Financing a project

Introduction to project finance and key features of this type of financing

The term 'project finance' generally refers to the debt element of the funding for a project.

The 'project' commonly involves:

1. •

   constructing and/or operating something tangible like a road or a school, or

2. •

   exploiting something tangible like oil or gold

Project finance can also be used for an arrangement where a concession to run an existing asset is given in return for payment of a capital sum (for example, an airport).

For information about some of the key concepts underpinning project finance, including who the borrower is, what security is offered and how the project asset is owned, see Practice Note: Introduction to project finance.

The Basel II: International Convergence of Capital Measurement and Capital Standards framework (Basel II) defines project finance as:

a method of funding in which the lender looks primarily to the revenues generated by a single project, both as the source of repayment and as