What is Project Finance?

Description
What is Project Finance? What differentiates it from corporate or leveraged finance? And why does it suit infrastructure projects?

To understand why project finance modelling is so complex, firstly we must understand Project Finance - also sometimes known as Infrastructure Finance as infrastructure is what it typically finances. Most large infrastructure projects are Project Financed as it enables long-term debt and separation from a company which may not be able to raise that sort of finance on their own accord.

Project Finance models are put together to assess the financial feasibility of a project to be undertaken by a new entity - in other words, off-balance sheet lending. This article explores project finance and project finance models to understand why these financial models are considered to be among the most complex models there are.

These models assess the cash flows on a period by period basis and show returns for shareholders. They also show the banks that the projects are financially capable of repaying debt, with enough room to spare.

Matthew is an entrepreneur, engineer, CFA® charterholder, trainer and Excel addict with a love for finance, data science, process optimisation, data visualisation and building businesses. Before joining RMB's Infrastructure Finance division, Matthew was a Director at Seoketso (an advisory, technology and training firm) and before that was Head of IT & Operations Consulting at a financial consultancy. As a member of KPMG’s Green IT team, he honed his love for green and renewable energy.