Construction Of Project Finance Transaction

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This practice note sets out a number of fundamental legal and business considerations and issues to address in the context of a project finance transaction.
Project Finance Generally
Industrial projects, such as power plants, toll roads, ports and oil and gas pipelines, are all typically financed through a complex legal, financial and regulatory structure involving multiple project parties, sophisticated documentation and extensive negotiation.
Project finance transactions are typically either (i) limited recourse, where lenders do not assume the entire financial risk of the project and instead rely on mechanisms such as completion guarantees or parent guarantees, or (ii) non-recourse, where the revenues generated from the project and the project’s assets repay the indebtedness owed to the lenders. In addition to providing funds to complete new projects, the scope of project finance also allows project companies to expand existing projects or refinance existing indebtedness on existing projects at more favorable terms.
Nature of the Transaction
One of the key issues to address at the outset of a project finance transaction is a determination as to whether the project is within a regulated industry. If it is, the project sponsor will need to engage specialized regulatory counsel to address issues related to obtaining permits, managing industry-specific risk and other particular requirements and conditions precedent that will lead to deal completion.
If the

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