FINANCIAL AND TECHNICAL ASSISTANCE OF A PROJECT

ANUJA CHAVAN

PROJECT

• A project consist of a combination

of organizational resources pulled

together to create something that

did not previously exist and that

will provide a performance

capability in the design and

execution of organizational

strategies.

PROJECT FINANCE

• Project finance is a method of financing very large capital intensive projects, with long gestation period, where the lenders rely on the assets created for the project as security and the cash flow generated by the project as source of fund for repairing their dues.

What does it cover?

• Project finance generally covers green-field industrial projects, capacity expansion at existing manufacturing units, construction ventures or other infrastructural projects.

• Capital intensive business expansion and diversification as well as replacement of equipment may also be covered under project finance.

• Project finance is quite often channeled through a project company known as special purpose vehicle or project development vehicle.

PROJECT FINANCING PARTICIPANTS AND AGREEMENTS

• Sponsor/Developer

• Additional equity investors

• Construction Contractor

• Operator

• Feedstock supplier

• Product off taker

• Lender

ADVANTAGES OF PROJECT FINANCING

• Non-Recourse

• Maximize leverage

• Off balance sheet treatment

• Maximize tax benefit

DISADVANTAGES

• Project financing are extremely complex.

• Take much longer period of time to structure, negotiate and document.

• The legal fees and related costs associated can be very high.

Stages in project financing

1) Project identification2) Risk identification and minimizing3) Technical and financial feasibility4) Equity arrangement5) Negotiation and syndication6) Commitments and documentation7) Disbursement8) Monitoring and review9) Financial closure / Project closure10) Repayments & subsequent monitoring

Financial assistance for a project

• Term loan• Deferred payment guarantee• Soft loan• Supplier’s line of credit• Buyer’s credit• Debentures• Leasing • Public deposits• Own fund-equity, preference share, retained earnings, unsecured

loans• Bridge loan• Seed capital• Government subsidies

Who is eligible for technical assistance?

• The beneficiaries of technical assistance are Bank borrowers including:

the governments of partner countries;

public utilities in the fields of infrastructure, water, energy, etc.;

operators in the financial sector and private promoters.

Technical Assistance services may include support to beneficiaries for carrying out:

• identification,•studies,• environmental and social impact assessment,• financial affordability analysis• budgetary planning,• complete design,• assistance to tendering process, and,• supervision of implementation works.

conclusion

• The key to any project finance is to use a right mix of debt and equity.

• Further there should be right mix of foreign currency and rupee loans.

• Its is also important that due care is taken in drafting the documents concerning the financing of the project.

• The companies should adopt the project financing structures so that the objective shareholders wealth maximization can be achieved.

• As the world is heading towards a global integrated market and the failure of governments as well as the demand for private capital in infrastructure assets is increasing, project finance will continue to play important role in both developed & developing markets.

Thank you