Project finance—key project parties
Project finance—key project parties

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Project finance—key project parties
  • Sponsor
  • Project company
  • Holdco
  • Contractors and sub-contractors
  • Suppliers
  • Off-takers
  • Host government
  • The relationships between the project parties

The main project parties in a typical project finance transaction are:

  1. the sponsor(s)

  2. the project vehicle (referred to in this Practice Note as the 'project company') which is typically the borrower of the project loans

  3. contractors and sub-contractors

  4. suppliers, and

  5. off-takers

The main finance parties in a typical project finance transaction are explained in Practice Note: Project finance—key finance parties.

Sponsor

The sponsor is the party which manages the project.

The sponsor is typically:

  1. the government of the country in which the project is located (the host government), or

  2. a private company (or group of companies)

Governments (or governmental authorities) tend to be the sponsor in projects involving public services eg infrastructure (roads, rail, ports etc) or social facilities (schools, hospitals, prisons etc).

Private companies tend to be the sponsor in projects which are designed to exploit resources eg oil, gas and mining.

Even where a host government is not involved in initiating a project, it often has an important role to play in making a project viable—see Host government.

In some types of projects, a consortium of sponsors collaborates to deliver a project together. The consortium might include entities with complementary skills eg building contractors, facility managers and service providers.

One of the key functions of the sponsor is to provide initial investment in the project to get the project