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 25 years, 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 who signs 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 likely to 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 this