PROJECT FINANCING
Project financing is a long-term funding mechanism designed for major
infrastructure or industrial projects, where repayment is derived solely from the future cash flows of the project, not from the sponsors’ financial statements. This method is typically applied in energy facilities, highways, airports, mining activities, telecom infrastructures, and other capital intensive projects. The main characteristics of project financing include:
- Recourse debt: Lenders can only claim the assets and cash flows of the project, not the sponsors' other properties.
- Special Purpose Vehicle (SPV): A legally separate entity created specifically for the construction and management of the project.
- Cash flow–based lending: We evaluate the project's ability to generate revenue rather than the sponsors' creditworthiness.
- Complex contractual structure: This includes construction contracts, supply agreements, off-take agreements, and insurance policies.
- Risk allocation to the parties best suited to manage them: Contractors take on construction risk, operators handle performance risk, buyers are responsible for market risk, and so on.
Understanding Project Financing:
- Project sponsors identify a feasible initiative and perform feasibility assessments.
- A Special Purpose Vehicle (SPV) is established to mitigate risk.
- Contracts are negotiated, including EPC, O&M, off-take, and supply agreements.
- Lenders assess anticipated cash flows through financial modeling.
- We contribute both debt and equity to the SPV.
- Construction commences, with lenders typically disbursing funds in phases.
- The project becomes operational and starts generating income.
- Debt is repaid to lenders from the project's cash flow over a period of 5 to 30 years.
- We impose an interest rate of 7-10% (ROI) on financing annually, which must be paid monthly before the 5th of each month.
Our project finance procedure is as follows:
- The client fills out the application and signs it, providing a copy of their CIS and passport.
- They must accept our terms and conditions.
- The contract will be signed by both the Operator and TTFG.
- After the contract is signed, TTFG will issue a Proforma Invoice (PI) for the payment of the Processing, Bond, and Security Fees, which will depend on the financing amount.
- Payment for the Processing, Bond, and Security Fees is mandatory.
- Following this payment, TTFG will commence the financing process for the funds.
- Partnership Strength: Underline the value of collaboration with banks, investors, and financial institutions.