Project Finance
Contents
Definition
Project Finance is a method of financing in which the lender looks primarily to the revenues generated by a Project, both as the Source of Repayment and as security for the Exposure.
Context
This type of financing is usually for large, complex and expensive installations that might include, for example
- power plants
- chemical processing plants
- mines
- transportation infrastructure
- environment infrastructure, and
- telecommunications infrastructure.
In such transactions, the lender is usually paid solely or almost exclusively out of the money generated by the contracts for the Project’s output, such as the electricity sold by a power plant. The client is usually a special purpose vehicle that is not permitted to perform any function other than developing, owning, and operating the installation. The consequence is that repayment depends primarily on the Project’s cash flow and on the collateral value of the Project’s assets.[1]
See Also
References
- ↑ Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards ("Basel II")”, November 2005
