TABLE OF CONTENTS As we saw in the previous section, there are several parties in a project financing. Here is a list, albeit non-exhaustive, of the most usual ones.
The project company is the legal entity that will own, develop, construct, operate and maintain the project. The project company is generally an SPV created in the project host country and therefore subject to the laws of that country (unless appropriate commissions can be paid so that key government officials can grant exceptions to the project). The SPV will be controlled by its equity owners. The control mechanism may be defined in a charter, a joint venture agreement or partnership agreement and may also be subject to local laws. Its only activity will be to own and operate the project.
The project sponsor is the entity that manages the project. The sponsor generally becomes equity owner of the SPV and will receive any profit either via equity ownership (dividend streams) or management contracts (fees). The project sponsor generally brings management, operational, and technical experience to the project. The project sponsor may be required to provide guarantees to cover certain liabilities or risks of the project. This is not so much for security purposes but rather to ensure that the sponsor is appropriately incentivized as to the project s success.
The borrowing entity might or might not be the SPV. This depends on the structure of the financing and of the operation of the project (which will...
