Project finance involves the raising of debt in order to realize a project that repays this debt through future cash flows. Prior to any such realization, during its development phase, the project will be evaluated in detail for the lenders to be confident in the project’s ability to repay the debt.
According to Yescombe,1 projects involved in project finance possess the following characteristics:
1. The project usually relates to major infrastructure with a long construction period and long operating life.
2. As a result, the financing must also be for a long term (typically 15–25 years).
3. As the lenders rely on the project’s ...