Clearly, banks say that if the borrower of the project company does not have enough cash to repay the loan and interest at any time during the term of the loan – say five to seven years, even during the operating term, well after the end of the project – the sponsor must stand up and help make the payment. In fact, if the borrower does not pay, it is the sponsor who must pay. The only objective of sponsorship support is therefore the completion of construction. In addition, the proceeds of the project play a decisive role in the place of the sponsor. A delivery contract is concluded between the project company and the supplier of the necessary raw material/fuel. The Shareholders` Agreement (SHA) is an agreement between project sponsors for the creation of a special purpose vehicle (SPC) with regard to project development. This is the most fundamental structure owned by sponsors as part of a project financing transaction. This is an agreement between the promoters and deals with the creation of a special purpose entity for each project, which protects other assets of a project sponsor from the negative effects of a project defect. As an ad hoc company, the project company does not own assets other than the project. Capital commitments from the owners of the project company are sometimes necessary to ensure that the project is financially sound or to convince lenders of the sponsors` commitment. Project financing is often more complex than alternative financing methods. Traditionally, project financing has been most used in the raw materials (mining), transport, telecommunications and energy sectors, as well as in sports and entertainment facilities.
There are differences between a sponsor support contract and a personal guarantee. The developer`s assistance is to ensure that construction continues until its completion on time, passing through financial difficulties. Sponsor support is shorter and ends with the completion of the project. A personal guarantee ensures that lenders are reimbursed with or without completion of the project. In the case of a temporary loan, this guarantee is guaranteed for the long term of the facility, as long as the project company still owes money to the banks. The guarantee will only end when each baht is refunded. In general, lenders will not wait for the project to crash. They will monitor the financial health of the projected company every three months, including during the construction period, through its audited and audited accounts. If they experience a liquidity problem in the next quarter, banks will have enough time to tap into the sponsor`s personal resources to recharge them, failing which lenders will have the right to reduce the line of credit. Project financing is the long-term financing of infrastructure and industrial projects, based on the project`s expected cash flows and not on the balance sheets of its promoters.
Typically, a project finance structure includes a number of investors called “sponsors” and a “consortium” of banks or other credit institutions that provide loans for the operation. These are typically non-recourse loans that are secured by the project`s asset funds and fully paid for by the project`s cash flows and not by the general assets or creditworthiness of the project sponsors, a decision supported in part by financial modelling.  see project funding model. . . .