Principles of project financing

Project financing is one of the forms of attracting investments, which is most often used in construction, energy, oil and gas and mining industries, as well as in the creation of large infrastructure facilities.

This type of financing is used in the most complex and large-scale projects, when banks cannot protect their loan with collateral and credit checks of the borrower alone, but are forced to delve into the details of the financed business.

In this book you will find answers to many questions that arise during the implementation of large investment projects. And these answers will be based on the practical experience of similar solutions in countries where project financing mechanisms have been developed over centuries. 

 

It is important to understand these mechanisms even if right now you do not have the task of finding money for the next infrastructure project.

Project finance is a method of attracting long-term debt financing for large projects through:

 

 "Financial engineering", 

 

based on borrowing across cash flow generated only by the project itself; it depends on a detailed assessment of the creation of the project, operational and income risks and their distribution among investors, loaners and other participants on the basis of contracts and other contractual agreements.

Project finance is a relatively new financial discipline that has become widespread over the past twenty years. In 2001, $190 billion in global investments were financed using project financing methods.

Project financing is the most complex option for an investment project. It contains all the problems, all the experience of analysis and organization, all the financial and market mechanisms that are used for long-term capital investments.

Therefore, the methodology and practice from this book can be used as a collection of solutions for any task related to the management of a company's investments. 

This applies to risk assessment, methods of raising capital, and financial modeling (which in the form of specific models and tools is usually worked out specifically for project financing, and then applied to any type of capital investment).