Large Project Financing
$50M- $2.5M
Large Project Financing
For Diverse Industries.
About Project Funding
We provide financing for large-scale projects and growth-stage companies.
Our Financing Program provides up to 100% debt financing for large energy projects, commercial real estate and infrastructure projects, government projects and growth-stage companies.
(asset managers) who study each case in detail to find the best financial solution that allows the Initiator to finance the project in the long term with the lowest possible own contribution.
Project Funding Process
What Is Project Funding
Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors.
Usually, a project financing structure involves a number of equity investors, known as ‘sponsors’, and a ‘syndicate’ of banks or other lending institutions that provide loans to the operation.
Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors.
Usually, a project financing structure involves a number of equity investors, known as ‘sponsors’, and a ‘syndicate’ of banks or other lending institutions that provide loans to the operation.
They are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors.
The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given a lien on all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms.
Minimum Loan Amount: $50 Million
Maximum Loan Amount: $2.5 Billion
How Project Funding Works
Special Purpose Vehicle (SPV): A separate legal entity is usually created just for the project. This isolates the project’s finances from the sponsoring company’s balance sheet.
Revenue as Collateral: Lenders and investors look at the project’s future cash flow (e.g., tolls from a road, electricity sales from a power plant) as the primary source of repayment, not the broader assets of the sponsor.
Risk Sharing: Multiple stakeholders—banks, equity investors, governments—split the financial risk, often with detailed contracts outlining who’s responsible for what.
Example
Imagine a company wants to build a $500 million solar farm. They set up an SPV, secure $400 million in loans from banks (repaid via future electricity sales), and raise $100 million from equity investors. The company’s main business isn’t liable if the solar farm underperforms—lenders rely on the farm’s revenue instead.
Trade-Offs
It’s not all rosy—project financing is complex, with high legal and advisory costs, and it requires a project to have reliable revenue projections. If the cash flow doesn’t materialize
(say, demand drops), the structure can collapse.
So, project financing is like a bespoke financial engine: it powers big ideas by spreading risk and tapping future earnings, but it needs precision to work.
Benefits Of Project Funding
Non-Recourse or Limited Recourse
Lenders have little to no claim on the sponsor’s other assets if the project fails—repayment comes mainly from the project itself.
High Debt Levels:
It often involves significant borrowing (sometimes 70-90% of the project cost), with equity covering the rest.
Long-Term Financing:
Repayment schedules align with the project’s operational life, often spanning decades.
Risk Mitigation:
By isolating the project in an SPV, the sponsoring company’s core business isn’t jeopardized if the project flops. Failure stays contained.
Access to Big Capital:
It allows companies to tackle massive projects they couldn’t fund alone, pooling resources from banks, investors, and sometimes public entities.
Off-Balance-Sheet Funding:
For the sponsor, the debt often doesn’t appear on their main financial statements, preserving their borrowing capacity for other needs.
Leverages Future Revenue:
Projects with predictable income (like a wind farm selling power) can secure funding without needing upfront cash or heavy collateral.
Shared Expertise:
Involving multiple financiers often brings in technical and managerial know-how, improving project execution.
Scalability:
It’s ideal for ambitious ventures—think a new dam or a telecom network—where costs are high, but payoffs are long-term and steady.
Document Required
A project financing transaction involves a stack of documents to ensure every detail is nailed down, risks are managed, and all parties—sponsors, lenders, contractors, etc.—are on the same page. These documents form the backbone of the deal, providing legal, financial, and operational clarity. Here’s the rundown of the key ones:
Project Feasibility Study:
A detailed report assessing the project’s viability—technical feasibility, market demand, cost estimates, and revenue projections. Lenders rely on this to confirm the project can generate enough cash to repay them. For a solar farm, it’d include sunlight data and power price forecasts.
Financial Model:
A spreadsheet or software-based projection of the project’s cash flows, costs, and returns over its life. It’s the numbers behind the deal—showing debt repayment schedules, equity returns, and sensitivity to risks like delays or price drops. Advisors tweak this obsessively.
Loan Agreement:
The core financing contract between the SPV (borrower) and lenders. It spells out the loan amount, interest rate, repayment terms, and covenants (e.g., maintaining certain financial ratios). If the project tanks, this dictates lenders’ rights.
Equity Contribution Agreement:
Outlines how much equity the sponsors and investors are putting in, when, and under what conditions. It ensures the SPV has enough “skin in the game” before lenders step up.
Shareholders’ Agreement:
If multiple sponsors or investors form the SPV, this governs their relationship—voting rights, profit splits, and exit strategies. It prevents infighting from derailing the project.
Engineering, Procurement, and Construction (EPC) Contract:
The deal with the contractor to build the project. It’s often fixed-price
or turnkey to cap costs, with milestones, penalties for delays, and performance guarantees. For a wind farm, it’d specify turbine delivery dates.
Operation and Maintenance (O&M) Agreement:
Locks in the operator to run the project post-construction. It covers upkeep costs, performance standards, and timelines—ensuring a toll road or power plant stays profitable.
Off-take Agreement:
The revenue lifeline—a contract with the buyer (off-taker) committing to purchase the project’s output (e.g., electricity, water, toll revenue) at set prices and volumes. A 20-year power purchase agreement (PPA) with a utility is a classic example.
Security Documents:
Lenders need collateral, so these include mortgages on project assets (like a factory), pledges of SPV shares, or assignments of revenue streams (e.g., toll fees). If the SPV defaults, lenders can seize these.
Intercreditor Agreement:
When multiple lenders are involved (banks, bondholders, etc.), this sorts out their pecking order—who gets paid first if cash runs dry—and how they coordinate enforcement actions.
Permits and Licenses:
Government-issued approvals—environmental clearances, land use permits, or operating licenses. Without these, the project’s dead in the water. A dam might need a dozen of these, each a legal must-have.
Insurance Policies:
Contracts covering risks—construction delays, natural disasters, or political upheaval. Lenders often mandate these, with the SPV as the insured party and lenders as beneficiaries.
Due Diligence Reports:
Compiled by advisors, these dig into legal, technical, and financial risks. They flag issues like shaky land titles or unreliable contractors before money flows.
Government Support Agreements
(if applicable):
In some cases—like public-private partnerships—governments provide guarantees, subsidies, or tax breaks. These documents lock in that support, reducing lender risk.
Risk Allocation Matrix:
Not always a standalone document, but often part of the contracts. It maps out who bears what risk—sponsors take cost overruns, contractors handle delays, etc.—keeping disputes to a minimum.
For a real-world vibe: Imagine a desalination plant. You’d have a feasibility study proving water demand, a loan agreement for $200 million, an EPC contract with a builder, a 25-year off-take deal with a city, and permits proving it won’t wreck the coast. Miss one, and the whole deal could unravel.
The exact list varies by project—energy deals lean on PPAs, infrastructure on permits—but this is the core toolkit. Want to zoom in on any of these?
Deal Structure
Project funding transactions can vary widely depending on the type of project, the industry, and the parties involved (e.g., private companies, governments, or nonprofits). However, they generally follow a structured process designed to allocate capital efficiently while managing risk and ensuring returns for investors or stakeholders. Below is an overview of how these transactions are typically structured.
1. Project Identification and Feasibility
Before funding begins, the project is defined, and its viability is assessed:
2. Funding Sources
Projects are rarely funded by a single entity. Instead, they rely on a mix of capital sources:
- Equity: Provided by project sponsors or investors (e.g., companies, venture capitalists, or private equity firms) who take ownership stakes and share in profits/losses.
- Debt: Loans from banks, financial institutions, or bond issuances. These lenders expect repayment with interest but don’t take ownership.
- Grants/Subsidies: Government or nonprofit contributions, often for public-interest projects (e.g., infrastructure or clean energy), which may not require repayment.
- Mezzanine Financing: A hybrid of debt and equity, often used to bridge funding gaps, with higher risk and higher returns for lenders.
The mix depends on the project’s risk profile and expected returns. For example, a high-risk tech startup might lean on equity, while a stable infrastructure project might use more debt.
3. Legal and Financial Structure
A formal structure is created to manage funds and liabilities:
- Special Purpose Vehicle (SPV): Many projects, especially large ones like infrastructure or energy, use an SPV—a separate legal entity—to isolate financial risk from the sponsors’ main operations.
- Contracts: Key agreements include:
- Loan Agreements: Terms of debt, interest rates, repayment schedules.
- Equity Agreements: Ownership stakes, profit-sharing, and governance rights.
- Offtake Agreements: Commitments from buyers to purchase the project’s output (e.g., power purchase agreements in energy projects).
- Construction Contracts: With builders or suppliers to deliver the project.
- Security/Collateral: Lenders may require assets (e.g., project equipment) as security against default.
4. Capital Deployment
Funds are disbursed in stages, tied to milestones:
- Tranches: Money is released incrementally based on progress (e.g., after design completion, groundbreaking, or testing phases).
- Escrow Accounts: Funds may be held in escrow to ensure they’re used as agreed.
- Monitoring: Investors or lenders often appoint overseers (e.g., project managers or auditors) to track spending and performance.
5. Revenue Generation and Repayment
Once operational, the project generates cash flow to repay stakeholders:
- Revenue Streams: From sales, user fees, or contracts (e.g., toll roads, electricity sales).
- Debt Service: Loan repayments follow a schedule, often prioritized over equity payouts.
- Profit Distribution: Equity holders receive dividends or returns after debts are serviced, based on their stake.
6. Risk Management
Risk is a key factor in structuring transactions:
- Risk Allocation: Contracts assign risks (e.g., cost overruns, delays, or regulatory changes) to the parties best equipped to handle them (e.g., contractors, sponsors, or insurers).
- Insurance: Coverage for unforeseen events like natural disasters or lawsuits.
- Hedging: Financial tools (e.g., currency or interest rate swaps) to mitigate market risks.
Example: Infrastructure Project
(e.g., a Highway)
- Funding: 30% equity from a private company, 60% debt from a bank syndicate, 10% government grant.
- Structure: An SPV is created to own and operate the highway. The government signs a concession agreement allowing toll collection for 20 years.
- Deployment: Funds are released in tranches—design, land acquisition, construction.
- Repayment: Toll revenues repay the debt first, then profits are split among equity holders.
Variations by Sector
- Tech Startups: Heavy on equity (venture capital), with milestone-based funding rounds (e.g., Series A, B, C).
- Real Estate: Mix of bank loans and investor equity, secured by property assets.
- Energy Projects: Often use project finance (non-recourse debt) tied to long-term offtake agreements.
Players In The Transaction
In a project financing transaction, several key players come together to make it work. Each has a distinct role, and their collaboration ensures the project gets funded, built, and generates returns. Here’s the lineup:
- Sponsors: These are the initiators—companies, governments, or individuals with the vision for the project. They provide equity (cash or assets) and often manage the project’s development. For example, an energy company might sponsor a wind farm. They’re in it for the long-term profits but also bear the most risk if things go south.
- Special Purpose Vehicle (SPV): Not a “player” in the human sense, but a critical entity. The SPV is a standalone company created specifically for the project. It holds the project’s assets, liabilities, and contracts, shielding the sponsors’ main businesses from financial risk. Think of it as the legal “box” containing the deal.
- Lenders: These are the money providers—commercial banks, development banks (like the World Bank), or institutional investors (e.g., pension funds). They supply the bulk of the funding as loans or bonds, repaid from the project’s cash flow. They’re laser-focused on risk and often demand detailed feasibility studies before signing checks.
- Equity Investors: Beyond the sponsors, additional investors—like private equity firms or infrastructure funds—might chip in equity. They take a bigger risk than lenders (no guaranteed repayment), but they get a share of the profits if the project succeeds.
- Contractors: The builders—engineering, procurement, and construction (EPC) firms—turn the plan into reality. They’re hired by the SPV under fixed-price or turnkey contracts to limit cost overruns. A delay or screw-up on their part can tank the project, so they’re heavily scrutinized.
- Off-takers: These are the buyers of the project’s output—like a utility buying electricity from a solar farm or a government paying for water from a desalination plant. Their commitment (often via long-term contracts like power purchase agreements) is what assures lenders the project will generate revenue.
- Advisors: A swarm of experts—financial advisors, lawyers, and technical consultants—guide the deal. Financial advisors structure the funding, lawyers draft watertight contracts, and engineers confirm the project’s doable. They’re the glue keeping everyone aligned.
- Government/Regulators: They’re not always direct players, but they set the rules—issuing permits, offering tax breaks, or even guaranteeing loans (e.g., via export credit agencies). In public-private partnerships (PPPs), they might also be sponsors or off-takers.
- Insurers: They cover risks like construction delays, natural disasters, or political instability. Lenders often require insurance to protect their investment, especially in volatile regions.
Picture a highway project: The government and a construction firm (sponsors) create an SPV. Banks lend $500 million, private investors add $100 million in equity, and a contractor builds the road. A toll operator runs it, drivers (off-takers) pay fees, and advisors ensure the numbers add up. If it’s a toll road in a shaky country, insurers might cover political risk.
Everyone’s got skin in the game, and the SPV keeps it all tied together.
Items Needed To Apply
- Project Summary : Objective: A clear goal is established (e.g., building infrastructure, developing a product, or launching a renewable energy initiative).
- 5 Year Projective Income Proforma
Start with your current financial statements. These baseline numbers provide the foundation for your projections. - Use Of Proceeds
Use of proceeds statement is used majorly by start-ups seeking funds; the document is short and doesn’t usually exceed more than two pages.
The numbers added on proceeds statements are tentative estimations and are usually averaged to the nearest millions or thousands. - Feasibility Study: This includes technical, financial, and legal analyses to determine if the project is practical and profitable. It often covers cost estimates, timelines, revenue projections, and risks.
- Stakeholders: Key players (e.g., sponsors, investors, lenders, and governments) are identified.
Frequently Asked Questions
