Project finance 4

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PROJECT FINANCE

M-4105 APEKSH

A

M-4131

JUHI

M-4123 SONALI

M-4135 PALVI

Presented by…

THE KEY TO PROJECT

FINANCING IS THE REALLOCATION OF ANY RISK AWAY

FROM THE LENDERS TO THE PROJECT.

It’s All About

Risk!

WHAT IS

PROJECT

FINANCE ?

Project Finance involves a

corporate sponsor investing in

and owning a single purpose,

industrial asset through a legally independent entity financed with non-recourse debt.

The financing of long-term infrastructure, industrial

projects and public services.

project financing is a loan structure.

attractive to the private

sector.

WHY PROJECT FINANCE?

Size and cost of projects

Risk minimization

May be only way that enough funds can be raised

FEATURE

It is provided for a “ring-fenced”

ADVANTAGES

Project financing is usually chosen by

project developers in order to inter alia: Eliminate or reduce the lender’s

recourse to the sponsors

Permit an off-balance sheet treatment of the debt financing

Maximize the leverage of a project

Reduce political risks affecting a project

Circumvent any restrictions or covenants binding the sponsors under their

respective financial obligations

Avoid any negative impact of a project on the credit standing of the sponsors

Obtain better financial conditions when the credit risk of the project is better

than the credit standing of the sponsors

DISADVANTAGES

Often takes longer to structure than

equivalent size corporate finance.

Higher transaction costs due to creation of

an independent entity can be up to 60bp

Project debt is substantially more

expensive (50-400 basis points) due to its non-recourse nature.

Extensive contracting restricts managerial decision making.

Project finance requires greater disclosure

of proprietary information and strategic

deals.

TYPES

PUBLIC FINANCE

CORPORATE

FINANCE LIMITED- RESOURCES

PARTICIPANTS

Affected Communities

l projects

L&T Transportation

Infrastructure Limited(L&T-TIL)

construction of a 28km bypass road

Bypass commenced in Dec.1998 and

Jan.2000 respectively

expected traffic demand of 4.1 million

passengers per year

investment will be US$240 million (Rs.1240 crores)

Service began in nov 2000

4) TRADE & EXHIBITION CENTRE:

Hyderabad International Trade

Expositions Limited (HITEX)

developed on a 100-acre plot

eight air cooled halls of 3500 Sqm each of indoor

an open exhibition space (32,825 Sqm)

conference rooms of a total area of 4553

Sqm

5) WATER SUPPLY PROJECTS

Vizag Industrial Water Supply

Company Limited (VIWSCO)

Pipeline works from Rajahmundry to YLBC

56 km

Concession period for the project is 32

years