Introduction

In recent years project finance (PF) has become an increasingly popular method of funding long-term capital-intensive infrastructure projects worldwide, particularly in developing countries. The nature of modern project finance is to use limited or non-recourse syndicated loans to a special purpose vehicle (SPV), where such debt typically represents the lion’s share of the capital structure. The vehicle usually has one objective, such as to build a dam or a pipeline, and therefore avoids some of the decision-making tensions common in the corporate finance literature. In typical project finance syndication there tend to be several types of bank. It is not uncommon for multilateral development banks such as the International Finance Corporation (IFC) of the World Bank group to participate in the lending process; however, the biggest lenders are syndicates of large international banks. These institutions (e.g. Barclays plc and HSBC plc) are private sector entities that are characterized by the broad objectives of profit and shareholder wealth maximization.