Creative, innovative and structured financial solutions are vital to any large-scale project. Ensuring you have legal advice you can trust is key to the management of risk and reward and securing your success. Our lawyers have a proven track record across the project finance lifecycle and can advise on all aspects of your financing needs.
Project financing discipline includes understanding the rationale for project financing, how to prepare the financial plan, assess the risks, design the financing mix and raise the funds.
We believe clients always benefit from a cross-practice approach. Our project finance lawyers work closely with professionals in other areas such as financial services, M&A and capital markets, and procurement, to seamlessly manage all aspects of transactions and identify and mitigate any potential risks.
Legal Assure attorneys handle all aspects of project finance on a broad range of infrastructure projects.
The team has rich experience in drafting and negotiating all kinds of commercial contract arrangements including outsourcing and other service provision agreements, joint ventures, franchises, supply contracts, strategic relationship agreements, agency arrangements and manufacturing agreements.
Our Projects and Project Finance practice offers integrated legal representation across diverse sectors. Our team has extensive expertise in infrastructure sector development in India, both in the area of policy and transactions.
Our lawyers take an innovative approach to project financing that enables commercial and practical solutions to manage risk in a timely and cost-effective financial closure. Our comprehensive understanding of the issues that impact project finance for diverse sectors enables us to deliver robust legal advice on all aspects of a transaction.
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.
Project finance is long-term financing of an independent capital investment, which are projects with cash flows and assets that can be distinctly identified. Real estate project finance is a classic example.
High quality, well-written project finance documents are essential for getting your project finance loan approved. The more professional the project finance documents, the higher the likelihood of being able to negotiate loan terms which are favorable to the project, its sponsors and stakeholders.
There are far more projects seeking financing worldwide than there is available funding. Therefore, potential lenders must be convinced that your project is not only a solid investment but that it is a better investment than the other project finance requests being considered. Your project finance documents are the primary means of communicating this.
After the project financing is closed and the project commences, the project documents are also vitally important for the success of your project.
In traditional or corporate financing, the sponsoring company (the company building the project) typically procures capital by demonstrating to lenders that it has sufficient assets on its balance sheets. That is, in the case of default, the lender will be able to foreclose on the sponsor company’s assets, sell them, and use the proceeds to recover its investment. In project finance, the repayment of debt is not based on the assets reflected on the sponsoring company’s balance sheet, but on the revenues that the project will generate once it is completed.
The sponsoring company must consider several factors when determining whether to use a corporate or project finance structure. Such considerations include the amount of capital needed, the risks involved (political risks, currency risks, access to materials, environmental risks, etc.) and the identity of the participants (whether a government, multilateral institution, regional bank, bilateral institution, etc. will be involved). As the graph below demonstrates, corporate finance most often involves private investors who provide financing in return for ownership (equity) in a project company. The focus in project finance, however, is mostly on loans to the project company, with project revenues as the source of the return on the investment to lenders.
Project finance greatly minimizes risk to the sponsoring company, as compared to traditional corporate finance, because the lender relies only on the project revenue to repay the loan and cannot pursue the sponsoring company’s assets in the case of a default. However, a sponsoring company can only use project finance where it can demonstrate that revenue streams from the completed project will be sufficient to repay the loan. In fact, lenders will often require that the sponsoring company demonstrate that it has agreements in place that will generate the required revenue (called “off-take agreements”). For example, in the case of power projects, the sponsoring company often signs contracts with distributors where the distributors agree to purchase electricity generated by the project. Therefore, project finance is most suitable for a project where there is a predictable revenue stream to support debt repayment.
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