Project Finance

Jun 18th, 2015
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1. INTRODUCTION : Project Finance is the long term financing of infrastructure and industrial projects based upon the projected cash flow of the project rather than the balance sheets of the project sponsors.It is the financing of a particular economic unit in which a lender is satisfied to look initially to the cash flow and earnings of that economic unit

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FINANCING BUSINESSFINANCE1. INTRODUCTIONProject Finance is the long term financing of infrastructure and industrial projects based upon the projected cash flow of the project rather than the balance sheets of the project sponsors.It is the financing of a particular economic unit in which a lender is satisfied to look initially to the cash flow and earnings of that economic unit as the source of funds from which a loan will be repaid and to the assets of the economic unit as collateral for the loan.Usually, a project financing structure involves a number of equity investors, known as sponsors, as well as a syndicate of banks that provide loans to the operation. The loans are most commonly non-recourse loans, which are secured by the project assets and paid entirely from cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modelling. The financing is typically secured by all of the project assets, including the revenue producing contracts. Project lenders are given a lien on all of these assets, and are able to assume control of a project if the project company has difficulties complying with the loan terms. Assets that have been financed on a project basis include pipelines, refineries, electric generating facilities, hydroelectric projects, dock facilities, mines, toll roads, and mineral processing facilities.It is the method of financing very large capital intensive project, with long

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