Project Financing
Project financing is a specialized form of funding used for large-scale, capital-intensive projects such as infrastructure developments, energy plants, real estate developments, or industrial ventures. It is typically structured as non-recourse or limited recourse financing, meaning the repayment depends primarily on the project's cash flow rather than the borrower's assets or creditworthiness.
Key Features of Project Financing
Non-Recourse or Limited Recourse Financing: Non-recourse: The lenders rely solely on the project’s cash flow for repayment, with no claim on the sponsor’s assets.
Limited recourse: Sponsors may offer limited guarantees until certain milestones are met.
Cash Flow-Based Repayment: The project’s anticipated revenues (e.g., tolls, energy sales, or rents) are the primary source of repayment. Ensures the project's viability is thoroughly analyzed before funding.
Special Purpose Vehicle (SPV): A separate legal entity is created to own and manage the project, isolating the financial risk from the sponsors' balance sheets.
Multiple Stakeholders: Typically involves sponsors, lenders, contractors, and government entities.Lenders can include banks, institutional investors, and international development organizations.
Collateralized by the Project: The project’s assets, contracts, and cash flow serve as security for the loan.
