Project Financing

Project financing is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors.

Usually, a project financing structure involves a number of equity investors, known as sponsors’, and a syndicate’ of banks or other lending institutions that provide loans to the operation.

They are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling.

Risk identification and allocation is a key component of project financing. A project may be subject to a number of technical, environmental, economic, and political risks, particularly in developing countries and emerging markets.