PROJECT FINANCE STRUCTURES

GENERALLY Project finance structures are virtually unlimited by the creativity and flexibility of bankers and lawyers. Largely, the structures are influenced by the risk appetites of the lenders and investors involved in the financing and by the economic condition of the host country. In general, these structures are based on one of three macro varieties: nonrecourse financing, limited recourse financing, and project output interest financing. Nonrecourse and limited recourse financing structures provide for debt repayment from the cash flows of the project. Output interest financing structures are centered on the purchase of an interest in the project output, which purchase price is used, in part, to finance the facility. Within these three broad categories are countless other structures, on a micro level. The most frequently used of these, loan financing, export credit financing, lease financing, and bond financing are discussed in this chapter. COMMERCIAL LOAN FINANCING The general structure of a loan financing in the project finance context is not unlike the structure used in other loan transactions. In the typical project finance transaction, funds are lent to the project company for the construction and operation phases of a project.