Thursday, April 7, 2016

Finance: Project Finance Explained

Good Fences Make Good Financing: Project Finance Explained (EERE)

At the U.S. Department of Energy, one of our key missions is supporting research, development and deployment of new technologies. How do we do this? We fund projects of all sorts. One way we do this is through project finance.

Project finance is a common way for large infrastructure projects to structure funding that offers companies and investors many benefits over traditional corporate finance. In project finance, a company (or “project sponsor”) raises capital through a special purpose vehicle (SPV)—essentially a “shell” holding company—and equity and debt holders rely on the cash flows of the assets in this entity to recover their investment. The SPV adds additional protection—a fence—to the company because it owns the project, and in turn is owned by the project sponsor and other investors.

For more information, read the full article at the National Renewable Energy Laboratory’sProject Finance website.

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