Many owners of large projects consider project financing to be a somewhat independent exercise from project development, often delegated to the finance department. However, our experience shows that financing participates deeply in project strategic development. In addition, it is essential to avoid delays in final investment decisions due to financing issues. In our new White Paper 2022-05 ‘Why Project Funding Must be Considered Earlier in Project Development for Owners’ we explore best practices in the field of project financing from the perspective of overall project development.
Most large and complex projects require some financing setup beyond the main owner’s internal resources, and external funding is actually an increasing trend for major infrastructure and energy projects. This financing can take many forms and lead to setups of various degrees of complication, and will include a combination of the following:
- International / multilateral institutions financing (development bank for the continent or country)
- Export Credit Agencies
- Capital-level financing: partnerships, financial market/market introduction of ad-hoc project entity, private equity
- Debt: commercial banks, etc
- Government subsidies and tax rebates
- Future client funding (may include a production take-off commitment)
Financing does influence project development and later project execution at several levels. Many owners being focused on the technical and project management aspects of project definition tend to start the setup of project financing relatively late, however, our experience shows that this often creates substantial performance issues for the project. Read our new White Paper 2022-05 ‘Why Project Funding Must be Considered Earlier in Project Development for Owners’ to understand better how financing must be taken early and how it influences project development.
Project financing is an increasingly important topic for large industrial projects. Many owners consider this to be an independent exercise that can be performed in parallel to project development. However, it is an integral part of project definition and project financing must be integrated within the project team. Also, it has to be considered early enough; we recommend the overall financing strategy to have been set prior to embarking into the Detailed Feasibility Study (DFS) phase, even if the final parameters will only be set at Final Investment Decision (FID).
If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2022-05_consider_funding_earlier_V1.pdf
