Back in the 18th and 19th centuries, England underwent a massive modernization of the road network, using tolls as the main source of repayment of borrowed funds for Italian banks. The development of transport infrastructure, electricity and communications in the 19th century required active participation of private capital, laying the foundation for project finance in Europe. According to the Basel Committee on Banking Supervision, international project financing (PF) is a form of financing the construction of capital facilities based on debt repayment through cash flows generated by the facility.
Project finance as a concept based on the participation of private capital in the implementation of large scale public projects has more than 200 years of history.
The age-old desire of business to go beyond the possible in search of new sources of income leads to the creation of unprecedented masterpieces of technical and engineering thought.
In 2015 alone, PF accounted for several hundred projects worth about $ 275 billion worldwide.
The largest private banks and international financial institutions, such as the EIB and the EBRD, actively use PF instruments in their activities.
Viola Funding Limited offers funding of large international investment projects by providing long-term loans from € 50 million on flexible terms.
We also offer a full range of engineering, organizational and legal services for large businesses anywhere in the world.
The experience of recent decades shows that international project finance is applicable to many investment projects. PF can be used both in the real sector of the economy and for large-scale financial projects.
International project financing: Basis and theory
A wide range of PF contractual options allows the initiator to share risks with foreign partners and ensures more efficient project implementation compared to traditional funding methods.
The main advantage of the PF is non-recourse financing, which allows companies to use a high level of leverage without burdening financial statements with high levels of debt.
International project financing refers to the cross-border method of realizing capital intensive investments through a legally and financially independent project company (SPV).
International project financing is an innovative business finance model. The PF offers members unique benefits that attract lenders despite the lack of collateral.
International project financing allows you to attract significantly more funds in comparison with traditional funding models.
Banks’ requirements also include extensive financial, legal and technical analysis of the project.
This is a flexible organizational structure, which primarily allows the companies that initiate the project to obtain loans based on the future income projected from the project.
SPV in international practice is an independent business entity, and all relations with the project participants follow from the general principles of law, concluded agreements and contracts.
The SPV (SPE) has ownership of the assets being funded and the sponsor is not financially liable for the debt of this entity (unless it has provided appropriate guarantees).
In many cases, companies prefer joint stock companies or limited liability companies, which have a number of advantages for the initiating companies. In such companies, the participants are liable for the debts of the project solely within the framework of their contribution to the capital of the SPV or its shares.
The bank is confident that a particular company will limit its activities to specific investments only and that the possibilities for securing claims and meeting them are significant.
The global project finance market present and past
Leading investors, consultants and lenders have projects from different countries in their portfolio and successfully use the practical experience gained in other similar projects.
Today, trends are changing again, fueled by geopolitical tensions and unpredictability that have affected a number of regions of the planet and even industries.
The global financial crisis caused a sharp reduction in lending to government projects and contributed to a shift in project activity towards China and other Asian countries. If in the countries of the Americas, the PF volume in 2015 reached $ 95 billion, while in the developing countries of Asia, the Pacific region and Japan, projects worth $ 75 billion were implemented.
However, government projects have repeatedly demonstrated high resilience to financial shocks.
The use of PF has helped to maintain growth in Latin America, Africa, South and East Asia.
This confirms that international project finance is most effective for developing countries with weak business infrastructure and high external capital requirements.
Our financial team is ready to assist you in the implementation of large investment projects anywhere in the world.
Contact Viola Funding Limited in international project financing deals.