Contributed By Winston & Strawn London LLP
Typical sources of finance in project finance transactions include long-term limited-course loans from (conventional and/or Islamic) commercial banks, development finance institutions and/or other financial institutions. In addition, project bonds have increasingly been utilised, often in conjunction with limited recourse loans, as an alternative source to meet the financing requirements of large-scale capital-intensive projects.
Projects may be purely private (such as independent power projects), may involve a partnership between the public and private sectors (PPPs), or may be built and operated entirely by the public sector. Generally, PPPs are long-term contracts (eg, 20–30 years) under which the Project Company constructs the project, such as a road, using financing obtained on a project finance basis and, thereafter, operates and maintains the project in return for: