Project Finance Law
Project finance is the long-term financing of infrastructure and industrial projects based on projected cash flow versus the entity's balance sheets. Usually, project financing involves a number of equity investors, known as “sponsors,” and a group (or “syndicate”) of banks or other lenders. Financing provided through project finance arrangements are typically non-recourse loans that are secured by the project assets and paid entirely from project cash flow rather than from the general assets of the project sponsor. Project finance lenders are given a lien on all assets of the project and are able to assume control of a project if the project company fails to comply with loan terms.
Project finance is often more complicated than alternative financing methods, but is often used in mining, transportation, sports, entertainment, and telecommunication ventures. This is largely due to the risk involved with these types of ventures. While other lenders may not be willing to invest due to these risks, project finance can offer a way to provide capital while simultaneously distributing risk and ensuring profit to investors.
Project finance can be a very complicated method for financing that requires a thorough understanding of contract, securities, and banking laws among others. The resources below will provide additional information, but before attempting to participate in any form of project finance one should obtain the assistance of an attorney. For attorneys in your area, check out the Law Firms page.
Project Finance Law - US
- ABA - Project Finance Committee
The Project Finance Committee provides the forum for discussion of both traditional project finance, which is centered in the energy sector, and other types of projects, such as airports, ports, toll roads, LNG facilities, heavy manufacturing facilities, and sports facilities. While project finance (PF) is generally understood to apply to significant infrastructure projects, e.g., power plants, telecommunications projects and toll roads, PF techniques are routinely applied in a wide variety of transactions where parties desire to finance significant activities on a limited or non-recourse basis.
- Project Finance - Definition
Project finance is the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. Usually, a project financing structure involves a number of equity investors, known as sponsors, as well as a syndicate of banks that provide loans to the operation. The loans are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling.
- Public Utility Regulatory Policy Act (PURPA)
The Public Utility Regulatory Policy Act (PURPA) was passed in 1978, in the midst of the energy crises that ripped through industrial world economies. Faced with predictions that the price of oil would rise to $100 a barrel, Congress acted to reduce dependence on foreign oil, to promote alternative energy sources and energy efficiency, and to diversify the electric power industry.
- Public–Private Partnerships - Definition
Public–private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP, P3 or P3. PPP involves a contract between a public-sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. In some types of PPP, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer.
- Transportation Infrastructure Finance and Innovation Act (TIFIA)
The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides Federal credit assistance in the form of direct loans, loan guarantees, and standby lines of credit to finance surface transportation projects of national and regional significance. TIFIA credit assistance provides improved access to capital markets, flexible repayment terms, and potentially more favorable interest rates than can be found in private capital markets for similar instruments.
- US Code Chapter 6 - Infrastructure Finance
In this chapter, the following definitions apply: (1) Eligible project costs.— The term “eligible project costs” means amounts substantially all of which are paid by, or for the account of, an obligor in connection with a project, including the cost of— (A) development phase activities, environmental mitigation, construction contingencies, and acquisition of equipment; (B) construction, reconstruction, rehabilitation, replacement, and acquisition of real property; and (C) capitalized interest necessary to meet market requirements, reasonably required reserve funds, capital issuance expenses, and other carrying costs during construction.
Organizations Related to Project Finance Law
- AASHTO - Center for Excellence in Project Finance
AASHTO is a nonprofit, nonpartisan association representing highway and transportation departments in the 50 states, the District of Columbia and Puerto Rico. It represents all five transportation modes: air, highways, public transportation, rail and water. Its primary goal is to foster the development, operation and maintenance of an integrated national transportation system. AASHTO's mission is to advocate transportation policies, provide technical services, demonstrate the contributions of transportation and facilitate institutional change.
- Harvard Project Finance Portal
This portal is a reference guide for practitioners, researchers, and students seeking information about project finance, infrastructure finance, and public-private partnerships (PPP). In addition to bibliographical references for books, articles, and case studies, the site contains links to hundreds of related sites containing data as well as information about particular projects and companies/organizations involved with project finance.
- International Project Finance Association (IPFA)
The International Project Finance Association (IPFA) is the largest and the only international, independent, not-for-profit association dedicated to promoting and representing the interests of private companies and public sector organisations in Project Finance and Public Private Partnerships (PPPs) throughout the world.
- National Council for Public-Private Partnerships
The National Council for Public-Private Partnerships is a non-profit, non-partisan organization founded in 1985. The Council is a forum for the brightest ideas and innovators in the partnership arena. Its growing list of public and private sector members, with experience in a wide variety of public-private partnership arrangements, and its diverse training and public education programs represent vital core resources for partnering nationwide. The Council's members bring an unmatched dedication to providing the most productive and cost-effective public services.
- PPP in Infrastructure Resource Center for Contracts, Laws and Regulation (PPPIRC)
The PPP in Infrastructure Resource Center for Contracts, Laws and Regulation (PPPIRC.) contains sample public-private partnership (PPP) agreements and concessions, checklists, terms of reference, risk matrices, standard bidding documents develped by government agencies and sample ppp and sector legislation and regulation. It is designed for government officials, project managers and lawyers involved in PPP infrastructure projects and will help you address contractual and legal issues related to infrastructure legal reform and PPP projects.
Publications Related to Project Finance Law
- Project Finance Magazine
Market trends, deals, debt pricing, covenants, models and risk: Project Finance puts key business intelligence right where you need it - at the end of a click. Industries covered include: telecoms, power, oil, gas, rail, roads, bridges, tunnels, water, ports, airports, stadia, property and tourism development, petrochemicals, mining, private and public partnerships (PPP), PFI and utilities.
- Public Works Financing Magazine
For the most experienced help in designing innovative solutions to your infrastructure needs, please visit the Find an Expert section of this Web site, a compilation of industry leaders, all of whom advertise in Public Works Financing.
Articles on HG.org Related to Project Finance Law
- 4 Crowdfunding Models Your Startup Can Use to Raise CapitalHave you been thinking about using a crowdfunding model to launch your startup? Then you may want to understand the 4 basic types of crowdfunding models and the financial and legal implications of each one.
- Legal Considerations in Using Other People’s Money to Start Your BusinessInvestments into a new company may take many forms. When the individual has been targeted to become a member of the business, this investment is usually added as an asset or a portion of the company interest or shares are provided in compensation. It is when this is not the case that the matter may become complicated.
- The Real Estate Crisis in California and Lawsuits in the Wake of the Credit CrunchThe author of this article discusses some possible new problems the real estate market may face in California as the economic crisis and credit crisis grows. The article also focuses on some new construction law problems in California related to the credit crisis and the relates the type of calls attorneys are now getting from the public in fear of losing their homes.
- All Banking and Finance Law Articles
Articles written by attorneys and experts worldwide discussing legal aspects related to Banking and Finance including: asset protection, capital markets, corporate finance, financial planning, financial services law, investment law, offshore accounts, private equity, project finance, public finance, securities, trade investment and venture capital.