Authors: Prince Elisha Nsiah-Asamoah1, Dr. David Ackah, PhD2
1PhD. Student, Business University of Costa Rica
2President, Institute of Project Management Professionals
Email: nanayawghgh@yahoo.com | drackah@ipmp.edu.gh
Abstract
Project finance is the long-term financing of economic infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. Projects can be finance with equity from one or more sponsoring firms and non-recourse debt for investing in a capital asset – to own and invest in the project. Equity and debt instruments such as shares, venture capital, institutional investors, bonds, loans and debentures serve as sources of funding for infrastructural and developmental projects. Other specialized sources for funding projects are grants, crowd funding and peer-to-peer funding. Project finance creates value by reducing the costs of funding, maintaining the sponsors financial flexibility, increasing the leverage ratios, avoiding risk, reducing corporate taxes, improving risk management, and reducing the costs associated with market imperfections. It involves non-recourse financing of the development and construction of a particular project in which lenders looks to the revenue expected to be generated by the project for repayment of its loans and to the assets of the project as collateral for its loan rather than to the general credit of the project sponsor.
Project finance has its own challenges especially Public Private Partnership Projects. Public Private Partnership for developmental and social infrastructures involve the private sectors in the designing, building, financing and operating public infrastructure in institutional sectors such as power generation, transportation-roads, or railways, water supply, energy, hospitals, sanitation, waste management, affordable houses and schools. Public Private Partnerships (PPPs), project financing for public infrastructure, are now emerging as a viable source of infrastructure investment in developing countries. A successful PPP arrangement capitalizes on the strengths of the private and public sectors to provide a better and more cost-effective public service, and speed up the rate of its implementation or coverage. The growth in PPPs has been attributed to several reasons, including increased efficiency in project delivery and operation; reinforcing competition; access to advanced technology; and reducing government budgetary constraints by accessing private capital.
Keywords: Project Economic Impact, Payback Period, Project Viability, Project Performance Duration
