3.5. Summary project financing

Project finance characteristics

• SPE is a definable legal entity
• The sponsor’s balance sheet is not effected – off-balance sheet financing
• Sponsors liability is limited (to equity = non-recourse; with security package = limited recourse)
• Project cash flow as only source to serve interest and dividends
• Risk sharing among project participants
• Securities limited to
  • Forfeiting receivable from contracts
  • Equity of SPE
  • hypothecs
  • step in rights
  • sponsors cash deficiency agreements and security packages
• Cash-Flow model as core element fort he projects viability.

A project financing scheme is an independent small economic world with its own
rules. The stability of the project and the creditworthiness are solely depending
on the risk sharing agreement of the project sponsors and their ability to fulfil the
concession made in it.