Abstract
This article examines, classifies and categorizes various types of project risks inherent to international project finance and discusses legal techniques employed by the key participants of project finance to mitigate each of these risks based on thorough examination of project documentation typically elaborated for this purpose. It covers both commercial (internal and external) and non-commercial risks, in particular, completion risk, risk of excess expenditure, operational risk, environmental risk, risk of insufficient revenues, supply risk, currency risk, inflation risk, interest rate risk and others. The author argues that non-commercial risks, including political or country risks, present even greater peril for an international project and offers a complex of protective legal measures which could be used for diminishing such risks in the long run. The conclusions formulated at the end of the article present the author’s personal attitude towards legal solution of the problem of minimization of the project risks arising within international project finance. Key words: project finance, project company, commercial risks, non-commercial risks, contractual remedies.
Highlights
The success of the project finance over the last decades has been largely driven by the fact of internationalisation of the investment markets and desire of the national governments to shift the burden of financing of public-sector projects to the private investors
The purpose of this article is to examine, classify and categorize various types of risks inherent to international project finance and discuss legal techniques employed by the key participants of project finance to mitigate each of these risks based on thorough examination of project documentation typically elaborated for this purpose
Project risks present a complex of potential events which may have an adverse impact on implementation and performance of project and/or solvency of its participants
Summary
Сформулированные в конце статьи, представляют авторскую позицию касательно разрешения проблемы минимизации проектных рисков, возникающих в рамках международного проектного финансирования, при помощи правового инструментария. Project finance presents a method of raising long-term finance exclusively for the specified project Under this scheme the banks shall provide loans for the project implementation, and these loans shall be repaid solely by the cash-flow generated by the project. Since the project company running only the business related to the project has no sufficient assets to secure the whole amount of debt finance or credit history, lenders shall rely only on the future cash-flow to be generated by the project. The project documentation should envisage mitigation of the risks to the maximum extent possible These reasons determine high significance of our present investigation of the project risks and suitable legal instruments and techniques of their elimination within international project finance. The purpose of this article is to examine, classify and categorize various types of risks inherent to international project finance and discuss legal techniques employed by the key participants of project finance to mitigate each of these risks based on thorough examination of project documentation typically elaborated for this purpose
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