Project finance

Jun 21st, 2015
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Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of equity investors, known as 'sponsors', as well as a 'syndicate' of banks or other lending institutions

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Project Finance Teaching NoteFNCE 208/731Fall 1996Professor Gordon M. Bodnarwritten byBruce Comer____________________This teaching note was prepared by Bruce Comer under the Guidance of Professor Gordon Bodnar and Mr. Tom Pyle of PrincetonPacific Group. This note in intended for teaching purposes only and not for public distribution. Copyright 1996.______________________________________________________________________________The Wharton SchoolProject Finance Teaching Note - 1I. Definition of project financeThe term project finance is used loosely by academics, bankers and journalists todescribe a range of financing arrangements. Often bandied about in trade journals andindustry conferences as a new financing technique, project finance is actually acenturies-old financing method that predates corporate finance. However with theexplosive growth in privately financed infrastructure projects in the developing world,the technique is enjoying renewed attention. The purposes of this note are to contrastproject finance with traditional corporate financing techniques; to highlight theadvantages and disadvantages of project finance and ; to propose that a single structureunderlies every project finance transaction; to explain the myriad of risks involved inthese transactions; and, to raise questions for future research.Project financing techniques date back to at least 1299 A.D. when the English Crownfinanced the exploration and the development of t

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