International project analysis and financing / G. Pollio

1999

Principles of Project Finance, 2002

This chapter reviews the private-sector debt markets for project finance, in particular commercial banks (cf. §3.1) and bond investors (cf. §3.2). The uses of mezzanine or subordinated debt (cf. §3.3), leasing (cf. §3.4), and vendor finance (cf. §3.5) are also considered. Loans and guarantees provided by export credit agencies and multilateral and bilateral development banks, mainly for projects in developing countries where the private sector is not willing to assume the credit risk in the country concerned, are discussed in Chapter 11 (but cf. §3.6). Private-sector project finance debt is provided from two main sources-commercial banks and bond investors. Commercial banks provide long-term loans to project companies; bond holders (typically long-term investors such as insurance companies and pension funds) purchase long-term bonds (tradable debt instruments) issued by project companies. Although the legal structures, procedures, and markets are different, the criteria under which debt is raised in each of these markets are much the same. ("Lender" is used in this book to mean either a bank lender or a bond investor.

2000

The use of non-recourse project financing has grown steadily in emerging markets, especially in basic infrastructure, natural resources and the energy sector. Because of its cost and complexity, project finance is aimed at large-scale investments. The key is in the precise estimation of cash flows and risk analysis and allocation, which enables high leverage, and in ensuring that the project can be easily separated from the sponsors involved. Project finance is more difficult in emerging countries, which tend to pose unpredictable risks with unfavorably biased results. This imposes the need to introduce contractual, financing and structural elements that yield the maximum possible expatriation of operating flows.

Project finance is a pervasive method of financing in developing countries. It has a significant advantage over traditional financing approaches. In the era of the globalization of business and investment, where the demand for energy has soared and many international oil companies and private and institutional investors ventured into the developing world, this method of finance has created a wealth of new opportunities to finance capital-incentive ventures, including development of oil production, gas transmission, and electric power generation facility. Beginning in the 1980s, the risk associated with the construction of large infrastructure were largely born by governments, which normally built and operated these projects through their own enterprises. However, most of these governments were in transition or post-conflict states-saddled with debt and unable to finance large expensive infrastructure projects. Through much of the mid-to-late twentieth century, these government came to adopt the view that the best way to boost economic growth would be to limit the government involvement and make room for private investments and innovation. The proposed solution was the private financing of large and capital-incentive infrastructure. The world's appetite for oil & gas is great and is steadily increasing. The consumption of oil & gas remains concentrated in wealthy nations, particularly the United States and China which has surpassed most of the industrialized countries to become the world's second-largest consumer of Energy. To satisfy this increasing high demand of energy, oil-producing countries have rushed to increase their productions. Thus, developing countries have been and continue to be a favored destination for international oil companies mainly because financial constraints have hindered these countries' ability to commit its financial resources to the development of their infrastructures. Project finance has developed in response to this critical need. It offers the prospect to appeal both domestic and international private investment, in addition, it allows the developing countries to harness private sector's skills, expertise, the necessary technology, and know

Journal of Islamic Economics , Banking and Finance, 2013

The investment profile and particularly the horizon of traditional debt financing for projects seldom matches the returns on assets, particularly in the resources and infrastructure sectors where assets have a lengthy construction phase before realising a return. This mismatch in investment duration and risk-return profile is a key weakness of the Western approach to limited recourse borrowing under project financing conventions. The motives underlying Islamic finance however differ from the Western approach permitting longer-term investments and profit-sharing arrangements, subject to the strict practice of Shari´ah law. This paper highlights the advantages of Islamic investment practices over traditional approaches in project financing which can potentially fill a significant gap in funding options for firms in the global resources sector.

In project finance, credit risk tends to be relatively high at project inception and to diminish over the life of the project. Hence, longer-maturity loans would be cheaper than shorter-term credits. JEL classification: F34, G12, G28, G32. For decades, project finance has been the preferred form of financing for largescale infrastructure projects worldwide. Several studies have emphasised its critical importance, especially for emerging economies, focusing on the link between infrastructure investment and economic growth. Over the last few years, however, episodes of financial turmoil in emerging markets, the difficulties encountered by the telecommunications and energy sectors and the financial failure of several high-profile projects 2 have led many to rethink the risks involved in project financing.

2013

The purpose of this study is to show the importance of using project finance in infrastructure investments in developing countries. The paper will be focused only on one infrastructure sector, which is energy. Structurally, power project finance has involved largely buildown-transfer (BOT) project structures and long-term contracts. The projects largely reflect a rational allocation of risks among public and private participants. Private sponsors and lenders generally assume risks for completion and performance. Governments assume substantial risks in nearly all projects, mostly in areas in which they have control, such as utility performance, currency convertibility, fuel costs, inflation, and political event. The aim of this research is to empirically examine a financing and governance structure called Project Finance that typically funds large scale, capital intensive, infrastructure investments in risky countries. The methodology used in this paper is literature review of the ma...

Project finance (PF), can be viewed as an investment expedition1 and as any other expedition once it has departed it solely depends on its own resources and these are the arrangements that PF provides. PF’s legal framework interacts with the political and commercial conditions that O&G exploration projects confront and functions as a dispenser of risks among involved parties counterbalancing simultaneously their commonly conflicting interests. For the purposes of this paper we will cross PF from the union of sponsors until the undesirable event of insolvency, highlighting its innovating character and its importance to large-scale long term infrastructure projects.

2014

Funding projects through Project Finance arrangements in contemporary Economic and Corporate and economic governance has become the catalyst for developing capital intensive projects in most Organizations and Nations. Unlike corporate finance, project finance is a non-recourse debt that is financed through cash generated from the project. This paper examined the increasing reliance on project finance in recent times by assessing its merits over traditional corporate financing and described the operation of a typical Project Finance Scheme. Using a Descriptive Analysis, the theoretical underpinnings of this subject matter were assessed. Historical data on project costs using project financing were evaluated. The study revealed that the successful completion of most capital intensive projects were initiated and completed through project finance schemes. However, the ultimate key to projects finance is the accurate estimation and evaluation of project viability.

Thesis (Ph. D.)--University of Tennessee, Knoxville, 1986. Includes bibliographical references (leaves [112]-114). Vita.