Introduction: Understanding the Project Finance Gap

Global Scenario: A significant challenge in today's economic landscape is the project finance gap, particularly in developing countries.

The UN Conference on Trade and Development highlights a $4 trillion gap in sustainable development investments, with a $2 trillion gap specifically in investment towards an energy transition​​.

This shortfall is most pronounced in sectors such as energy, water, and transport infrastructure​​.

Financely's Approach to Project Finance

Supporting Diverse Projects: Financely is committed to facilitating project finance across various sectors, with a special emphasis on renewable energy and carbon projects. These projects are vital for achieving Sustainable Development Goals (SDGs) and advancing global environmental initiatives.

Bridging the Finance Gap: We specialize in helping companies, especially those in frontier markets, to raise financing both domestically and in international markets. Our approach is tailored to each project's unique requirements and circumstances, ensuring that viable and transformative projects secure the necessary funding.

Structuring Project Finance Transactions

How It Works: Project finance transactions are structured around the specific project's cash flow and assets, rather than relying on the balance sheet of the sponsoring company. This structure allows for the financing of large-scale projects with a high degree of risk isolation.

Risk Mitigation and Management: We employ a range of strategies to mitigate and manage risks associated with project financing. This includes thorough due diligence, use of special purpose vehicles (SPVs), and securing project assets as collateral.

Engaging Multiple Stakeholders: Our approach involves coordinating with various stakeholders, including governments, financial institutions, and international investors. This collaboration is crucial for securing the substantial capital required for large-scale projects.

Types of Projects Financely Focuses On

Renewable Energy Projects: We prioritize renewable energy projects, such as solar, wind, and hydroelectric power plants. These projects not only contribute to a greener future but also represent a growing sector with significant investment opportunities.

Carbon Projects: Carbon projects, aimed at reducing carbon emissions and enhancing carbon sequestration, are another focus area. These projects are increasingly important in the global effort to combat climate change.

Infrastructure Development: We specialize in financing large-scale infrastructure projects including transportation networks, urban development, and public utilities. These projects are crucial for economic growth and improved quality of life in communities.

Agricultural and Food Security Projects: We support projects that advance agricultural efficiency and food security. This includes sustainable farming practices, food processing, and distribution networks, vital for meeting the global food demand sustainably.

Healthcare and Education Infrastructure: Financing projects that improve healthcare and education infrastructure is a key focus. This includes building hospitals, clinics, and educational institutions, which are fundamental for societal development and wellbeing.

Technology and Innovation: We are committed to funding projects that drive technological advancement and innovation. This includes startups and established companies working on breakthrough technologies in various sectors such as biotech, fintech, and artificial intelligence.

Sustainable Tourism and Hospitality: We finance projects in sustainable tourism and hospitality, focusing on eco-friendly practices and community involvement, contributing to local economies while preserving natural and cultural heritage.

Waste Management and Recycling: Supporting projects in waste management and recycling is part of our commitment to environmental sustainability. These projects focus on reducing landfill use, recycling materials, and generating renewable energy from waste.

A typical project finance transaction is structured through several key steps:

Project Identification and Feasibility: The process begins with identifying a viable project and conducting a detailed feasibility study. This study assesses the project's technical, economic, and financial viability.

Special Purpose Vehicle (SPV) Creation: An SPV, a separate legal entity, is created to hold the project assets and isolate financial risk. This entity is responsible for the project development, operation, and debt repayment.

Securing Finance: The SPV seeks financing, which is typically a mix of debt and equity. Lenders provide loans based on the projected cash flows of the project, not the balance sheet of the sponsors.

Risk Allocation and Mitigation: Risks are identified, allocated, and mitigated through various means such as insurance, guarantees, and hedging. Risk allocation is often negotiated among various parties involved, including sponsors, lenders, and governments.

Contractual Agreements: Several contracts are established, including construction contracts, supply and off-take agreements, operation and maintenance contracts, and insurance agreements. These contracts provide the framework for project implementation and operation.

Project Implementation and Operation: Once financing is secured and contracts are in place, the project is developed and operationalized. The SPV manages the project during its operational phase.

Revenue Generation and Debt Repayment: The project generates revenue, typically from the sale of the product or service it produces. This revenue is used to repay the lenders and provide returns to the investors.

This structure allows for financing large-scale projects with minimized risk to the sponsors and maximizes the potential for successful project completion and operation.

Why Choose Financely for Project Finance?

Expertise in Frontier Markets: Our deep understanding of the challenges and opportunities in frontier markets sets us apart. We provide tailored solutions that address the specific financial and regulatory landscapes of these markets.

Comprehensive Solutions: From structuring the financing to managing risks and coordinating with stakeholders, we offer end-to-end solutions for your project finance needs.

Engage with Financely Group

Get Started on Your Project: To explore how Financely can support your project finance needs, visit our website to request more information or schedule a consultation.

Source: 

Developing countries face $4 trillion investment gap in SDGs | UN News