Project Finance
BASICS OF PROJECT FINANCE Definition Project finance involves the creation of a legally independent project company financed with non-recourse debt (and equity from one or more sponsoring firms) for the purpose of financing a single purpose capital asset, usually with a limited life 1 . Main parties in project financing Lenders Sponsors Contractors Project Company Customers Host Government Characteristics of Project Finance A project is established as a separate company A major proportion of the equity of the project company is provided by the project manager or sponsor, thereby tying the provision of finance to the management of the project. The project company enters into comprehensive contractual arrangements with suppliers and customers The project company operates with a high ratio of debt to equity, with lenders having only limited recourse to the equity-holders in the event of default Project Finance Investment An illust...
