Key Issues To Consider In Project Finance Transactions

Project finance is a complex financing structure used to finance the construction of capital intensive and long-term infrastructure projects such as pipelines, power plants and airports. Project finance typically involves multiple parties who are subject to a variety of risks and who have conflicting interests that must be protected and obligations that must be clearly defined. It is the role of counsel to identify the specific risks associated with the project and determine the project participant best able to assume such risks. Failure to do so may result in higher project costs, delays in the project’s construction schedule or a default under the loans. To ensure each risk is properly identified, counsel should prepare a matrix setting out (1) each project risk, (2) the party responsible for assuming that risk and (3) how that risk assumption is reflected in the documents. This guest column discusses some key project finance risks.... --By Erlyne J. Nazaire, Practical Law Company