Publications

Project Finance International biweekly magazine published by Thomson Financial. Infrastructure Journal The on-line resource for infrastructure professionals. PFI Intelligence Bulletin SMI Publishing, UK PFI Intelligence Bulletin is a newsletter covering PFI legislation, regulation, working procedures, and market potential including database of PFI projects 800 in total within the UK and beyond. Project Finance Magazine a monthly trade journal published by Euro-money Publications PLC. Project...

Export credit agencies

Export credit agencies use three methods to provide funds to an importing entity Direct lending This is the simplest structure whereby the loan is conditioned upon the purchase of goods or services from businesses in the organizing country. Financial intermediary loans Here, the export-import bank lends funds to a financial intermediary, such as a commercial bank, that in turn loans the funds to the importing entity. Interest rate equalization Under an interest rate equalization, a commercial...

Common misconceptions about project finance

There are several misconceptions about project finance The assumption that lenders should in all circumstances look to the project as the exclusive source of debt service and repayment is excessively rigid and can create difficulties when negotiating between the project participants. Lenders do not require a high level of equity from the project sponsors. This may be true in absolute terms but should not obscure the fact that an equity participation is an effective measure to ensure that the...

Introduction to project finance

What is 'project finance' The term features prominently in the press, more specifically with respect to infrastructure, public and private venture capital needs. The press often refers to huge projects, such as building infrastructure projects like highways, Eurotunnel, metro systems, or airports. It is a technique that has been used to raise huge amounts of capital and promises to continue to do so, in both developed and developing countries, for the foreseeable future. While project finance...

Project phases

Project financings can be divided into two distinct stages Construction and development phase - here, the loan will be extended and debt service may be postponed, either by rolling-up interest or by allowing further drawdowns to finance interest payments prior to the operation phase. The construction phase is the period of highest risk for lenders since resources are being committed and construction must be completed before cash flow can be generated. Margins might be higher than during other...

Description of a typical project finance transaction

Project Finance Player

Project finance transactions are complex transactions that often require numerous players in interdependent relationships. To illustrate, we provide Figure 1.1 Example of a commercial bank Figure 1.1 Example of a commercial bank an organization diagram of the various players seen from the viewpoint of an agent bank in a generic project finance transaction The core of a project financing is typically the project company, which is a special purpose vehicle SPV that consists of the consortium...

Advantages of project finance

Non-recourse limited recourse financing Non-recourse project financing does not impose any obligation to guarantee the repayment of the project debt on the project sponsor. This is important because capital adequacy requirements and credit ratings mean that assuming financial commitments to a large project may adversely impact the company's financial structure and credit rating and ability to access funds in the capital markets . Off balance sheet debt treatment The main reason for choosing...

Disadvantages of project finance

Complexity of risk allocation Project financings are complex transactions involving many participants with diverse interests. This results in conflicts of interest on risk allocation amongst the participants and protracted negotiations and increased costs to compensate third parties for accepting risks. Increased lender risk Since banks are not equity risk takers, the means available to enhance the credit risk to acceptable levels are limited, which results in higher prices. This also...