News 4
In a typical project finance transaction, the Project company (ie the borrower) is a Special purpose vehicle (SPV) set up specifically for the purposes of the project. This means that it does not have its own experienced employees and its only assets are the project assets.
The sponsor (which is traditionally an entity with more substantial corporate worth and skill) is often required to provide support to the project company to ensure that the project is successful. For more information on sponsors, see Practice Note: Project finance—key project parties—Sponsor.
What is Equity support in a project finance transaction?
Equity support for a project means any form of support provided by the sponsor to the project company.
The two main forms of equity support are:
- •
non-financial equity support arising out of the sponsor's experience, knowledge and technical expertise, including by way of:
- ◦
skilled personnel who are allocated to the project to oversee and manage its design and development
- ◦
assistance to procure official licences, authorisations and approvals (particularly in the case of any local
- ◦
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Related documents:
Practice notes 8
- Banking and finance—environmental risk
- Common Islamic finance structures used in project finance
- Financing a project with a bond issue
- Introduction to project finance
- Project accounts and the accounts agreement
- Project finance—conditions precedent
- Project finance—key project parties
- Project finance—representations and warranties