Building Infrastructure Projects Like Highways, Eurotunnel, Metro Systems, Infrastructure, Public And Private Venture Capital Needs

985 Words Jan 5th, 2016 4 Pages
What is ‘project finance’? The term features prominently in the press, more specifically with respect to infrastructure, public and private venture capital needs. The press often refers to huge projects, such as building infrastructure projects like highways, Eurotunnel, metro systems, or air- ports. It is a technique that has been used to raise huge amounts of cap- ital and promises to continue to do so, in both developed and developing countries, for the foreseeable future.
While project finance bears certain similarities to syndicated lending, there are a host of specific issues that mean that it is essentially a specialized dis- cipline unto itself, effectively a discrete subset of syndicated lending.
P roject finance is generally used to refer to a non-recourse or limited recourse financing structure in which debt, equity and credit enhance- ment are combined for the construction and operation, or the refinanc- ing, of a particular facility in a capital-intensive industry.
Credit appraisals and debt terms are typically based on project cash flow forecasts as opposed to the creditworthiness of the sponsors and the actual value of the project assets. Forecasting is therefore at the heart of project financing techniques. Project financing, together with the equity from the project sponsors, must be enough to cover all the costs related to the development of the project as well as working capital needs.
Project finance risks are therefore highly specific and it is…
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