Appraisal of Large-Scale Investment Projects: An Overview

The project company raises equity capital from one or more sources and supplements it with non-recourse debt for creation of specified capital assets. Issues relating to corporate governance, information sharing and expeditious decision making are better addressed and resolved within the framework of a project company. The most distinctive feature of project finance is the lenders&s; exclusive dependence on the project&s;s cash flows to service the project company&s;s debt. Project appraisal and investment decision-making warrants a curious combination of skills, ranging from strategic foresight to a thorough understanding of the nitty-gritty of applicable taxation laws and the like. The elementary sub-task within the appraisal mandate is the creation of a robust financial model, comprising the income statement, balance sheet and the statement of cash-flows for the proposed project. The project is closely monitored through construction and operation to confirm adherence to the plans.