The project finance structure for a build, operate, and transfer (BOT) project includes multiple key elements.
Project finance is the funding (financing) of long-term infrastructure, industrial projects, and public services using a non-recourse or limited recourse financial structure. The debt and equity used to finance the project are paid back from the cash flow generated by the project.
The project finance structure for a build, operate, and transfer (BOT) project includes multiple key elements. Project finance for BOT projects generally includes a special purpose vehicle (SPV). The company’s sole activity is carrying out the project by subcontracting most aspects through construction and operations contracts. Because there is no revenue stream during the construction phase of new-build projects, debt service only occurs during the operations phase. For this reason, parties take significant risks during the construction phase. The sole revenue stream during this phase is generally under an offtake agreement or power purchase agreement. Because there is limited or no recourse to the project’s sponsors, company shareholders are typically liable up to the extent of their shareholdings. The project remains off-balance-sheet for the sponsors and for the government.
Documents required for the project loan applications:
- Personal Background
- Resumes
- Project Plan
- Personal Credit Report
- Business Credit Report
FAQ
Project Finance involves long-term financing for industrial and infrastructure projects, as well as public services, using a limited recourse financial structure. In India, project finance caters to the funding needs of specific projects. It ensures that the project is considered secure once it is completed, and the generated revenue is utilized to repay the loan. Repayment in project financing depends on the project’s cash flow, while the project’s assets, rights, and interests serve as secondary collateral.
In the past few years, global interest in Project Financing as a tool for economic investment has increased. Project finance helps finance new investments. It is structuring the finance around the project’s cash flow and assets. Generally without any additional sponsor guarantees. It also alleviates investment risk and raises finance at a relatively lower cost. Thus, benefiting the sponsor and investor.