bonds submitted by Yajush G. Sonar to the Sardar Vallabhbhai National Institute of Technology in Surat, Gujarat, India to fulfill requirements for the course Project Formulation and Appraisal. The report provides an introduction to surety bonds, distinguishing them from traditional insurance. It describes the key parties in a surety bond and different types of bonds, with a focus on construction surety bonds. The report explains the need for construction bonds, outlines the main types (bid bonds, performance bonds, payment bonds), and describes how they work and the requirements for their use in public and private construction projects.
Similar to Project Financing Introduction (20)
Types of sponsors and investors in project finance
Types of sponsors and investors in project finance
Risk Insights - Wrap-up Insurance Programs for Construction Projects
Risk Insights - Wrap-up Insurance Programs for Construction Projects
UNIVERSITY OF PHOENIXCOLLEGE OF EDUCATION AND EXTERNAL STUDIES.docx
UNIVERSITY OF PHOENIXCOLLEGE OF EDUCATION AND EXTERNAL STUDIES.docx
ISMED Training: PPP Fundamentals by Andrew Fitzpatrick, OECD
ISMED Training: PPP Fundamentals by Andrew Fitzpatrick, OECD
Project Financing Introduction
- 3. -Introduction -Benefits & Disadvantages -Major Participants
- 5. - The mobilization of debt, equity, hedges and a variety of limited guarantees through a newly organized company , partnership or contractual JV.
- 8. Benefits & Disadvantages -Delays in financial closing -Minimizing the equity -Higher risk premium for commitment to be associated loans delivered to anyone -Lenders insist on having particular project greater oversight of the -Negotiating risk sharing project - Segregation project’s -Lenders view the liabilities from the insurance arrangements corporate balance sheet as part of the risk-sharing from accounting “added cost on the perspective sponsor”
- 9. Benefits & Disadvantages -Reducing taxes “1 entity - Documentation is not 2” lengthy and complex -Avoiding restrictive covenants on the corporate balance sheet arising from project’s debt financing -Achieving diversification
- 10. Major Participants Sponsors Project Construction Vehicle Contractors Lenders Third Insurance Other Off- Party Providers Parties Takers Operator Resource Government Supplier
- 11. Sponsor
- 13. Project Vehicle
- 17. Lenders
- 18. Sukuk
- 21. Other parties
- 23. Participants Found In Many But Not All Project Finance Deals Off-taker
- 24. The entity that is single purchaser of all the project output subject to a formal contract The off-take agreement is designed frequently to permit the project vehicle to hedge against certain risks “inflation-foreign exchange etc.”
- 26. Responsible for the O&M of the project When a third party operator is not used in a project, one of the sponsors may undertake this role.
- 28. Responsible for the delivery to the project of necessary fuel
- 29. Government
- 30. In industrialized countries the central government is rarely involved in project finance