Project Financing in Russia

Project financing in Russia is particular suitable for projects that require a significant funding, are high risk but will yield a stable cash flow.
In Russia project financing usually has a focus on the projects in the development of natural resources such as oil, gas, coal. However, transportation, telecommunications & IT, utilities, renewable energy, waste processing, chemicals, agriculture and social infrastructure are also under consideration. 
We provide advisory services with regards to the project financing which include: 
  • analysis and insight into business plans, feasibility studies, risk mitigation strategies and other specific elements of the project proposal 
  • comprehensive and sophisticated financial modeling of the investment project with sensitivity and scenario analysis
  • drawing up of information memorandum
  • transaction structuring which involves identifying the most appropriate project finance structure that maximises value for money
  • risk assessment and negotiation of the terms with the banks
  • ability to simulate the lender diligence reviews
  • ability to provide support for the specific bidding requirements as well as meeting the needs within the contract negotiating phase
  • recommendations regarding viability of the proposed projects for the lending institutions
  • contract negotiation support to the commercial and financial close. 
Under the project financing model, the project sponsor establishes a company in Russia for the project management and financing.  The company obtains a loan without recourse or with limited recourse from bank(s) by pledging assets/rights/interests in the project. It repays the loan using its cash flows and returns. 
If sponsor gets a loan directly from the bank, its ratio of liabilities and future financing cost will  increase. By contrast, if the sponsor establishes the project company with the legal personality – it takes charge of the project financing and construction costs. Additionally, on condition that share of the sponsor in the project company is no more than a certain percentage, the off balance sheet financing could be achieved. 
Advantages for this high-level liability structure of the project finance are tax deduction of the loan interest, the optimization of the capital structure and decrease of the capital cost of the company. Not to mentioned is the overall opportunity itself to arrange a capital intensive project financing in today challenging investment climate in Russia.


Project financing Russia