The people involved in a project are used to find financing deal for major construction projects such as mining, transportation and public utility industries, that may result such risks and compensation for repayment of loan, insurance and assets in process. That's why they need to learn about project finance in order to manage project cash flow for ensuring profits so it can be distributed among multiple parties, such as investors, lenders and other parties.
A Proiect is normally a long-term infrastructure, industrial orpublic services scheme, development or undertaking having:large size.
- lntensive capital requirement — Capital Intensive.
- Finite and long Life.
- Few diversification opportunities i.e. assets specific.
- Stand alone entity.
- High operating margins.
- Significant free cash flows.
Such projects are usually government regulated and monitoredwhich are allowed to an entity on 8.0.0 or B.O.T basis.
" The financing of long-term infrastructure, industrial projectsand public services based upon a non-recourse or limitedrecourse financial structure where project debt and equity usedto finance the project are paid back from the cash flowsgenerated by the project.”
Project finance is especially attractive to the private sectorbecause they can fund major projects off balance sheet.