Annotation: The article considers an analytical review of the concepts " project finance” and “project lending” from the point of view of various authors, common features and features of project lending are identified, the authors give a definition of the concept of project lending.
Keywords: project lending, project financing, project company
Fayruzova Nailya Fayrusovna
1st year master student, Institute of Economics and Finance, K(P)FU Kazan, Russian Federation
Abstract: the article describes an analytical overview of the concepts of "project financing" and "project loan" from the point of view of various authors, identifies the similarities and peculiarities of project lending, the authors have given the definition of project lending.
Keywords: project lending, project financing, SPV
For a more complete disclosure of the essence of project lending, consider the definitions of project finance (PF) and project lending (PC).
An analysis of the economic literature has shown many opinions regarding the definitions of PF and PC.
Authors Katasonov V.Yu. and Morozov D.S. interpret project financing as “a way of mobilizing various sources of financing and the integrated use different methods funding specific investment projects and optimal distribution associated with the implementation of projects financial risks» .
This interpretation of the PF most accurately reflects the specifics of its implementation. However, this definition does not say anything about repaying the debt with the future income generated by the project and the absence of collateral.
From the point of view of Stepanova V.S., project financing — this is a system of interconnected participants, formed according to the principle of integration for the implementation of the project, in which the source of debt repayment and payment of income is the cash flows generated as a result of the implementation of the investment project itself, and the project assets are collateral for lending.
Stepanova V.S. in his scientific works, he discusses the difference between the concepts of “financing” and “crediting”: “There are many definitions of project financing, but they are all based on the concept of “long-term lending”. But, it is worth noting that a loan is a movement of loan capital. Banks accumulate free cash and transfer them on the basis of payment, urgency, repayment and security. Unlike financing, which expresses a unilateral and gratuitous movement of value, a loan must be returned to the lender within a specified period of time with the payment of predetermined interest on it.
According to Nikonova I.A., “the most important feature of project financing is that a special project company (SPV - special purpose vehicle, SPE - special purpose entity) is created for the implementation of a specific project, which attracts resources for the implementation of the project, implements the project and settles with the creditors and investors of the project from the funds (cash flow) generated by the project itself. This feature also applies to project lending. The second feature of project financing is the absence of collateral (collateral) at the initial stage of the project. The loan is secured by the cash flow generated by the project. This item is also included in the features of project lending. The third feature of project finance involves many participants and, as a result, the use of various financial instruments(equity, debt, derivatives) and various types of contracts. It should be noted that the PF is a synthetic operation that combines elements of lending and investment, and the PC is lending, mainly bank lending for investment loans, starting from the pre-investment phase of the project. The main way to finance a project with a PC is bank loans.
The authors Wu Shen-fa and Wei Xiao-ping (Chinese University) in their scientific works define the term "project finance" as "a new and important way of long-term financing of large and capital-intensive projects, the main advantage of which is the diversification of risks" .
Dirk Kaiser (Chinese Academy of Sciences) in his article "Recent research in project finance" highlights the features of project finance, such as: 1) Debt service is carried out through the cash flow generated by the project. 2) funds are provided to a specially created project (SPV), which reflects them separately on its balance sheet. 3) project financing includes investors and creditors. 4) project financing is associated with high level risk .
The term "project finance" is a translation of the foreign slogan "project finance". Moreover, in foreign literature there is no concept of "project lending", in various scientific works, the authors use the term "project financing". At the same time, banking and corporate models of project financing are distinguished, each of which has its own characteristics of functioning.
Thus, project lending can be viewed as a bank model of project finance, in accordance with which most of the project costs are covered by bank loans.
Project financing (for a bank), from the point of view of T. Belikov, is a form of financing an investment project in the form of providing a long-term loan to a specially created project company (SPV1), when the main source of repayment of the principal debt on the loan is the cash flows that will be generated, while, as a rule, the only collateral for a loan will be the property acquired (created) within the framework of this project.
As can be seen from the definition, the author allocates project financing specifically for the bank, that is, in fact, this definition characterizes the term "project lending". According to T. Belikov, the features of project lending are: the creation of a project company; repayment of debt on a loan with the help of future cash flows generated by the project; the property created within the framework of the project, which will be collateral, often does not cover the amount of debt on the loan.
Author Barinov A.E. explores the concept of "project lending". In his opinion, project lending is understood as a specific form of predominantly long-term bank lending, involving the additional use of various debt instruments .
Thus, summing up, we can draw the following conclusions. Some authors believe that the term "financing" is incorrect, since it implies gratuitous financing without lending principles (payment, urgency, repayment), and consider it necessary to use the term PC instead of the term PF. Other authors are of the opinion that the PC is a part of the PF, and the concept of the PF is much broader, since the PC is credit operation, and PF is a synthetic operation that combines elements of lending and investment. In our opinion, the definitions of "project finance" and "project lending" are inextricably linked with each other, since project lending is part of project finance, however, the term PF is much broader, the term PC refers more specifically to banks.
In our opinion, the main features of the PC are: long-term bank loans; pre-investment phase of the project; design company; debt service source – cash flow generated by the project; loan collateral - property acquired within the framework of the project; high-risk type of lending; many participants; risk sharing.
Thus, in our opinion, project lending is a long-term bank lending to a project company, starting from the pre-investment phase of the project, in which the main source of debt servicing is the cash flows generated by the project, collateral for the loan - property acquired as part of the project, characterized by increased risks and multiple participants in order to share risks.
Bibliography:
1. Barinov A.E. Project lending and prospects for its development in Russian Federation: Dis. cand. economy Sciences. Moscow, 2003 - 201 p.
2. Belikov T. Project Finance Minefields: A Survival Guide for Credit Officers and Investors: Proc. allowance. M. : Alpina Business Books, 2009. - 221 p.
3. Katasonov V.Yu., Morozov D.S. Project finance: organization, risk management, insurance. - M.: Ankil, 2000. - 270 p.
4. Nikonova I.A. Project analysis and project financing: a textbook. M.: Alpina Publisher, 2012. - 154 p.
5. Stepanova V.S. Formation of the project financing system commercial banks: Dis. cand. economy Sciences. Khabarovsk, 2004 - 199 p.
6. Dirk Kayser Recent Research in Project Finance // First International Conference on Information Technology and Quantitative Management. – 2013. – [ electronic resource] - Access mode. - URL: http://www.sciencedirect.com/science/article/pii/S1877050913002275 (Accessed 07/23/2015).
7. Wu Shen-fa, Wei Xiao-ping. The rule and method of risk allocation in project finance// Proceedings of the International Conference on Mining Science & Technology. - 2009. - [electronic resource] - Access mode. - URL: http://www.sciencedirect.com/science/article/pii/S1878522009002707 (Accessed 07/23/2015).
Investment lending is not identical to long-term, although it also involves more long term use of credit resources, in contrast to short-term loans to replenish working capital.
First of all, investment lending is characterized by the presence of a financed project, new or already existing, for the implementation or development of which the credit resources attracted by the borrowing enterprise are directed. At the same time, the investor bank actually assumes part of the risks associated with the implementation of the funded project. And the result of the decision made in favor of lending to the project, respectively, depends on the income planned from the implementation of the project. Thus, the current financial condition enterprises, the amount of profit, the dynamics of growth of indicators, stability, creditworthiness, solvency of the enterprise, but the investment project itself is also of no small importance. When lending an investment project, special attention is paid to the predicted result, to the planned "output" from the implementation of the project "into life".
At the same time, which is especially important for borrowers, the attraction of long-term resources does not reduce the limit of lending amounts for replenishment of working capital, that is, the borrowing enterprise has the opportunity to separately finance investment and current purposes.
Investment lending traditionally subdivided into investment lending, project financing and construction project financing. Each direction deserves separate consideration.
Investment lending involves the injection of long-term (long-term) money into an enterprise, which is closest to the concept of long-term lending. This direction is less risky, since the actual performance of the enterprise for the analyzed period is taken into account, forecast indicators are built, including without taking into account the implementation of the project, since if the enterprise would continue to engage in current activities under the same circumstances and at the same time would pay the costs of investment loan. As a rule, re-equipment, renewal of fixed assets, acquisition of additional equipment, expansion of the vehicle fleet or fleet of equipment, acquisition and launch of another similar line of equipment, purchase of another store, and similar expansion of current activities are suitable for this direction. That is, the enterprise continues to move in the usual direction, or, if it opens a new direction, then only if it is possible to cover all the risks with the profit received from current activities.
Project finance this is the area of lending where the creditor bank partially assumes the financing of the project, since it is supposed to finance a project that did not take place, and the calculation of the project's payback is based on the expected benefits from the project. Accordingly, the enterprise intends to settle with the creditor bank for the loan at the expense of the income received from the implementation of the project. Project financing includes new self-sustaining lines of business for an existing enterprise, or the creation of a new enterprise, a new production. The creditor bank can even become a direct investor of the enterprise, that is, invest directly in its authorized capital, if it expects to increase the company's cash flows in the future and, accordingly, receive a profit from its investments.
Financing construction projects represents the provision of loans for the construction of residential, commercial and industrial facilities. Typically, the bank finances construction project if there is a ready-made package of the necessary initial permits for construction and installation works, approved design and estimate documentation, registered land plot (the right of long-term lease or ownership). That is, bank financing is attracted at the investment stage of the project, when the preparatory stage of the project, design and other preparatory work, has already been carried out without the participation of the Bank. In this direction, the requirements for the share of investment by the borrowing enterprise in the implementation of the project of own funds are the highest. When considering a project, it is calculated economical effect on the intended use of the areas under construction, whether they will be leased or will be further implemented.
The main requirements for the bank to the borrower
Lending of investment projects requires a well-defined business plan, a feasibility study and, in fact, contracts (agreements, transactions) providing for the supply of purchased property, the implementation of the necessary work.
Certainly the borrower, either in individual cases the guarantor enterprise must have a stable financial position, be able to provide quality service and repay the loan in a timely manner.
The implementation, or rather the financing of the project, the bank does not undertake one hundred percent, it requires a mandatory share of the borrower's investment of its own funds, which ranges from twenty to fifty percent of total cost project. At the same time, it is possible to set off investments already made by the borrower at the project preparation stage, but the period for making such investments may be limited. For example, only funds spent by the enterprise on the implementation of the project no earlier than in the last six months will be accepted for accounting as own investments.
Investment lending, as well as other types of bank lending, assumes the presence of collateral, that is, loans are provided against liquid collateral.
When considering a project, the experience of the project initiator in the implementation of similar projects is taken into account. This factor is not decisive, but increases the likelihood of a positive decision of the bank to grant a loan.
AT without fail enterprises affiliated (interrelated) with the borrower are analyzed.
Basic conditions for investment lending slightly different from short-term loans:
- willingness to invest own funds in the project or to document the investments made;
- monthly repayment percent (less often quarterly), but a slight delay in payments is also possible;
- loan term up to seven, in some cases up to ten years, especially if the borrower implements the project with state support. The payback period of investments should not exceed the loan period;
- the debt repayment schedule is agreed with the borrower and directly depends on the parameters of the financed project;
- collateral is required;
- credit is provided both in rubles and in foreign currency(if, for example, imported equipment is purchased abroad);
- different modes of lending are acceptable depending on the specifics of the project;
- a loan can be provided to finance previously incurred costs or refinance existing debt to other credit institutions attracted to finance investment costs.
Risks of hidden lending for investment projects from short-term sources
In the case of attracting short-term loans with the expectation of a subsequent prolongation or “re-lending” (since “short” loans are easier to obtain, fewer documents, and so on) to finance long-term goals, the borrower runs the risk in the future or not receive a loan on the same conditions, or, even more dangerous, to be denied the next loan.
In the event that the goals of the enterprise correspond to the attracted investments, both in terms of quality and timing, the borrower receives a guaranteed invariability of lending conditions for the period of the project (provided that there are no force majeure circumstances). Also, the benefit for the borrower is to reduce the cost of collateral (especially requiring registration) for long-term loans. loan agreements compared to short-term ones, in which payment for registration of each encumbrance is required. In addition, with long-term investment lending, organizational costs, labor and time costs for collecting documents for processing and prolonging short-term loans are reduced.
Recently, more and more banks are turning their eyes towards developing business projects, while the latter, in turn, are also interested in raising funds. There are those who want to give money, there are those who want to take it: how to bring both to a common denominator?
First, a little theory that will help the parties understand each other's needs.
Investment project lending is a special type of banking investments, which can be used both by an already existing and stably operating enterprise, and new company. The features also include the attraction of long-term resources, that is, the borrower, as necessary, can finance current goals separately.
When lending to investment projects, bankers try to protect themselves from high risks as much as possible, so loans are taxed quite high interest and are accompanied by a thorough analysis of the enterprise or company for the feasibility of providing financial resources and income prospects.
The time during which the issue of project financing is resolved is individual for each credit institution. Depending on the characteristics of the company being lent, the analysis of its activities may take several weeks or several months. The need to raise funds is most often associated with the introduction of their own innovative projects that require additional capital.
You can get approval from the bank for financing only by providing a detailed and Full description project, which includes a business plan detailing the prospects for the development and implementation of the project, as well as the expected timing of profit. In other words, you need a clear and understandable investment proposal that will be attractive to the lender.
The most common forms of investment projects are project finance, raising capital to finance construction and providing purely investment loans.
Project finance characterized by the fact that the bank-investor partially assumes the risks. For the most part, this applies to new projects in which the expected payback is calculated taking into account borrowed money. The company will pay the creditor for debt and interest obligations solely from the funds received as a result of the successful implementation of the project. This means that the main collateral for the capital provided by the bank is the investment project itself.
When the borrower intends to receive funds for construction of a residential, industrial or commercial facility, then, first of all, the bank will require to provide already agreed permits, a project and an estimate of the upcoming work, as well as title papers indicating a long-term lease of a land plot or ownership of it.
In these projects, bankers are especially demanding on equity participation borrower in own project. Considering the application, bank specialists scrupulously calculate the profit of the areas built in the future, while taking into account their purpose - rent or sale.
Net investment lending is considered the safest, since long-term borrowed money is invested in the enterprise. The facts and results of the activity of a certain company for a specific period of time are taken into account. The method of making a forecast for the development of an enterprise without investment is also practiced in order to understand what are the possibilities for using exclusively own funds.
This type of investment is good for renewing funds, purchasing new technological lines, retooling production, or for other types of expansion of activities. In other words, the company works in its own direction, but has the opportunity to develop through bank investment.
Engaged in lending investment projects for more than 10 years, being the leader in this industry. The Bank provides both medium-term loans (from one to 3 years) and long-term loans (up to 7 years), in foreign currency and in rubles. The loan can be secured by equipment, real estate and other assets sufficient to repay the full amount of the debt and pay interest for 3 months. Deferrals on the main payments for the investment period of the project development are possible.
Bank Russian Credit offers financing of commercial projects for modernization, reconstruction, expansion of production, creation of new capacities. Minimum amount investment loan is 1,000,000 rubles. The loan is granted for a period of up to 5 years. The right to own a land plot, a real estate object, shares or assets not related to the invested project, a guarantee from a bank or solvent companies can act as security.
When lending to individuals, a procedure for assessing their creditworthiness is also carried out, which can be carried out on the basis of the borrower's income level, a study of his credit history, as well as a standardized scoring. The borrower's creditworthiness is assessed by income level based on income data individual and the risk of losing that income. Income is determined on the basis of salary certificates or a tax return, after which it is adjusted to take into account mandatory payments and bank risk ratios. Credit history is information about the receipt and repayment of loans by a potential borrower in the past. In order to form credit histories, credit bureaus are created and operate in countries. Scoring is a mathematical or statistical model by which, based on the credit histories of other customers, the bank tries to determine how likely it is that a particular potential borrower will repay the loan on time. In its most simplified form, the scoring model is a weighted sum of certain characteristics, as a result of which an integral indicator is formed. This indicator is compared with a certain numerical threshold, which, in essence, is a break-even line and is calculated from the ratio of how many clients, on average, who pay on time, are needed in order to compensate for losses from one debtor. A loan is issued to those clients whose integral indicator is above this line. Thus, scoring does not answer the question why the borrower does not pay. He highlights those characteristics that are most closely related to the unreliability or, conversely, the reliability of clients of a certain age, a certain profession, education, the same number of dependents, etc. This is the discriminatory nature of scoring: a person who is formally close to a group with a bad credit history will most likely not be able to get a loan.
Project finance- this is the financing of investment projects, in which the source of servicing debt obligations is the cash flows generated by the project. The specificity of this type of investment lies in the fact that the assessment of costs and income is carried out taking into account the distribution of risk between project participants.
Project financing is a method of attracting long-term debt financing for large projects through "Financial Engineering", based on a loan against cash flows generated only by the project itself, and is a complex organizational and financial event for financing and monitoring the implementation of the project by its participants.
Project finance is a relatively new financial discipline that has become widespread in the developed countries of the world over the past 20 years and has been actively used in Russia over the past 10 years. Project finance has its own specific advantages, which makes it different from other forms of finance. It differs from syndicated lending in that it is not impersonal, but targeted. From venture financing - that is not accompanied by high risks that always accompany the development and implementation of new technologies and new products. Project finance deals with more or less known technologies. The implementation of such projects is more predictable than the implementation of innovative ones. But here, too, there are risks that are of a specific nature, due to the tasks of project implementation (delay in putting an object into operation, an increase in prices for raw materials and materials, exceeding the construction budget, etc.). The main advantage of project financing is that it allows you to concentrate significant financial resources on solving a specific business problem, significantly reducing the risk due to the significant number of participants in the agreement.
The structures of project financing may differ depending on the specifics of project financing, the specifics of the purpose of the project, as well as on the type of agreement (contract) that is the basis for financing. But there are general principles underlying the project finance method: Project finance is used to finance a relatively “separate” project (from a legal and economic point of view) through a legal entity specializing in the implementation of this project (often a separate entity is created to receive and use project finance, so called the design company); As a rule, more often, project financing is used for a new project than for an already established business (usually used in debt restructuring); The source of return on invested funds is profit from the implementation of the investment project (separated from the financial performance of the project initiators). The share of attracted capital in the total amount of project financing is 70-80% (large "financial leverage"); For loan capital of project financing, investors do not provide collateral or guarantees, or the collateral or guarantees do not fully cover the financial risks of the project; Lenders, when paying interest and debts, rely mainly on the receipt of funds from the project (future profit), and not on the value of assets and financial performance of the company. The main guarantees for lenders are company contracts, licenses and exclusive rights to use and develop valuable assets, or technologies and production of competitive products. The project has a limited life span - the duration of the contract or license for the types of work or the development of assets, the period of commissioning of facilities or structures, the start of serial production.
Financing with full recourse to the borrower:
It is used, as a rule, when financing medium-sized, unprofitable projects. In this case, the borrower assumes all the risks associated with the implementation of the project;
financing without recourse to the borrower:
provides that all risks associated with the project are assumed by the lender. These projects are the most profitable and attractive for investments, giving competitive products as a result of the project;
financing with limited recourse to the borrower.
the most common form of funding. All participants distribute the risks generated by the project, therefore, everyone is interested in the positive results of the project at all stages of its implementation.
1) design company. It is created specifically for the project, is responsible for its implementation and usually does not have any financial history, no property for collateral. It is the use of a project company that is the main distinguishing feature of this type of project. Responsibility and risks for invested capital are not assigned to a proven and reputable enterprise, but, like financing, are distributed in a complex way among the participants in the process and are regulated by a set of contracts and agreements.
2) an investor who invests in the equity capital of the project company. The investor, on the one hand, is rarely limited to cash deposits and making a profit, and on the other hand, especially when there are several investors, their investments in general may not consist in financial injections. Such investors initiate a project, create a project company and in one form or another expect to benefit from its successful activities.
3) creditor. In addition to the fact that the project company receiving the loan has neither collateral nor guarantors in the traditional sense of these terms, the share of debt capital in project financing is much higher than in conventional corporate loans and the average amount provided by the lender is 70-80% of all capital costs of the project. It is clear that this puts the lender in difficult conditions and requires him not only to search for alternative ways to protect his capital, but also to carefully analyze all the details of the funded event.
Project finance - still quite rare banking service. Few Russian banks they declare it as a separate type of lending, and even they are in no hurry to invest in startups. However, if this is an interesting and profitable project, implemented by a team of professionals who also have experience in creating a successful business from scratch, bankers can make an exception.
Generally speaking, project financing is one of the types of targeted investment loans taken for a specific project, for example, for the creation of enterprises, the modernization or re-profiling of existing industries, the construction of industrial, commercial or residential facilities, etc. In practice, according to according to bankers interviewed by Co. the largest number applications for project financing comes just from the construction industry, as well as from the fuel and energy sector and the telecommunications business.
No extra obligations
One of the distinguishing features of project finance is the way the loan is repaid. As Bulat Davletshin, Deputy Chairman of the Board of Ak Bars Bank, explains, the only source of repayment of long-term obligations is the cash flows generated by the project itself, and the assets formed during its implementation act as collateral for credit obligations. At the same time, according to the managing director of Moskommertsbank Natalya Gryaznova, the borrower is interested in project financing precisely due to this feature, since he does not burden his own balance sheet with unnecessary obligations.
“In most cases, a project company is specially created for the implementation of an investment project, which usually acts as a borrower and operator of the project,” says the head of the service and financing directorate corporate clients Oksana Panchenko, Member of the Management Board of Raiffeisenbank. “This allows us to avoid the impact on the project of circumstances related to the past of the company, to make it more transparent in determining cash flows, to protect it from the influence of operations not related to it, to optimize the distribution of risks accompanying the project among its participants.” According to the expert, the operating activities of the project company should be completely independent of the operating activities of the initiators (sponsors) of the project.
The project matters
In order to make a decision on participation in the financing of a particular project, banks first of all evaluate not the current financial activities potential borrower, but the investment project itself. According to Aleksey Titov, senior vice-president of Globex Bank, the main focus is on the analysis of the effectiveness of the funded project, its relevance to the market, and control over the progress of implementation.
Naturally, the bank also conducts an analysis of the risks associated with the implementation of the project, both at its investment stage and during operation. The latter, as Oksana Panchenko says, includes an assessment of the sensitivity of the investment project to deviations from its forecast data (for example, assessing the risks of delaying the project’s entry into the operational stage, exceeding estimated cost construction, a decrease in the revenue side or an increase in the expenditure side of the project at the operational stage, etc.).
In addition, the project is undergoing legal analysis, technical and technological expertise. When evaluating projects, apply and international standards. Thus, the Nordea banking group has been using the so-called Equator Principles approved by the World Bank and IFC since 2007, namely a set of criteria for identifying and managing social and environmental risks in project financing.
Bulat Davletshin, in turn, is sure that the provision of project financing services also depends on the risks of income and their distribution among investors, lenders and other participants on the basis of contracts and other contractual agreements. " Commercial Bank- the largest lender, and in order for the company to receive a loan for project financing, investors must offer priority payment terms to the bank and, therefore, agree that they themselves will receive a refund only after all debts due to the bank have been paid, - the expert explains.
When banks give the go-ahead
As a rule, the terms for considering an application for project financing are much longer than when obtaining a conventional loan, on average - from a couple of months to a year and a half. This is understandable, because it is a priori more difficult and longer to structure and analyze such a transaction than in the case, say, when a standard loan is issued to replenish working capital. According to Alexey Titov, complex schemes for organizing transactions are used in project financing, structured taking into account the specifics of the project (conditions related to the supply of imported equipment, issuance of initial permits for construction, etc.), a variety of tools (loans, participation in capital , related funding). The conditions for servicing the provided financing are determined by the payback period of the project.
The process of the bank's work in the framework of project financing has much in common with the work of investors who enter the capital of the enterprise, or direct investment funds. So, in particular, when implementing large projects, the bank seeks to get its share of shares, and not just waiting for the return of capital.
“This is due to the desire of financiers to get the opportunity to control the project to a greater extent and directly participate in management as a shareholder,” explains Natalya Gryaznova. “At the same time, the bank can increase revenues without overloading the project with interest payments.” Average income on shares exceeds the income of the bank. By participating in the project, the bank redistributes its investments between two shares: a share with a lower but guaranteed return and a share with a higher expected but non-guaranteed return.
Often the share of bank investments in the project varies from 30 to 80%. The most common situation is when the "deposit" of the bank is limited to 70%, while the remaining 30% the credit institution expects to receive from the project initiator. Most often, we are talking about the fact that these 30% should be spent at the initial stage of the project, that is, for design, preliminary preparation, obtaining permits, etc.
Bulat Davletshin gives his own example: “According to our conditions, the cost of the project should be from 300 million rubles, and it is mandatory to use at least 30% of the client’s own funds and / or other investors, and also, depending on the project’s belonging to a particular industry, the presence the project initiator has the rights to land plot or a production site with the necessary engineering networks.
Loan rates and schedules for its receipt and repayment are set individually and may change at different stages of the project, depending on the progress of implementation and taking into account the projected cash flows of the borrower.
In most cases, banks set a condition to maintain a certain minimum level debt coverage ratio, typically in the range of 1.2 to 1.5, depending on the stability of project revenues and credit policy jar. Oksana Panchenko says: “This ratio is calculated as the ratio of net income of each period of the project to the amount of interest and principal payments planned for this period.” Thus, the net income of the project exceeds the amount of necessary payments due to the bank, which guarantees the stability of payments to the lender in case of possible deviations from the baseline forecast.
In general, according to Natalia Gryaznova, project financing is more expensive for a borrower than conventional lending, since the risks of a bank participating in a project scheme are much higher (due to the lack of collateral for the entire cost of the loan). On the other hand, with project financing, companies can always refinance the loan after the start of the enterprise.
There are projects ... but will there be funding?
And are there many banks in Russia today operating in the project financing market? According to Natalia Gryaznova, such a product in its classical form in our country was not and is not. “Individual transactions are not an indicator of the availability of project financing services in the line of this or that bank,” the expert says. The product currently being offered by banks still to a certain extent implies a certain regression on the client and his existing business. However, many banks have project finance departments in their organizational structure.
Relatively active credit organizations participate in the financing of investment projects within the framework of financial and industrial groups, when an enterprise, part of which belongs to the bank, is financed, or the bank services the company's accounts. In this case, control over the implementation of the project and repayment of the loan is greatly simplified.
“Obviously, a bank claiming to provide such a service must have two things: long-term liabilities, firstly, and a professional team, secondly,” Mikhail Polyakov, deputy chairman of the board of Nordea Bank, continues the topic. He is sure that today the combination of these factors can be observed only in the largest state-owned banks and subsidiaries of foreign financial institutions. There are also international financial institutions, in particular the EBRD and IFC, which independently or through the organization of syndications finance various projects in Russia in accordance with their policies.
"For use foreign experience in Russian realities in Moscow, with the assistance of the Central Bank of the Russian Federation and the EBRD, a Russian bank project financing, - adds Natalya Gryaznova, - and under the Ministry of Economy of the Russian Federation, Russian center project finance, later transformed into the Federal Center for Project Finance, and the Russian Center for Assistance foreign investment, which also by design were supposed to contribute to the process of financing new projects.
According to Alexei Titov, the insufficient development of project financing in our country is associated with high risks and the lack of an effective system of their insurance, insufficient capitalization of banks, and a shortage of long-term liabilities. In addition, there are no working levers of influence on the initiators of the project due to the imperfection of domestic legislation in this area.
Andrey MOSKALENKO
