Mitigating Commercial Risks in Project Finance
Author: Jeff Ruster Date: 2/1/1996 (PDF, 200KB)
In developing countries, project finance is commonly used as a vehicle for private participation in such infrastructure projects as power plants and toll roads. The investor's recourse is limited to claims on the project's cash flow and related assets. And risks are distributed across project participants--sponsors, lenders, third-party contractors, state-owned enterprises, and the government as end user--on the basis of who is best positioned to manage them efficiently, though commitments are usually limited in scope, amount, and time. From a lender's perspective, Jeff Ruster lists common instruments for mitigating commercial risks.