Project Finance

BioTherm Energy develops projects using the principles of project finance.

Project finance or limited recourse finance is a specialist discipline that largely evolved in power sectors of the United States and the United Kingdom . The essence of project finance is the allocation and mitigation of construction and operational project risks through the various contracts to counterparties who, because it is their core business, are best able to manage them. This allows the project lenders to be satisfied that the project will be duly built and operated and that they will be repaid from the project cash flow. The project is normally held in a single asset owning company and therefore lenders are exposed (and have recourse) only to the project. All significant revenue and expense items are usually contractually determined over the finance term.

The developer provides equity and raises debt against security of the project cash flow. Due to the structure, recourse to the balance sheets of the project owners and other contractual parties is limited to their contractual obligations under the relevant contracts and their equity commitment. Usually, the obligations of the contractual parties will not appear on their balance sheets (other than in the notes thereto) as these obligations are undertaken in the course of their normal business.

The developer/project sponsor invests equity in the project company, owns and operates the company for the economic life of the project assets which would typically be well beyond the debt maturity.