Project finance transactions are complex transactions that often require numerous players in interdependent relationships. To illustrate, we provide an organization diagram of the various players seen from the viewpoint of an agent bank in a generic project finance transaction:

• The core of a project financing is typically the project company, which is a special purpose vehicle (SPV) that consists of the consortium shareholders (such as contractors or operators who may be investors or have other interests in the project). The SPV is formed specifically to build and operate the project. The SPV can be structured either as a local project company or a joint venture (JV) consortium.

• The SPV is created as an independent legal entity, which enters into contractual agreements with a number of other parties necessary to the project. The contracts form the framework for project viability and control the allocation of risks.

• The project company enters into negotiations with the host government to obtain all requisite permits and authorizations, e.g. an oil or gas production licence, a mining concession, or a permit to build and operate a power plant.

• A syndicate of banks may enter into a financial agreement to finance the project company. There may be several classes of lending banks, e.g.

  • international banks lending foreign currency;

  • local banks lending domestic currency for local costs;

  • export credit agencies lending or guaranteeing credits to finance suppliers to the project of their national equipment; and

  • international agencies lending or guaranteeing development...