Project Finance or Finanproyecto (translation adapted from the English word) is a funding mechanism for major investments that underpin both the project's ability to generate cash flows that can meet the repayment of loans and contracts between various participants ensuring the profitability of the project. They are also include projects characterized by mature technologies widely.The large increase in infrastructure investment and the tendency of governments to reduce their budget deficit, has been a fundamental stage in the development of finanproyecto. This figure allows both public administration and private enterprise to undertake projects whose capital investment is high.
The finanproyecto is a technique widely used in the implementation of the telecommunications sector (mobile telephony, cable TV, etc.).. However, at present, has taken a lot of strength in sectors such as electricity or transport, allowing moving these large investments, historically linked to the public sector to the private sector. More specifically, large photovoltaic and wind parks are funded by this modality, because the very nature of these projects are fully adapted to the philosophy of Project Finance, and current legislation ensures a generation of predictable and adequate flows to sustain the payment lending quotas.
Finally, note the common use of a cover ratio, clearly indicating the "health" of the project, demonstrating the potential flows generated to repay the debt.
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Structure
Background
See also
Links
Structure
The main features of this figure are:
* It is a separate company for the project, which in the current literature is called the Society for Specific Purposes (Special Purpose Vehicle, SPV).
* The manager or project sponsor provides much of the capital of the company, thus linking the project financing for its management.
* The project company enters into agreements with the various integrals involved: the manufacturer, supplier, customer and financial institution, among others.
* The project company operates at a high level (ratio) in indebtedness on own resources, so that lenders have limited possibilities to claim in case of default.
* The requirement in the contracts allows the end guarantees that the project is profitable, and therefore that can satisfy all the interests of participants. Moreover, these requirements are greater in the initial phase of the project (design and construction). This is so because the charges located at this stage are very high and no income. In return, it is widely taken as security (pledge) contracts for the construction of machines and the actual purchase of energy, among others.
* Creation of a reserve fund, formed from excess cash flows that cover the negative contingencies over the life of the project.
Background [edit]
In defining when and where it appeared the Project Finance most authors do not agree, however, we can frame the birth of this approach in the last decade of the twentieth century, and assume that your application has shown an increasing trend worldwide . This initiative has had greater application in the U.S. and England, where regulators are the first attempts as the so-called PURPA (Public Utility Regulatory Power Act, 1987) in the U.S. and the British Society for Private Initiatives (Private Finance Initiative, PFI, 1992) .
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