Download - Project Financing Introduction
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Project Financing
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-Introduction
-Benefits & Disadvantages
-Major Participants
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- The mobilization of debt, equity, hedges
and a variety of limited guarantees through
a newly organized company , partnership
or contractual JV.
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Benefits & Disadvantages
-Minimizing the equity commitment to be delivered to anyone particular project -Negotiating risk sharing- Segregation project’s liabilities from the corporate balance sheet from accounting perspective
-Delays in financial closing-Higher risk premium for associated loans -Lenders insist on having greater oversight of the project-Lenders view the insurance arrangements as part of the risk-sharing “added cost on the sponsor”
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Benefits & Disadvantages
-Reducing taxes “1 entity not 2”-Avoiding restrictive covenants on the corporate balance sheet arising from project’s debt financing-Achieving diversification
- Documentation is lengthy and complex
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Major Participants
Sponsors Project Vehicle
Construction Contractors Lenders
Insurance
Providers
Other
Parties
Off-
Takers
ThirdParty
Operator
Resource
SupplierGovernment
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Sponsor
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Project Vehicle
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Construction Contractors
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Lenders
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Sukuk
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Insurance Providers
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Other parties
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Participants Found In Many But Not All
Project Finance Deals
Off-taker
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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.”
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Third-Party Operator
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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.
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Resource Supplier
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Responsible for the delivery to the project of
necessary fuel
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Government
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In industrialized countries the central government is
rarely involved in project finance
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Thank you very much