Difference between revisions of "Project Finance"
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| − | Project Finance is debt that is borrowed for a specific project. The amount of debt made available is linked to the revenue that the project will generate over a period of time, as this is the means of paying back the debt. This amount is usually adjusted to refelct inherent risks such as the production and sale of power. Should there be a problem with repaying the loan, the banks will establish | + | Project Finance is debt that is borrowed for a specific project. The amount of debt made available is linked to the revenue that the project will generate over a period of time, as this is the means of paying back the debt. This amount is usually adjusted to refelct inherent risks such as the production and sale of power. Should there be a problem with repaying the loan, the banks will establish first 'charge' or claim over the assets of a business. The first tranche of debt to be repaid from a project is called '[[Debt_Finance#Senior_Debt|senior debt]]'.<ref name="Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009.">Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009. </ref> |
Usually, project preparation for on-grid RE projects is carried out by large energy companies or specialised project-development companies. Energy companies finance the project preparation phase from operational budgets. On the other hand, specialised companies finance this phase through private finance, capital markets or with risk capital from venture capitalists, private equity funds, or strategic investors. | Usually, project preparation for on-grid RE projects is carried out by large energy companies or specialised project-development companies. Energy companies finance the project preparation phase from operational budgets. On the other hand, specialised companies finance this phase through private finance, capital markets or with risk capital from venture capitalists, private equity funds, or strategic investors. | ||
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Revision as of 15:05, 29 August 2016
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Overview
Project Finance is debt that is borrowed for a specific project. The amount of debt made available is linked to the revenue that the project will generate over a period of time, as this is the means of paying back the debt. This amount is usually adjusted to refelct inherent risks such as the production and sale of power. Should there be a problem with repaying the loan, the banks will establish first 'charge' or claim over the assets of a business. The first tranche of debt to be repaid from a project is called 'senior debt'.[1]
Usually, project preparation for on-grid RE projects is carried out by large energy companies or specialised project-development companies. Energy companies finance the project preparation phase from operational budgets. On the other hand, specialised companies finance this phase through private finance, capital markets or with risk capital from venture capitalists, private equity funds, or strategic investors.
Further Information
References
- ↑ Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009.
