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PROJECT FINANCE
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PROJECT FINANCE

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M-4105APEKSHA

M-4131JUHI

M-4123SONALI

M-4135PALVI

Presented by…

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THE KEY TO PROJECT FINANCING IS THE REALLOCATION OF ANY RISK AWAY FROM THE LENDERS TO THE PROJECT.

It’s All About Risk!

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WHAT IS PROJECT FINANCE ?

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Project Finance involves a corporate sponsor investing in and owning a single purpose, industrial asset through a legally independent entity financed with non-recourse debt.

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The financing of long-term infrastructure, industrial projects and public services.

project financing is a loan structure.

attractive to the private sector.

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WHY PROJECT FINANCE?

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Size and cost of projects

Risk minimization

May be only way that enough funds can be raised

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FEATURE

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It is provided for a “ring-fenced” projectThere is a high ratio of debt to equityThere are no guaranteesLenders rely on the future cash flow The main security for lenders

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ADVANTAGES

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Project financing is usually chosen by project developers in order to inter alia: Eliminate or reduce the lender’s recourse to the sponsorsPermit an off-balance sheet treatment of the debt financingMaximize the leverage of a projectReduce political risks affecting a project

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Circumvent any restrictions or covenants binding the sponsors under their respective financial obligationsAvoid any negative impact of a project on the credit standing of the sponsorsObtain better financial conditions when the credit risk of the project is better than the credit standing of the sponsors

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DISADVANTAGES

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Often takes longer to structure than equivalent size corporate finance.Higher transaction costs due to creation of an independent entity can be up to 60bpProject debt is substantially more expensive (50-400 basis points) due to its non-recourse nature.Extensive contracting restricts managerial decision making.Project finance requires greater disclosure of proprietary information and strategic deals.

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TYPES

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PUBLIC FINANCE

CORPORATE FINANCE

LIMITED-RESOURCES

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PARTICIPANTS

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Government Equity FundersNonrecourse Debt FundersOperatorConstruction/Engineering ConsultantsAffected Communities

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Developmental projects

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1)ROAD: L&T Transportation

Infrastructure Limited(L&T-TIL) construction of a 28km bypass roadBypass commenced in Dec.1998 and Jan.2000 respectively

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2)AIRPORT: Bangalore International Airport

Limited (BIAL)project covers construction of a 4000m runwayexpected traffic demand of 4.1 million passengers per yearinvestment will be US$240 million (Rs.1240 crores).

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3)BRIDGE : Narmada Infrastructure

Construction Enterprise Limited (NICE)The construction of a 1.4km-long bridge adjacent to the first bridge & 4.6km of approach roadsService began in nov. 2000

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4) TRADE & EXHIBITION CENTRE: Hyderabad International Trade

Expositions Limited (HITEX)developed on a 100-acre ploteight air cooled halls of 3500 Sqm each of indooran open exhibition space (32,825 Sqm) conference rooms of a total area of 4553 Sqm

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5) WATER SUPPLY PROJECTS Vizag Industrial Water Supply

Company Limited (VIWSCO)Pipeline works from Rajahmundry to YLBC 56 kmConcession period for the project is 32 years

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