Project Finance and Investment Structuring

Project finance is about relatively big, typically long-term projects, such as industrial investment projects, public infrastructure or services, and others through a project with a specific financial structure. The structure of Project Finance basically relies and to a great extent depends on the future cash flows for repayment of the project finances. Public entities or private companies prefer project finance for long-maturing projects or for joint venture arrangements or collaboration arrangements.
Project finance is about relatively big, typically long-term projects, such as industrial investment projects, public infrastructure or services, and others through a project with a specific financial structure.

Financial structuring in projects

The structure of Project Finance basically relies and to a great extent depends on the future cash flows for repayment of the project finances. Public entities or private companies prefer project finance for long-maturing projects or for joint venture arrangements or collaboration arrangements.

Debt, equity and SPV in projects

Finances can consist of a mix of debt and equity. The first part - the assets or ownership rights held under the project act as collateral for the finance. The second part - companies typically hold the project debt in a specific company called Special Purpose Vehicle (SPV) with a minority holding. Why? Because this helps in maintaining the right debt ratios of the company. In the case of the government, they may wish to keep the project off their balance sheet to have more fiscal room. The cash flows from the project enable servicing of the debt and repayment of debt and equity.

Risk management in projects

The Project Finance models is not a simple case and typically contains multiple key elements. SPV may carry out the project itself or subcontract a portion of the project. In the absence of revenues during the construction/investment phase, the interest on debt capital obviously is paid after the commencement of operations and from the first relevant project revenues.

Project financing is a tool for projects, which carry high risks on the capital employed. Often, there is no sufficient financial recourse available to the parties willing to execute and partially fund the projects. In this case SPV need to use a bank and/or investment capital. Careful Business Planing is obviously in need. That is why Project financing requires thorough expertise, reliable financial and relevant technical knowledge, which creates trust between Project Parties and creates solid platform for successful Project Manegment.

How we can help you launch large projects

To let you feel comfortable while participate in Private-Public Partnerships, or launch large-scale projects with third parties like investors, lenders, and different stakeholders, and more than that – to make them successful - we offer our practical experience as the basis of knowledge transfer to our clients via competent and highly efficient consulting services.
More detailed and updated information can be found in the relevant blog articles. Welcome.
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