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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COLLEGE OF EDUCATION AND EXTERNAL STUDIES
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DEPARTMENT OF EXTRA MURAL STUDIES
MASTERS OF ARTS IN PROJECT PLANNING AND MANAGEMENT
LDP 602: PROJECT FINANCING
CIRCUMSTANCES IN WHICH ENVIRONMENTAL, POLITICAL AND MACROECONOMIC RISKS ARE IMPORTANT FOR PROJECT FINANCIERS BEFORE ADVANCING LOAN TO A PROJECT COMPANY
CESAR DELARIVIER
L50/76492/2014
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1. Table of Content 油page
Explain the circumstances in which environmental, political and macroeconomic risks are important for project financiers before advancing loan to a project company (15marks).
Introduction
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.
Gatti (2007) defines it as the structured financing of a financial economic entity _the SPV, or special purpose vehicle, also known as the project company- created by sponsors using equity or mezzanine debt and for which the lender considers cash flows as being the primary source of loan reimbursement.
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This document discusses structuring large projects using project financing. It explains that project structure is important to ensure capital providers receive a reasonable return given the risks. Key aspects of project structure discussed include using a special purpose vehicle, extensive contracting between multiple parties, high debt levels with non-recourse to sponsors, and various models like build-operate-transfer. The document also summarizes different types of contracts like take-or-pay, throughput agreements, and forms of supplemental credit support including cash deficiency agreements and insurance.5714383.ppt
5714383.pptGUDAGUDA
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The document provides guidelines for auditing public private partnership projects. It defines PPP and describes the main characteristics as long term service provisions, transfer of risks to the private sector, and long term contracts between legal entities and public authorities. It also identifies and describes various types of risks in PPP projects including feasibility, financing, construction, operation and maintenance, demand, revenue, termination, and residual value risks. The document states that a balanced sharing of risks between public and private partners is essential for the success of PPPs. It advises auditors to review the risk assessment and allocation to ensure risks are balanced and in the public interest.
Project Finance
Project FinanceMD. RASHEDUL ISLAM .
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This document provides an overview of project finance, including:
1) Defining project finance as the financing of independent projects using limited or non-recourse debt, where lenders look primarily to the cash flows of the project for repayment.
2) Key characteristics including the use of a special purpose vehicle, contractual agreements between parties, limited recourse, keeping financing off the sponsor's balance sheet, and relying on the project's revenue stream.
3) Legal considerations involve determining the type of concession agreement and security for lenders, while financial considerations include forecasting costs, revenues, and funding parameters.ISMED Training: PPP Fundamentals by Andrew Fitzpatrick, OECD
ISMED Training: PPP Fundamentals by Andrew Fitzpatrick, OECDOECDGlobalRelations
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Presented at the Training Session on Public Private Partnerships organised by the MENA-OECD Investment Security in the Mediterranean (ISMED) Support Programme in September 2014.1 Aydemir_2006.ppt introduction to project finance
1 Aydemir_2006.ppt introduction to project financePierre Celestin Eyock
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introductory course on priject financingUNIT- 4.pptx
UNIT- 4.pptxAfreen Fatima
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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.
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 projects -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 projects 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