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An "Introduction to Project Finance" Introduction to Project Finance by Andrew Fight, 2006, Butterworth-Heinemann, ISBN 075065905X (www.books.elsevier.com)
The hurricanes that ravaged New Orleans and the Gulf Coast inflicted significant damage on the region's infrastructure of ports and canals, roads and highways, electric grids and energy pipelines, and water and sewer systems. This is the stuff of great public works, and Andrew Fight's Introduction to Project Finance is a timely book. P.T. Barnum once said that every crowd has a silver lining. The Gulf Coast's reconstruction offers bankers considerable credit opportunities, but reconstruction is going to extend far beyond working capital lines of credit and term loans. This is a job for project finance.
Fight explains that project finance is a non-recourse or limited recourse financing structure in which debt, equity, and credit enhancement are combined for the construction and operation, or the refinancing, of a particular facility in a capital-intensive industry. It is a technique commonly used to raise large amounts of capital for highway systems, subways, airports, and dams, for example. Underwriting and terms are based on the project's cash flow forecasts, not on the creditworthiness of the sponsors or the actual value of the project assets. Financing and equity contributed by the project sponsors must be enough to cover all costs related to the development of the project as well as working capital needs. Non-recourse or limited recourse is a key attribute of project finance because the size of the operation often dwarfs the size of the participating sponsors' balance sheets. Moreover, the borrowing entity...