Project Finance is a long-term credit arrangement with a debtor related to the development and construction of infrastructure or a large commercial or industrial project. The technique involves mobilization of debt, equity, contingent equity, hedges and a variety of limited guarantees through a newly organized company, partnership or contractual joint venture, often referred to as Special Purpose Vehicle (“SPV”), for the purpose of building a capital intensive facility and operating a discrete business activity;
- Lumpy capital investment;
- Debt service tailored to cash flow;
- Preponderance of credit enhancements ;
- Extensive due diligence; and
- Involvement of several parties including sovereign entity.
Project Finance can be limited- or non-recourse transaction characterized by
Greenfield, Born field as well as Balancing-Modernizing-Rehabilitation-Expansion Program (“BMRE”) projectsBIFFL can be the only financier to the project (Sole Finance)BIFFL may collaborate and complement other lenders to complete the debt package of a project (Co-Finance)BIFFL can be a part of Syndicated Loan “as loans extended by multiple banks where the overall credit involved exceeds an individual lender’s lending or other limits (Syndicated facility)