Project finance for Construction Lawyers

What is project finance?

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

A project can be 'greenfield' (ie the construction of a new asset) or 'brownfield' (ie the redevelopment of an existing asset).

Almost any asset with a predictable revenue stream could be eligible for project financing.

See Practice Note: Introduction to project finance.

Analysis of risk and risk allocation

The risks involved in a project financing are generally allocated to the party or parties best placed to bear them. For example, construction risk typically falls with the construction contractor who is responsible for building the project.

If risks are allocated in an unacceptable way from the lenders' perspective, some form of credit enhancement is likely to be necessary. Such credit support could take the form of a letter of credit, a guarantee or insurance.

See Practice Note: Project risks and risk allocation.

Types of projects

Project