A guide to Practical Law Finance's project finance resources.
This note acts as a guide to Practical Law Finance's resources on the debt financing of energy, infrastructure and other capital-intensive projects, including private and public sector projects carried out under the private finance initiative or as public private partnerships. This note also includes links to content relevant to the energy sector (oil, gas and power projects). As well as links to those Practical Law Finance standard documents, drafting notes, practice notes and checklists that are relevant to project finance, this note also includes links to project finance related resources from other Practical Law services such as Construction, Public Sector, Energy, Environment and Tax.
Introduction
This note acts as a guide to Practical Law Finance's resources on the debt financing of energy, infrastructure and other capital-intensive projects, for example, the:
Building of a tunnel, bridge, motorway or rail system.
Development of an oil or gas project for the exploitation of oil and gas deposits.
Building of a power station (conventional, renewable or nuclear).
Development of telecommunication, cable, water or wastewater systems and electricity distribution networks.
Development or redevelopment of an airport or seaport facility.
Project finance overview
Project finance is a complex multi-disciplinary topic, involving the following key aspects:
Various miscellaneous aspects of project finance transactions, including those involved in structuring, financial close and ongoing implementation of a project (see Miscellaneous aspects of a project finance transaction).
This note identifies resources relevant for each of these aspects of a project finance transaction. It also identifies detailed materials relating to certain sectors where project finance is often used as a financing technique (see Specialised industry sectors).
Understanding the structure of a project finance transaction
For an introduction to project finance, including an outline of a typical project finance structure, an overview of the parties to the project and their objectives and the key issues for lenders, see Practice note, Project finance: UK law overview.
Many cross-border projects may involve one or more export credit agencies (ECA) which can help mitigate certain political risks assoicated with some emerging markets.
For a note on the use of project bonds as a source of funding in project finance, see Practice note, Project bonds.
For an overview of raising debt finance by issuing eurobonds generally, including an explanation of the key documentation and parties and a guide on how to do a bond issue, see Practice note, Bond issues: overview.
For a note that provides a step-by-step guide to raising finance by issuing bonds and describes the key stages involved in a general bond issue, gives practical tips specific to each stage and discusses post-closing matters, see Practice note, Bond issues: step-by-step guide.
Security and quasi-security in a project finance transaction
Project finance transactions are a type of secured lending transaction. As a result, taking security and the ability to enforce it forms a critical part of any project finance transaction.
For an introduction to the different methods of perfecting security, the basic rules governing priority and contractual ways in which the rules can be varied, see Practice note, Perfection and priority of security.
For an overview of how a lender (or other chargeholder) may enforce security over the assets of a corporate security provider, see Practice note, Enforcing security: overview.
For a note providing an overview of the issues that need to be considered when taking security over a foreign asset or from a foreign entity, see Practice note, Taking cross-border security.
For a note which examines the legal background and case law relating to subordination of debt and which analyses different methods used to alter the priority of debts, see Practice note, Subordination.
Due diligence for a project finance transaction
Due diligence is an important and potentially lengthy part of any project finance transaction.
Reaching financial close in a project finance transaction
Reaching financial close of a project finance transaction can be a challenging process. Some key issues to consider include:
Conditions precedent in project finance transactions
Conditions precedent play a large role in reaching financial close in a project finance transaction. For more information generally on conditions precedent in lending transactions, see Conditions precedent in lending transactions: overview.
Given the complexities involved in a project finance transaction, it is not uncommon for them to require careful monitoring on an ongoing basis. It is also not uncommon for them to encounter difficulties. For a note considering what to do with a project in trouble, see Practice note, Projects in trouble: guidance for lenders.
The potential implications of insolvency law should also be recognised when advising on project finance transactions.
Insolvency generally
For an introduction to the aims of and background to corporate insolvency law, together with a brief overview of the various insolvency procedures available, see Practice note, Corporate insolvency: a guide.
Commercial aspects of a project finance transaction
Construction aspects of a project finance transaction
The construction phase of a project finance transaction generally constitutes the riskiest aspect of the project. As a result, the construction aspects play an important role in the structuring of any project.
For information on the roles and responsibilities of a project monitor (sometimes, also known as a technical adviser), including the advantages to a funder and the project if a project monitor is appointed, see Practice note, Project monitoring.
For a note on the key issues that parties should consider when drafting and negotiating an operation and maintenance (O&M) contract and the key provisions of a typical project finance O&M contract, primarily in the context of a project in the energy sector, see Practice note, Operation and maintenance (O&M) contracts: key issues.
Corporate aspects of a project finance transaction
Corporate aspects of a project finance transaction play an important role in the structuring of a project.
For a note examining the downstream gas industry in Great Britain including gas transportation, shipping, supply, storage and trading and explaining the concepts of upstream, midstream and downstream, see Practice note, Downstream gas industry: overview.
For a note on the preliminary stages in the development of a power project, from the feasibility study through to preparing to obtain finance, see Practice note, Power projects: development phase.
For an overview of a nuclear power project from project development to decommissioning, including key project documents, revenue streams and consents and considering the issues involved in developing, financing, constructing, operating and decommissioning a nuclear power station in Great Britain, see Practice note, Anatomy of a nuclear power project.
For an overview of a wind power project, from project development to decommissioning, including key project documents, revenue streams and consents, see Practice note, Anatomy of a wind power project.
For an overview of a ground-mounted solar photovoltaic project from project development to decommissioning, including government policy, project milestones, key project documents and revenue streams, see Practice note, Anatomy of a ground-mounted solar power project.
For an overview of a gas-fired power project in England and Wales, from project development to decommissioning, including key project documents, revenue streams and consents, see Practice note, Anatomy of a gas-fired power project.
For a note outlining common terms used in the electricity sector in Great Britain covering power generation terminology as well as the electricity retail and wholesale markets, renewable and low carbon incentive schemes and electricity networks, see Practice note, Electricity sector: terminology.
Miscellaneous aspects of a project finance transaction
Tax in project finance transactions
The general tax principles that arise in a project finance transaction are similar to those that arise in other commercial loan transactions. The following resources provide an overview of various tax issues commonly encountered in finance transactions.
For a note that discusses the Equator Principles (a set of voluntary social and environmental guidelines that certain financial institutions have agreed to be bound by) and their implications for project finance transactions, see Practice note, The Equator Principles.
For project financing resources from a United States perspective, see Project Finance & Development.
Useful links
Practical Law search function
To conduct a search of all Practical Law materials, use the toolbar at the top of the Practical Law Finance, Project Finance homepage. The Practical Law search function applies a faceted search, which means that you can tailor your search by filtering by topics, services, jurisdictions and resource types. For more information on searching, see How to search Practical Law resources.