Faculty of management studies
Course work test
Name reg no.
1. JAMIRA KADALA 211-033021-03701
2. NANTEZA FATUMA211-033021-04148
3. ASIIMWE PHIONA211-033021-03699
4. NANKABIRWA FATUMA 211-033021-04109
5. NALUBOWA RAHMA211-033023-03762
6. MUWOMGE ABDUL NASHIRI211-033023-03760
7. NSEREKO ABDUL JALILI211-033023-03762
8. GALIWANGO ASHIRAFU 211-033023-04008
9. NAMUBIRU SULAIBA210-033022-03743
10. NAMBATYA FAHIMA211-033022-03743
11. BIRIBAWA KULTHUM211-033023-03752
COURSE UNIT: PROJECT PLANNING AND MANAGEMENT
INSTRUCTOR: NANGOLI SUDI
Identify and explain the technical, economic, ecological, financial and market aspects of project finance.
Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of equity investors, known as 'sponsors', as well as a 'syndicate' of banks or other lending institutions that provide loans to the operation. They are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling. The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given a lien on all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms. Generally, a special purpose entity is created for each project, thereby shielding other assets owned by a project sponsor from the detrimental effects of a project failure. As a special purpose entity, the project company has no assets other than the project. Capital contribution commitments by the owners of the project company are sometimes necessary to ensure that the project is financially sound or to assure the lenders or the sponsors' commitment. Project finance is often more complicated than alternative financing methods. Traditionally, project financing has been most commonly used in the extractive (mining), transportation, telecommunications and energy industries. More recently, particularly in Europe, project financing principles have been applied to other types of public infrastructure under public–private partnerships (PPP) or, in the UK, private finance initiative (PFI) transactions (e.g., school facilities) as well as sports and entertainment venues. Defined by the International Project Finance Association (IPFA) as the following: The financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cash flow generated by the project. In other words, project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights, and interests held as secondary security or collateral.
Project finance is especially attractive to the private sector because they can fund major projects off balance sheet. History
Limited recourse lending was used to finance maritime voyages in ancient Greece and Rome. Its use in infrastructure projects dates to the development of the Panama Canal, and was widespread in the US oil and gas industry during the early 20th century. However, project finance for high-risk infrastructure schemes originated with the development of the North Sea oil fields in the 1970s and 1980s. For such investments, newly created Special Purpose Corporations (SPCs) were created for each project, with multiple owners and complex schemes...