Project Finance: Identification, Allocation And Mitigation Of Risk Factors

INTRODUCTION

Project finance is generally used to refer to a non-recourse or limited recourse financing structure in which debt, equity, and credit enhancement are combined for the construction and operation, or refinancing, of a particular facility in a capital-intensive industry, in which lenders base credit appraisals on the projected revenues from the operation of the facility, rather than the general assets or the credit of the sponsor of the facility, and rely on the assets of the facility, including any revenue-producing contracts and other cash flow generated by the facility, as collateral for the debt.¹ Simply put, project finance enables governments to finance infrastructure by using "other people's money".²