Project and Principal Finance

This chapter provides an overview of the project financing process itself-the participants, phases, and risks, as well as the benefits of bringing structured financing solutions to bear on project financing problems. The chapter also analyzes four different types of project financing structures. First, securitization structures and project finance collateralized debt obligations (CDOs) that serve as synthetic credit reinsurance and/or synthetic refinancing vehicles for original project lenders. Second, future flow securitizations of exports and other receivables for development and infrastructure financing. Third, future flow securitizations related to principal finance rather than development finance (including whole business securitizations and intellectual property securitizations). Four, synthetic project finance and securitizations of synthetic project finance using prepaid commodity forwards and swaps. The chapter also reviews some of the reasons that structured finance can make project finance easier, more practical, and, in some cases, less costly.