Project financing

By
Shantveerayya.G.Math
Roll. no 59
 Project financing is an innovative and
timely financing technique that has
been used on many high-profile
corporate projects,
 Project Financing discipline includes
understanding the rationale for
project financing, how to prepare the
financial plan, assess the risks, design
the financing mix, and raise the funds
 Project finance is finance for a
particular project, such as a mine, toll
road, railway, pipeline, power station,
ship, hospital or prison, which is
repaid from the cash-flow of that
project.
Risk minimisation process
 STEP 1 - Risk identification and
analysis
 STEP 2 - Risk allocation
 STEP 3 - Risk management
Sources of Equity capital
Fund
Internal Preference
capital

Internal
Accruals

Sources Term loans

of fund

Debentures

External
Miscellaneous
sources
EQUITY CAPITAL

Equity capital represents ownership

capital as equity shareholders
collectively own the company. They
enjoy the rewards and bear the risks
of ownership.
PREFERENCE CAPITAL
 Preference capital represents a hybrid
form of financing-it partakes some
characteristics of equity and some
attributes of debentures.
 Ex: fixed rate of dividend , no voting
right
INTERNAL ACCRUALS
 The internal accruals of a firm consist
of depreciation charges and retained
earnings.

 Depreciation represents the allocation of capital

expenditure to various periods over which the capital
expenditure is expected to benefit the firm.
 Retained earnings are that portion of equity earnings
which are ploughed back in the firm.
TERM LOANS

 Term loan mean the loan given for

employed to finance acquisition of
fixed assets and working capital.
DEBENTURES
 Debentures are a viable alternative to
term loans. Akin to promissory notes,
debentures are instruments for
raising debt finance. Debenture
holders are the creditors of a
company.
MISCELLANEOUS SOURCES
 Lease and hire purchase finance.
 Unsecured loans and deposits.
 Commercial paper.