What is Project Finance?
João Pinto ()
No 1, Working Papers de Economia (Economics Working Papers) from Católica Porto Business School, Universidade Católica Portuguesa
Project finance is the process of financing a specific economic unit that the sponsors create, in which creditors share much of the venture’s business risk and funding is obtained strictly for the project itself. Project finance, often used for capital-intensive facilities and utilities, is commonly used to segregate the credit risk of the project from that of its sponsors so that lenders, investors, and other parties will appraise the project strictly on its own merits. Project finance creates value by reducing the costs of funding, maintaining the sponsors financial flexibility, increasing the leverage ratios, avoiding contamination risk, reducing corporate taxes, improving risk management, and reducing the costs associated with market imperfections. Besides describing the economic motivations for using project finance, this paper provides details on project finance characteristics and players, presents the recent trends of project finance market, and provides some statistics of project finance (PF) lending activity in Western Europe between 2000 and 2011.
Keywords: project finance; structured finance (search for similar items in EconPapers)
JEL-codes: G24 G32 (search for similar items in EconPapers)
Pages: 19 pages
New Economics Papers: this item is included in nep-ppm
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Persistent link: https://EconPapers.repec.org/RePEc:cap:wpaper:012014
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