top project finance companies in the world

top project finance companies in the world

Top Project Finance Companies in the World

1. Introduction to Project Finance

Because project firms are created for the sole purpose of realizing the project, the value of a project firm is typically its equity investment, which is often related to the size of the costs of the development, hence the covenants of a typical project finance loan are often subjected to strict financial triggers. The project structure is designed to account for the high information costs, to make the information about the project credible, and to reduce the impact of the project risk on outside claimants. “It allows sponsors to undertake…large projects…with limited downside exposure. If the project fails to produce expected returns, the equity investment is lost, but the balance sheets of the sponsoring companies remain unaffected.”

Given the focus on project finance firms, we exclude banks, which use the technique infrequently and whose primary business is not project financing, with a loan commitment classified as project finance. A project firm is formed to develop a specific asset and any financing secured is secured by, encumber the asset and the cash flows of the asset, and not the entire firm or the cash flows of the sponsor companies. Project firms do not have a track record because they are often set up specifically for a particular deal and are not expected to have continued operations following the payoff of the financing. Given this situation, and that the asset is not available for inspection outside of the company, both information costs and risk to the lender are higher for project finance than for corporate finance. Moreover, the project entity cannot be placed into bankruptcy and recovered under a going-concern valuation, with the management being held accountable for deviations from budget.

2. Key Players in the Global Project Finance Industry

Project finance advisory and financial arrangements is highly specialized. Even though some of the largest global financial institutions are active in arranging for and providing finance for project finance deals, the relatively limited opportunities would make it very difficult for these companies to justify the specialized expertise required for project finance. Secondly, by their nature, project finance deals are long term. To be able to continue to successfully arrange for sophisticated financial deals, the project finance advisor has to remain active on the scene and to have had experience in successful project finance transactions.

The following companies are the main players in the project finance industry. They range from specialized project finance companies and export credit agencies, to investment and commercial banks and law firms. Chapter 4 shows some leading law firms. Investment banks generally play many roles including financial advisors, lead lending, and arranger, underwriter and facility agent. Insurance companies provide insurance on project finance transactions as do the agencies that have been started by the government. Export and other credit agencies require payment of insurance premiums. The premiums can vary in price depending on the risks of the project issuing the debt. The criteria of the credit are determined by the projects involved.

3. Case Studies of Leading Project Finance Companies

The leading project finance banks have always played an active role in the market and have extensive experience and expertise. Project finance also offers these parties significant transactional possibilities: to sense and analyze markets in real time, to develop proposals for the financing of major transactions, and to see if and when and on what basis they can develop these suggestions into business. After playing an active and for many successful mentors’ role, they have little or no difficulty in finding support from their in-house and external operational and structuring and legal teams to turn suggestions into formal propositions. Their know-how and expertise have enabled them to make highly significant returns and develop important cooperation with their competition.

Abstract The previous chapters have provided a detailed overview of European and US project finance markets, the parties involved, and an analysis of the key risks and risk management approaches. This chapter will examine the case of six of the leading project finance parties in the market: four banks and two bond investors. They will demonstrate their approach to the role and key responsibilities of the various parties, the risk issues and structures, and their assessment of the appetite for the primary project risk issues amongst the other parties. Also explored will be the recent impact of existing and proposed new Basel rules governing bank involvement in project finance deals.

4. Emerging Trends and Innovations in Project Finance

There are many promising new areas for global project-financing activity that reflect dramatic changes in the project development and investment landscape worldwide. New high-interest areas for expanded financial activity include infrastructure projects in the developing countries of Eastern Europe, the Near East, and the Far East. In the Far East, where growth rates are among the highest in the world, development of infrastructure is proceeding rapidly. According to the OECD The Global Outlook for Financing Large-Scale Infrastructure, issues in the global recession Financing of large-scale non-communicable infrastructure projects out of government budgets is no longer possible due to fiscal rectitude or lack of public funds, making private sector financing the only viable alternative for new projects. Already in many developed market economies, privatizations show how a judicious selection of assets may be sold to private sector investors by governments and used for infrastructure services. In the lessons of the 1980s financing crisis in the developing countries of Latin America and East Asia.