Project finance refers to that the project sponsor (shareholder) raises funds through establishment of a project company for such project operation, and then taking the company as borrower, its cash flow and benefits as repayment source and its assets as guaranty of loans. It is generally applied to such large-scale infrastructure projects as generating facilities, high-grade highways, bridges, tunnels, railways, airports, urban water supplies and sewage treatment plants, and other construction projects with large investment scale and long-term stably expected profits.

Project financing may be divided into recourse project financing and non-recourse project financing.

1. Realize the non-recourse or limited recourse of finance. Under normal situations of such product design, the project sponsor shall not guarantee loan liquidation by its assets except for investing a certain share capital into the project company. Therefore, the sponsor will have bigger space and more resources to invest other projects.
2. Realize the off-balance sheet finance. If the sponsor gets a loan directly from the bank, its ratio of liabilities increased, part financial indicators worsen will enlarge future financing cost. By contrast, the sponsor establishes the project company with legal personality which takes charge of project finance and construction. On condition that shares of the sponsor in the project company is no more than a certain percentage, the finance of the company will not be reflected on the balance sheet consolidated by the sponsor.
3. Enjoy the tax preference. As the high-level liability structure in the project finance and tax deduction of loan interest, the optimization of capital structure and decrease of capital cost of the company will be achieved.

In accordance with the project’s industry, region, shareholder, loan currency and other specific circumstances.

The term of project financing is generally long, includes medium term (one to five years) and long term (over five years), it mostly adopts amortization and floating interest rate.

In accordance with contract signed by both Parties.

All projects that may gain stable cash flow and be attractive to the bank may raise funds through project finance. Mainly focusing on following fields: projects of energy development, oil pipeline, oil refinery, mineral resource exploitation, toll road, sewage treatment and communication facility.