With project financing, the initiator of a project launches a project company for the purposes of raising fund for this project, and operating this project after accomplishment; the project company is the loan bearer, who has its cash flow and earnings as sources for repayment of loans, and the assets (or right) of the project as hypothecation; the loan itself usually carries no or very limited right of recourse.
Project financing is, more often than not, applicable to projects that need huge amount of funds at high risks in investment, and traditional means of financing is no long able to offer stable cash flow. These projects are major ones in the field of natural resources exploration (natural gas production, coalmining, and petroleum, etc.) as well as large infrastructure construction work such as transportation facilities, electric power generation, agriculture and forestry, and public utilities.
Service Features
1. Requiring a single batch of fund in considerable amount;
2. Construction work and investment recouping period is long with many uncertainties;
3. Projects for such financing usually yield good economic and social benefits.