Principles of Project Finance 1/3



The need for Guarantees to enable Funding and Project Finance. Project finance is a method of raising long-term debt financing for major projects through ‘financial engineering’. It is based on lending against the cash flow generated by the project alone. Project finance depends on a detailed evaluation of a project’s construction, operating and revenue risks, and their allocation between investors, lenders, and other parties through contractual and other arrangements.


The writer is experienced, both as a banker and as an independent advisor in project finance. If you need guidance to the principles of project finance and to the practical issues that can cause the most difficulty in commercial and financial negotiations, then you should read on.


This report can serve as a structured introduction for those who are new to the subject, and as guidance for those developing and negotiating project-finance transactions. To fully understand the subject of this report, no prior knowledge of the financial markets or financial terms is assumed or required.


The report is structured based on reviews the basic features of project finance, the factors behind its development, and the ‘building blocks’ of a project-finance structure. The benefits of using project finance are considered from the point of view of the various project participants.


Project Development and Management


The life of a project can be divided into three phases: development, construction, and operation. The Sponsors play the primary role during the development phase of the project, managing this process with the support of external advisors. Where more than one Sponsor is involved, a joint-venture structure has to be agreed to. The Project Company is usually set up towards the end of the development phase and manages the project from Financial Close. The project may also be developed initially by parties other than the Sponsors through a bidding or public procurement process for a PPP project, organized by a Contracting Authority.


The Project-Finance Markets


Private-sector project-finance debt has traditionally been mainly provided from two sources—commercial banks and bonds. Commercial banks provide long-term loans to Project Companies; bondholders (typically life-insurance companies and pension funds, which need long-term cash flows) purchase long-term bonds (tradable debt instruments) issued by Project Companies. Recently these non-bank lenders have also begun to make direct loans to projects and participate in debt funds. Other types of private-sector finance are sometimes also used in projects. Although the financial and legal structures and procedures are different, the criteria under which debt is raised in each of these markets are much the same.


Working with Lenders


Considered are the procedures for raising project finance from private-sector lenders, in particular commercial banks and bondholders, with a comparison between the two. Lenders’ ‘due diligence’ processes, and the roles of their various external advisors also have the be considered as well as the ways in which a Contracting Authority interacts with bidders’ lenders in a public-procurement process.


Types of Project Agreement


The Project Contracts provide a basis for the Project Company’s construction and operation of the project. The most important of these is the Project Agreement which is the contract that provides the framework under which the Project Company obtains its revenues. The Sub-Contracts which make up the rest of the Project Contracts are important as well and have to be considered and discussed like the Offtake Contract, Availability-based Contract and Concession Agreement.


A preliminary clarification: expressions such as BOT, DBFO, and so on are rather confusing, and overlap with each other. There is actually no need to use these terms. There are three main models for a Project Agreement: (1) an Offtake Contract in a process-plant project, under which the Project Company produces a product and sells it to an Offtaker. (2) an Availability-based Contract based on the PFI Model where a Contracting Authority pays a Project Company for making the project available for use. (3) A Concession Agreement, under which the Project Company provides a public service, and collects User Charges for doing so. The confusing list of ‘PPP-like’ contracts, which are often counted as PPPs, but most of which do not require project finance should also provide interesting, related information for this subject.


We prefer to work with qualified clients with good banking relation to leverage a client’s financial possibilities for project finance. Chances to materialize a transaction can be very high if the borrower’s company is of substance. If you would like to discuss this further, please use the reply form, or call 00353860325153. This number also works on Whatsapp, Signal, Telegram and WeChat.



Learn more about these topics by reading our blog post “The need for Guarantees to enable Funding and Project Finance” 2 and 3


·       Common Aspects of Project Agreements

·       Sub-Contracts and Other Related Agreements

·       Commercial Risks

·       Macro-Economic Risks

·       Regulatory and Political Risks

·       Financial Structuring

·       The Financial Model

·       Project-Finance Loan Documentation

·       Public-Sector Financial Support

·       Export-Credit Agencies and Development-Finance Institutions

·       Recent Market Developments and Prospects for Project Finance



NOTE: The content of this report is an abstract based on the 577-page book we make available to our contracted clients providing guideline to successfully structure project finance with the help of third-party collateral and Prime Bank Guarantees. It is widely read by private sector investors and lenders who intend to make project finance deals.


Principles of Project Finance 1/3

The need for Guarantees to enable Funding and Project Finance. Project finance is a method of raising long-term debt financing ...
Read More

Common Aspects of Project Agreements 2/3

There are important issues which are common to any of these types of Project Agreement, namely: contract term, Payment Mechanism, ...
Read More

Project Finance and Financial Structuring 3/3

The need for Guarantees to enable Funding and Project Finance (3 of 3). Financial-structuring issues are likely to arise once ...
Read More

Does your own banker ask for a collateral “PRE-ADVICE”?

Your banker would provide you with funding if you came up with collateral? Would he be happy to help if ...
Read More

So you are qualified to receive a loan or borrow a bank instrument?

So you are qualified to receive a loan or borrow a bank instrument? When you seek credit support, is your ...
Read More

Validity Term in a Borrowing and Lending Transaction

ICC 600 URDG 758 and ISO15022International Chamber of Commerce (ICC) and International Organization for Standardization (ISO) In a Borrowing and ...
Read More

This is how you can pay for Borrowing and Lending fees only after 180 days!

We deliver a highly rated Financial Instrument to you now, and you only pay for it later!   With the ...
Read More

In a Back-to-Back transaction you can issue your own bank guarantee instrument!

When negotiating terms to issue a bank guarantee instrument with any bank, a BG or an SBLC for a certain ...
Read More

Why there is a Reservation Call Option Fee requirement?

A client will have to have a complete understanding of the transaction basics and know how we generate genuine instruments ...
Read More

What do you need to borrow genuine and verifiable Prime Bank collateral?

What do you need to borrow genuine and verifiable Prime Bank collateral? The consent of your bank to issue a ...
Read More

This is how you can get a Loan to start your Project right now

Do you need a Business Loan, or would like to start a Project right now? You have a bank, an ...
Read More

How to rent Financial Capacity to leverage your Investment Possibilities

You can now rent financial capacity and leverage your investment possibilities and benefit from high yielding Private Placement Programs!   ...
Read More

These Bank Guarantees support Commodity Trading in Bulk

Bank Guarantees support Commodity Trading in Bulk How to issue an SBLC to your commodities seller on a back to ...
Read More

This monetizer can fund against borrowed financial Prime Bank collateral

Monetization can be a great way to get a project in funds and there are clients served who are successful ...
Read More

The aim of our Bank Guarantee Collateral Program

Bank Guarantees are powerful collateral for an agreed upon period of time, provided on the basis of collateral borrowing and ...
Read More

Steps to a successful transaction.

This summary explanation is available for educational purposes only and explains how Securities Borrowing and Lending is utilized by qualified ...
Read More

If you are qualified, we can provide all the collateral you need!

  We lend highly rated Securities in the format of an SBLC or BG to back up your Credit Line ...
Read More

Why should a client be qualified to receive a multi million Euro bank guarantee instrument?

The instrument that you probably seek should be valid and fully verifiable, correct? If an instrument is genuine it is ...
Read More

The way you can expect a third party to provide you with a valid, fully verifiable cash backed, divisible and assignable Bank Instrument.

If you are interested to obtain a valid fully verifiable Bank Guarantee instrument from a third party to trigger a ...
Read More

Pennies can help you access valid BG or SBLC collateral – issued for you on the back of highly rated, verifiable and publicly listed Securities

You are in contact with us, probably since the banks you deal with do not provide a bank guarantee service ...
Read More

“Solving financial issues through Credit Enhancement”

You can directly download the Summary of the eBook "Solving financial issues through Credit Enhancement" by Geordon Saraveloz here You ...
Read More

Here is how you can access Credit Enhancement

Credit Enhancement and what is available in your situation?Here you will learn about terms and concepts and available working procedures ...
Read More

The Leverage Effect.

Opportunity explained: The Leverage Effect. In business, credit enhancement is usually applied to make a company more creditworthy to reduce ...
Read More

This is the bank that has never asked for any money in advance!

This is the bank that has never asked for any money in advance! – Isn’t that really good news?   ...
Read More

Prime Bank Instrument without advance fees. This is how we even advance the call option fees for you and issue a Prime Bank instrument for you!

There is a call option fee to be placed for this transaction to block the securities which build the basis ...
Read More

Questions about the Bank Guarantee instrument that you seek

QUESTION: Are you looking for a prime Bank Instrument? An instrument issued by a top World Bank or can we ...
Read More

You expect this Service on your Terms?

Our “proven-way-to-success” terms guarantee a successful closing! If you need funds, you first ask your own bank, obviously. Banks are ...
Read More

Why should a client provide a Mandate and place a retainer to get a bank instrument and credit enhancement service?

Good question - easy to be answererd. I am in this business since over 40 years and my sources are ...
Read More

Prime Bank Guarantee Instruments

We are the experts to structure and emit your Prime Bank Instrument. Our Bank Guarantees and Standby Letters of Credit ...
Read More