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Summary of VINCI’s Rion Antirion Bridge Project
-- The use of project finance
By Run GAO from Télécom ParisTech

What is project finance?
Project finance is now largely used as a preferred method of financing infrastructure and other large-scale projects worldwide. It is very different from traditional forms of cooperate finance because it usually provides long term financing, up to 25years, for a particular project, such as power plant, oil field, transport or telecommunication. The repayment of debt is based on the cash-flow of that project while having no recourse or limited recourse to the project sponsors.
Generally, in project finance, a special purpose company is created by the project sponsor for each project. It has no assets other than the project. It is this SPC whosigns a series of contracts with constructor, operator and lenders to make this projects start and work. Other roles involved are the suppliers, off-takers, government and insurance agency.

The reason for companies to choose project finance lies at the size of the project. Using traditional finance may not get enough funds to operate a project like the power plant. However, using project finance,it can initiate such project with banks’ loan involved by paying a relatively higher rate of interest. This loan may cover up to 95% of the total project expense. Also, even if the project fails, it won’t do much harm to company’s balance sheet.
For the banks, the risks in such project are great as the loan can only be repaid when the project is operational. If it fails, the financiers are likelyto lose a large sum of money. In order to secure their loan, it becomes natural for the financiers to make substantial effort to analyze and manager every risk associated with the project and to ensure that all the risks are reduced or eliminate as far as possible. Of course, this can be a very time-consuming process as every detail concerning risks of the project needs to be disclosed and thisprocess itself can generate extra costs.
In project finance, there are many different types of risks in all phases of the project, such as the completion risk, commercial risk, political and regulatory risk, technical risk, force majeure and other risks like the interest rate, inflation and currency. The basic idea of eliminating the risk is to share the risk among different parties and allocatedifferent risk to those who can manage it through negotiation of the contractual framework. For example, it is very common that the construction work is assigned to a constructor by an EPC contract.

What is VINCI’s Rion Antirion Bridge Project?
VINCI construction is a French-based construction company. It employs over 164,000 people and is the largest construction company in the world byrevenue.
VINCI and its predecessor companies has been involved in many major projects including the Gariep Dam completed in 1971, the Tour Montparnasse completed in 1972, the Centre Georges Pompidou completed in 1977, the Yamoussoukro Basilica completed in 1989, the new visitor entrance to the Louvre completed in 1989, the Channel Tunnel completed in 1994, the Pont de Normandie completed in 1995, theStade de France completed in 1998.
In this project, Rion Antirion Bridge, which crosses the 3 Km Corinth Gulf, is a 2,880 m long bridge between Rion and Antirion and it is the first project to be let in concession in Greece. It was first planned in mid-1990s and was built by a French-Greek consortium led by the VINCI group. It greatly improves the local transport, since before the only ways to getthrough were either by ferry or via the isthmus. Its 2,252 m long five-span four-pylon cable-stayed portion of length 2,252 m (7,388 ft) is the world's second longest cable-stayed deck, and is the longest cable-stayed "suspended" deck.

Why use concession?
Infrastructures concessions means that a private company enters into an agreement with the government to have the exclusive right to...
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