Annotation: The article considers an analytical review of the concepts of "project financing" and "project lending" from the point of view of various authors, identifies common features and features of project lending, the authors give a definition of the concept of project lending.

Keywords: project lending, project financing, project company

The concept of project lending

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 for the implementation of a specific project, a special project company (SPV - special purpose vehicle, SPE - special purpose entity) is created, 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. Bank loans are the main way to finance a project with a PC.

Authors Wu Shen-fa and Wei Xiao-ping (Chinese University) in their scientific papers 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 at the expense of 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 a high level of 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 banking model of project finance, in accordance with which most of the project costs are covered by bank loans.

Project finance(for a bank), from the point of view of Belikov T. - a form of financing an investment project in the form of 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 the 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 part of the PF, and the concept of the PF is much broader, since the PC is a credit operation, and the 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 system of project financing by 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).

The Russian economic literature considers two independent forms banking investments: investment lending and project financing.

Investment lending- this is the process of providing a long-term loan by a bank for the implementation of a specific investment project against certain security in the form of property, valuables, guarantees, guarantees.

Sources of repayment of obligations under long-term investment loans for legal entities are their income and profit generated as a result of their financial and economic activities, including income generated by the project. Sources of repayment investment investments for individuals, their income will be in the form wages and other legal income.

Investment lending has a number of distinguishing features from conventional loans.

First of all, and it has already been pointed out, the term of the loan. With investment lending, it cannot be short-term, as a rule, long-term or medium-term.

While carrying out investment lending, highly qualified specialists of the bank conduct a more detailed analysis of the company's activities both in the current period and in the future period. This analysis includes a description of the demand for these products, the state of the sales market for the forecast period from taking into account the expected dynamics of market prices, exchange rate, interest rates.

Bank specialists find out not only the creditworthiness of the borrower at the date of the loan, but also its investment creditworthiness for the period of investment lending.

To clarify the comprehensive aspects of the enterprise, a wider range of documents is involved. As a rule, this is not only the balance for 2-3 years and the current financial statements, but also a feasibility study for an investment loan, a project business plan, an investment project form, an estimate construction project and the rationale for its effectiveness, various tolerances and permits, etc.

The assessment of investment risk is also considered quite complicated, taking into account many market and non-market factors that can reduce the effectiveness of an investment project.

In the most general view under project finance is understood as lending, in which the repayment of the debt obligations of the borrower is carried out with cash receipts from its sale.

Project financing implies a closer participation of a commercial bank in an investment project in the form of an investment loan, bank guarantees, project financing at its earliest stage. Very often, the bank claims to share in project. Taking into account all the assumed risks, the bank, therefore, will receive not only a percentage of the loan, but also a part of the profits of the enterprise. Return of invested funds is possible at the stage of operation of the project, mainly from the income received after the project materializes. This is possible only if the manufactured products are competitive and find their buyers.

Experts note certain differences between investment lending and project financing. Comparative characteristics of investment lending and project financing are given in Table. 8.1.

Table 8.1

Comparative characteristics of investment lending and project financing

When assessing the possibility of providing an investment loan or project financing, the influence of the so-called stop factors, which increase risks and hinder these investments, is taken into account. For example, project being created located in a region of high political or economic instability; during the construction of the facility there is no transport and communication infrastructure; there is a shortage of personnel; project efficiency is problematic, etc.

All investment projects differ in the degree of risk: the least risky are projects carried out under the state order. Corporate community projects have a significantly higher degree of risk. But in practice, mixed forms of financing, the so-called public-private partnership, can also be used.

The sources of corporate project financing are the own funds of a commercial company, depreciation, retained earnings. If bank loans become the predominant source of financing, then such a project is financed under the terms of bank project financing.

In market conditions, joint project financing is used to create and build very large facilities. This means that the funds are allocated by several credit institutions. Joint project financing can be carried out in three forms: independent parallel financing, co-financing, mixed project financing.

With independent parallel financing, the lending institution enters into a separate loan agreement with the borrower and provides financing for a certain part of the project.

Co-financing means the association of lenders into a single pool in the form of a consortium or syndicate that enters into a single loan agreement with the borrower.

Mixed project financing combines several types of financing: borrower's funds, bank loans, commodity loans, leasing, borrowings in the loan capital market, etc.

Financing investment projects, as already mentioned, is always associated with certain risks, due to various external and internal factors. Therefore, the key issues are the distribution of risks between project participants.

The distribution of risks is carried out on the basis of the degree of regression.

Non-recourse lending on the borrower's corporation assumes that the creditor bank assumes all the risk associated with the implementation of the project without any guarantees from the borrower. If successful, the creditor bank receives increased compensation in the form of high interest payments and part of the profits of the established enterprise.

Lending with limited (partial) recourse means that each participant assumes a certain part of the risk. The parties interested in the implementation of the project assume specific commercial obligations. Typically, these obligations are distributed according to the stages of creating a project and an object.

The essence of project financing with full recourse to the borrower is that the borrower assumes all possible risks that may occur when creating a project. In this case, the risks for the bank are significantly reduced, especially when it comes to government orders, but do not disappear at all.

Project financing has its own organizational forms, which differ depending on the types of project financing, sources of financing, subjects of credit relations, forms of protecting the interests of all parties involved. Organizational forms of project financing are reflected in Table. 8.2.

Table 8.2

Organizational forms of project financing

An analysis of the organizational forms of project financing used reveals their advantages, which are that they allow attracting significant resources for a potential project, provide good credit terms, receive guaranteed funds within the framework of joint activities, distribute project risks among the participants.

A feature of project financing is that an independent entity- design company. The founders of this company are not responsible for the repayment of the loan, their task is to gradually create an investment project. For this purpose, the project company has its own bank account, which receives the necessary funds from the founders.

For rate economic efficiency investment project, many indicators are used. For example, to reduce risks and determine future profitability, you should calculate the financial safety margin of the project. The latter is determined based on the calculation of the debt coverage ratio, which is calculated as the ratio of the expected net proceeds from the project to the planned payments on credit debt. This coefficient should not be lower than 1. In world banking practice, the minimum value of the coefficient is 1.3. Sberbank of Russia provides project financing and investment lending if this ratio is at least 1.5.

In addition to this indicator, the following are calculated: net present value, internal rate of return of the project, index of return on investment, payback period of investments. Currently, in order to simplify the system for calculating data and other indicators, programmers have developed many programs that the bank can choose at its discretion. It is also important to pay attention to the sensitivity of the project to external changes. This analysis allows you to determine the degree of influence of individual volatile market factors on the payback period of the project.

As already mentioned, investment lending and project financing are the most risky types of long-term lending. In this case, we are talking about specific credit risk.

In turn, the likelihood of such a risk depends on a number of external and internal factors.

To external factors include causes of a macroeconomic nature, the occurrence of which is especially difficult to foresee. For example, global financial crises, the dynamics of world prices for projected products and raw materials, inflationary processes within the country that increase the cost of the project, tax and tariff changes, possible changes in the country's legislation, natural disasters, man-made disasters, etc.

Internal factors investment risks depend on the project participants themselves. This may be the risk of non-compliance by participants 146

the project of its obligations to finance the project, the risk of default by suppliers and contractors of their obligations, the risk of delaying the construction of facilities, as well as the delivery of equipment. There are great risks associated with errors in the project, with defects in the construction and installation works, the risk of illiterate management in making organizational and managerial decisions.

In addition, with investment projects, the purpose of which is the production of new products, there may be a marketing risk, the essence of which is in an incorrectly chosen marketing strategy. The marketing strategy concerns, first of all, pricing policy, sales markets, evaluation of the infrastructure component of the project, etc.

For long term and large-scale projects frequent administrative risks. The fact is that such projects are always accompanied by obtaining various permits and licenses from the supervisory authorities. Lack of certain permits and licenses may violate the terms of construction of the facility.

Investment lending and project financing, as we have already seen, have their advantages and disadvantages for both borrowers and banks. High risks are associated for borrowers with the loss of part of their income and puts them under the control of the bank. But it is quite possible that without the participation of the bank, the investment project would not have been implemented.

Important in the development of lending is the widespread introduction of project financing into Russian practice. It is the attraction of long-term investment resources for large projects using financial engineering technology. The peculiarities of this method are that it is based on a loan against cash flow generated only by a specific project, depends on a detailed assessment of the project, operational risks, income risks, their distribution among investors, lenders and other participants based on contractual agreements 1 , and financial support investment process is targeted and long-term.

In the economic literature, there are several points of view and approaches to assessing the economic content and functions of project finance, the definition of the concept itself, often identified with project lending, venture financing, investment lending or investment project financing. In fact, project financing differs significantly from traditional methods of financing investment projects and has its own specifics.

P. Nevitt in his work “Project financing” considers it as “financing of a separate economic unit, in which the lender is ready at the initial stage to consider financial flows and the income of this economic unit as a source of formation of funds from which the loan will be repaid, and the assets of this economic unit as additional collateral for the loan. The emphasis in this definition is on economic isolation and a new cash flow pattern that distinguishes project finance from other mechanisms for accumulating investment resources.

Generalization of experience foreign countries indicates that project financing is interpreted in two ways. On the one hand, it is considered as targeted lending to the borrower for the implementation of an investment project without recourse (turnover) or with a limited loan recourse to the borrower. The borrower's payment obligations are secured by cash income generated by the object of investment activity (as well as assets related to the investment project). On the other hand, project financing is considered as a way to mobilize different sources and use different methods of financing in an integrated way, as well as the optimal distribution of financial risks. In a certain sense, project financing is one of the types of structural financing and reflects an organizational and technological approach that differs significantly from the product approach, where project financing is viewed as an integrated banking service.

Implementing this approach, I.I. Popkov defines project financing as a complex banking product provided for the implementation of a separate investment project and based on a combination of lending and equity financing services.

Project finance has a distinctive feature. Traditional financing mechanisms, as you know, assume that if a company attracts financing for a specific project, then the party providing such financing (including in the form of a loan) finances not the project, but the company implementing this project. In this case, all the assets of this company act as collateral for financing. The mechanism of project financing involves the financing of a separate investment project, and the free cash flow generated by the project becomes the source of funds for the return of received investment resources. Thus, an important (but not the only) difference between project financing and project lending, investment financing and project financing is that only assets acquired for the implementation of a new investment project (IP) act as collateral. In conventional lending, the funds are received by the project organizer, who simultaneously acts as a borrower and implements the project. Project financing involves the creation of a specialized company for the implementation of the project, which is the borrower and organizer of the project.

The organizational approach to project financing involves consideration of not only objects, but also subjects, which include project participants who perform certain functions and take on a certain share of risk, as well as the structure (scheme) of project financing, the system of agreements (contracts), management models and control. The subjects of the project implementation are the initiator or sponsor of the project. Typically, these roles are:

• enterprises interested in attracting additional investments for the development of their own assets;
• companies interested in project implementation;
• an engineering and construction firm engaged for design and construction;
• supplier of equipment;
• the operating organization - to manage the project after its completion;
• internal suppliers;
• external buyers;
• an independent engineer (engaged to present a conclusion with an assessment of technical readiness for the start of the project, the reality of the timing and cost of construction, the possibility and conditions of the project operation);
• insurance consultant;
• legal adviser;
• marketing consultant (may be involved to assess the reliability of project indicators, especially if there are no firm contracts for the sale of products produced as a result of the project);
• financial adviser (provides the most favorable financial, credit and design conditions);
• creditors, etc.

As part of investors, it is necessary to single out strategic ones, focused on project management and long-term business growth, and portfolio investors, aimed at diversifying their investments and selling their own share at a certain stage. As a rule, portfolio investors are investment funds and banks.

Depending on the nature of the investment project, the proportions between equity capital and borrowed funds, which are considered as off-balance sheet liabilities of the project initiators, may vary. If shareholders are interested in reducing the share of their capital, which has a higher minimum rate of return on invested capital compared to borrowed funds, then creditors are interested in having this share be larger. The project company receives the funds missing for the implementation of the investment project in commercial banks or other financial institutions. At the same time, tools to attract the missing financial resources may perform:

• bank loans, which for a long time were the main source of borrowed capital;
• bonds, the role of which has increased in connection with the implementation of infrastructure projects.

Currently in economic developed countries many instruments are used, among which, along with bank lending and the placement of bonds, the issue of shares, the issuance of bills of exchange and other instruments, as well as their combinations, are used. Participation of international financial institutions or government structures allows minimizing country and political risks. The mechanism of project financing involves taking into account the interests of all parties involved, and the expected profit should compensate for the costs and risks of the project participants.

Overcoming the consequences of the global financial crisis involves diversification Russian economy, modernization of its infrastructure, technological renewal of the production apparatus, introduction of innovations, which is impossible without large-scale attraction of investments from various sources on the principles of project financing. Active implementation of effective investment projects in the Concept of long-term social economic development The Russian Federation until 2020 is classified as one of the main priorities. In line with targets long term development our country, a fourfold increase in investment (compared to the level achieved in 2007) should provide a general GDP growth 2.3 times, and real income population - 2.6 times. Until 2020, the contribution of the banking sector to investment financing should increase by 2.6 times and amount to 25% of GDP against 9.4% in 2007.

The potential that Russian banks have today, unfortunately, does not meet such ambitious tasks. Suffice it to say that, in accordance with the general scheme for locating electric power facilities of the Russian Federation, the need for investments in this industry alone by the end of 2020 is estimated by the Government of the Russian Federation at 20.7 trillion rubles, which is comparable to the amount of resources that all Russian commercial banks at the end of 2008 (28.0 trillion rubles).

Even more modest opportunities in comparison with the general need of economic entities for investment are available to each individual bank. Thus, the largest operator in the investment lending market, Vnesheconombank, which manages the flow of investments on the basis of public-private partnership, plans by 2012 to make direct investments (in the form of long-term loans to enterprises) in the amount of 850 billion rubles, in the form of investments in the authorized capital of enterprises implementing investment projects - 120 billion rubles, in the form of guarantees - 100 billion rubles.

The development of bank project financing in our country has a fairly high potential in the post-crisis period, since there is currently a pent-up demand for investments in various sectors of the economy, including the implementation of large infrastructure projects.

AT last years there was a trend of growth in the use of project financing in the world. In the period 1987-2001. volumes of the international project financing market grew from 10 billion dollars. per year up to 220 billion dollars. In 2008, this figure reached 250.63 billion dollars. Dynamics of the project financing market in the period 2004-2008 characterized by the following indicators:

• a total of 2,828 loans issued under project financing;
• the total volume of project finance loans amounted to $908,272.3 million;
• the average annual growth rate of funding amounted to 121.2%.

Despite the steady growth in the volume of project financing in the world in recent years, the global financial crisis of 2008-2009. made his own adjustments. In 2009, there was a significant decline in project finance lending. Compared to the previous year, volumes decreased by more than 60% (Fig. 6.1).

Rice. 6.1.

The volume of transactions in 2009 amounted to 79.3 billion dollars. (while in 2008 - 203.3 billion dollars). The largest drop of about 70.1% occurred in the project finance markets of North, Central and South America.

The most active player in the Asian market was India, which showed an increase in project financing by 56.6% compared to previous year. According to the results of 2009, the total volume of transactions in India reached 22 billion dollars.

In the Russian Federation, project financing volumes have always been significantly lower than in many other countries, as evidenced by international ratings. Thus, in the regular rating of banks participating in project financing, which is published by the magazine Project Finance Magazine, there are no Russian banks at all. Our country appears in a number of country ratings, as a rule, in connection with the implementation of large single projects with foreign participation. Nord Stream, Sakhalin-2, South Stream, Gazprom-Yuzhno-Russkoe, where the Russian Federation was the initiator, are a classic example of the application of the project financing mechanism.

Thus, in 2009 the Russian Gazprom-Yuzhno-Russkoye project entered the top ten largest project financing transactions in the world and became the fourth largest in the region EMEA(Europe, Middle East, Africa). Obviously, resource-oriented industries are the most promising for expanding the use of the project financing mechanism in our country.

Currently, project financing is carried out mainly by large Russian banks. However, the question of the availability of participation in project financing not only for large and largest, but also for medium and small banks, remains open.

Given the many forms of bank participation in project financing, it is necessary to introduce new approaches into Russian practice. banking products, which accumulate the necessary resources. We are talking about such methods of raising funds widely used abroad, such as targeted and brokerage deposits, conditional investment loans, social and insurance savings, general banking management funds, etc. The use of such mechanisms will allow the bank to increase the share of long-term resources with a minimum risk of withdrawal and increase interest private investors in keeping funds, since a potential investor, investing in a bank, knows in advance where they will be placed. The Bank actually creates collective management funds and, on its own behalf, places funds in those projects that are seen as promising by the direct principals. The needs of the bank's savers who are inclined to individual investment of funds can be satisfied with the help of index deposits, the profitability of which is linked to the income from the project.

Pyubalny economic crisis 2008-2009 began precisely in the area of ​​interbank lending and seriously undermined the possibility of concerted action by groups of banks. Eventually banking system faced objective restrictions on investment lending, which are associated with a shortage of long-term liquidity, the need for a significant increase in reserves for risky loans, the problem of "bad debts" and the growth of overdue debts. The problem of the lack of long-term investment resources, which are necessary for the implementation of large projects within the framework of project financing, has become aggravated. In addition to traditional project financing instruments, such as project finance, major international banks are actively using other financing mechanisms. For example, syndicated lending, equity financing and the placement of project bonds. At the same time, methods of both direct and indirect participation in the financing of large projects are used.

Thus, the problem of lack of long-term investment resources necessary for the implementation of large projects within the framework of project financing has become much more acute. Methods of not direct, but indirect participation in the financing of large projects are beginning to come to the fore both in the Russian Federation and abroad.

These include methods that involve the participation of banks in the placement of project bonds. A feature of this scheme is that within its framework, the bank participates in the financing of the investment project not directly, but through a specially established project company, which is usually called a special purpose company abroad - special purpose vehicle (SPV).

One of the sources of raising funds for the project company is the issue of project bonds. As with bank loans, the principal and interest on project bonds are paid only from the cash flows of the project. From the point of view of a special project company, the procedure for issuing bonds is very similar to obtaining a loan from a bank. Essentially, the borrower receives resources in the form of a long-term loan. The main difference between a project loan and a project bond is that the issue of bonds is aimed at a wider range of potential investors interested in financing the transaction (the so-called bond holders). Not only banks can act as investors, but also institutional investors, such as pension funds, Insurance companies, mutual funds specializing in infrastructure investments.

Similarities Between Project Bonds and project loans are as follows. First, quite often the bonds of a special project company are purchased by a bank pool (the so-called sold transaction). Secondly, bonds, like any other securities, can be traded on financial markets between an investor and another buyer, although in reality project bonds may be less liquid than regular corporate bonds. They are usually sold to a group of institutional investors through a private placement and remain in the portfolio until maturity.

The international market for project bonds is much smaller than the market for project loans. However, the market for project bonds has grown significantly in recent years. It should be noted that the market is concentrated in regions such as the United States, Western Europe and Asia.

There are several reasons for the growth of the project bond market:

• the growth in demand for the development and improvement of infrastructure requires significant investment, while governments, especially in the context of the global crisis, are not able to provide the necessary investments;
• expertise and interest on the part of institutional investors is increasing in favor of alternative medium-term or long-term investments with a certain risk-reward ratio;
• international rating agencies are increasingly involved in the evaluation of project financing transactions, which helps to reduce costs and increase the availability of information for investors.

Project bonds as a source of financing are most actively used in the oil and gas sector. It should also be noted the growth in bond issuance in the sector private finance initiative (PFf) for the last few year s.

When should project bonds be used? When financing a special project company, issuing bonds is an alternative to syndicated lending, a more common form of raising funds in project financing. However, this alternative has a number of limitations and is applicable only in certain circumstances. While syndicated loans are contracts that are structured according to the needs of the project sponsors, project bonds are in the form of securities that are not easily personalized. For this reason bookrunners ( bookrunner)" is quite difficult to find investors willing to buy bonds with many specific characteristics, unless these investors have been identified in advance.

A bond issue in the secondary markets must have standard features that are unlikely to be able to meet the specific requirements of the deal. It should be noted that bond investors (unlike banks) are most often not ready to bear the risks associated with the construction phase, accepting only the risks of the operating phase. Country risk can also act as a barrier to bond issuance if the Special Project Company is located in a country with a high level of country risk. Therefore, raising funds in the form of bond issues is more appropriate when refinancing a transaction when the construction stage has already been completed, since in this case the bonds are more like asset-backed securities than project financing transactions.

The most common form of issuing project bonds is a private placement with an already predetermined group of investors. The procedure for issuing project bonds in a private placement is very similar to arranging a syndicated loan by one or more lead arrangers. The set of participants is quite specific in the case of a bond issue: rating agencies, trustee, paying agent. The role of each of these actors needs to be considered.

Investors investing in project bonds have entire divisions to analyze the creditworthiness of a special project company. However, they tend to make their investment decisions based on the issuer's quality certification by a project bond bookrunner, as well as on a credit assessment conducted by rating agencies. The assigned rating assesses the intentions and ability of the issuer to pay debts in a timely manner in the short and medium term. Taking into account the peculiarities of project financing, the most significant ratings refer to the medium and long term.

Rating agencies play a key role in the use of such a fundraising tool as the issuance of bonds, including project bonds. The charter of some institutional investors even prohibits the purchase of securities in the absence of a credit rating. One of the main tasks of a project bond bookrunner is to present the project to one or more rating agencies. The rating process itself is laborious and time consuming, which is why the bookrunner contacts the rating agency immediately after receiving a private placement mandate.

Foreign banks have been active participants in project financing for a long time, performing certain functions. In particular, before the global financial crisis (2007-2009), a strong position in the project finance market was occupied by "Royal Bank of Scotland" whose diversified portfolio included energy, infrastructure, oil and gas projects. At the same time, the specified bank participated not only in the financing of the project, but also in the organization and management of the loan and financial consulting.

As the analysis showed, for many Russian banks, project financing is becoming a new large and ever-expanding niche in the banking services market. Banks in the project finance market perform various functions (operations), the main of which are project lending, financial consulting, leasing, providing certain guarantees, etc. In addition, banks act as investment brokers (investment banks), initiators or managers of banking consortiums, institutional investors acquiring securities of project companies, leasing institutions. In the context of the investment activity (strategy) of banks, it is important complex analysis participation of banks in project financing, consideration of the variety of forms and nature of participation.

When deciding whether to enter a project, banks take into account a number of factors that affect strategic development goals and economic benefits. Economic aspects include forecasts of project profitability, loan terms, optimal investment volume, the degree of bank control over the project, the reputation of the project initiator and other indicators that affect decision-making. From the point of view of the strategic interests of the bank, financial prospects, social, economic and political significance of the project. The choice of the sphere of investment investments may pursue the goals of diversifying the loan or investment portfolio, as well as improving the image of the bank.

Project finance is not a standard product and requires significant labor costs embodied in various operations, products and services of banks. Banking services under project finance are complex and complex, and operations are active and commission-based. The development of project finance in the Russian Federation will form a new demand for banks for a wide range of services, including investment consulting, investment financing, guarantees, etc. In addition, as a result of the implementation of investment projects, new structures will arise in the real sector of the economy (organizations, infrastructure facilities), which will also form their segment of the market demand for banking services, which will contribute to the development and improvement banking. From these positions, project financing is a means of further development of the banking sector, increasing the efficiency of its functioning and increasing its share in the financial services segment.

Project financing with the active participation of banks can be singled out as a separate area of ​​analysis. Most promising areas development under project financing are:

• equity participation;
• consulting services;
• object financing;
• participation in foreign projects through the development of mechanisms export finance; mezzanine financing;
• leasing.

It should be noted that mezzanine financing refers to mixed financing instruments - a combination and sharing of debt instruments such as loans, bonds, leasing, and equity instruments (financing through a private equity fund, IPO). The undeniable advantages of mezzanine financing include a higher yield (higher than the standard credit rate bank), the ability to convert debt into a block of shares or shares of the company implementing the project.

In general, the analysis of project financing allows us to highlight the key provisions that hinder its development.

• 1. The decisive factor is the investment rating and current financial position of the project initiator, rather than the cash flows generated by the project. For many banks, the existence of an operating business of the borrower, as well as the presence of a positive result from the main activity, is a prerequisite for making a decision on financing a project. Thus, the bank reserves the possibility of recourse to the current activities of the borrower in case of project failure, which is contrary to the principles of project financing. With equally effective and cost-effective proposals, the lender gives preference to projects whose initiators have an operating business in a given or related industry. As a result, there is a situation in which project financing is available mainly to large commodity companies that have a profitable operating business.
• 2. Limited long-term borrowed resources. Two key problems should be singled out here: the low capitalization of Russian banks and the lack of long-term money. The use of a significant share of borrowed funds (ie high financial leverage) in financing large-scale projects is one of the key characteristics of the project financing mechanism. The possibility of mobilizing large-scale long-term investment resources in the required volume for a certain period and under an adequate interest rate is a prerequisite for any investment project implemented under the project financing scheme. In the Russian Federation, the capitalization of banks, as already noted, is still at a fairly low (by world standards) level, which does not allow financing large and super-large projects. However, it should be noted that there are certain positive developments in this direction. At present, only a part of large banks that at one time were able to go public or international market are able to independently provide large and long-term investment loans. They are the main source of "long" money.

Very often, banks make investments in the form of traditional bank lending using all possible forms and methods of security (pledge of property, securities and other assets, bank guarantees, savings guarantee accounts escrow, guarantees). Direct large-scale loans for long term Russian borrowers can get either from a foreign bank or from 3-5 largest Russian banks. At the same time, only the largest companies, first-tier companies in stock market or those companies that can provide highly liquid collateral. Such a position in the capital market, which allows banks to dictate their requirements for the cost and terms of lending, can be characterized as an oligopoly. Lack of "long" sources of funding for Russian market is expressed in the payback criteria of the project, which is set by the bank. If in some Western countries banks accept for financing projects with a payback period of 20-30 years, then in Russian banks this figure does not exceed 5-7 years.

3. Underdevelopment of methods and instruments of debt financing

with project financing. The use of leasing in project financing is only 4-5% when investing in authorized capital 1 . More high stakes compared to traditional lending (higher by 100-200 basis points), as well as the condition of payment of principal and interest without grace period are the reason that hinders the use of this financing instrument.

An analysis of the bond market showed that in the context of the global crisis, the ruble bond market is rapidly declining. The foreign investment market, in particular Eurobonds, has undeniable advantages for Russian companies. The ability to attract significant amounts of funds for a longer period is a significant advantage of Western markets. However, only 15-20 largest Russian companies can take advantage of these benefits. In particular, the issuance of Eurobonds requires serious preparation from the company, the company must prepare reports in accordance with Western accounting standards and publish them regularly, while reporting must be absolutely transparent. Also, one of the conditions is the availability of ratings assigned by world rating agencies. There are still few companies on the Russian market that meet all the requirements. In addition, the difficulty of issuing Eurobonds is due to high overhead costs.

• 4. High cost of project finance is a determinant deterrent to potential borrowers. The cash flows of many projects are simply not capable of providing such interest. Again, only large companies with high turnover are able to pay for such a project financing mechanism. The high interest rate is due to several factors:
  • the cost of actually borrowed resources;
  • risk premium;
  • overhead costs for the analysis and maintenance of the project.

Long-term resources are always more expensive,

than short term. This is due to the high cost of the actual borrowed funds. The risks associated with project financing transactions for the bank are significantly higher than with commercial lending, and, accordingly, the risk premium included in the interest rate should be higher. The complexity of analyzing a business plan in project financing is always greater than in commercial lending to replenish working capital, which increases total cost financing. These three indicators reach their maximum values ​​in project finance transactions, which increases the final interest rate.

5. Consulting. Project financing is a progressive, but rather complex financial technology, in which consulting plays an important role. Consulting helps to reduce risks and, accordingly, reduce the cost of project financing. Weak level of training business plan very often cited as one of the reasons preventing bank financing. Out of 100 projects, no more than 10% are selected for further analysis, and only 2-3% receive funding and reach implementation. The business plan does not reflect all the benefits of the project, the economic effect is not sufficiently substantiated and is not proven low level project risk 1 .

Poor preparation of the business plan of the project, the inconsistency of its quality with the requirements of the bank allow us to judge the low level of management of the project initiators, the lack of a team of professionals and readiness for the successful implementation of the project.

In order to develop project finance, as well as to increase the role of banks in its implementation and to increase the use of “sequential bank financing” and “risk-sharing bank financing” models, the following measures to improve the refinancing and risk management procedures for banks that accept participation in project financing.

• 1. For the development of the secondary market of claims for loan agreements concluded between banks and special project enterprises, and to provide banks with long-term financial resources, it is necessary to create a special government agency to support banks that finance investment projects (Project Finance Agency). Its functions should include refinancing banks on the terms of assignment of rights of claim under loan agreements for lending to investment projects, as well as providing direct assistance to bank borrowers (special project enterprises) to restructure their debt obligations to banks. It is important that the opportunity state support applied to banks whose conditions for project financing of borrowers comply with the Agency's credit standards.
• 2. In order to cover possible short-term imbalances in providing liquidity to banks involved in project financing, adjustments should be made to the current procedure for lending by the Bank of Russia to commercial banks against non-marketable assets. In particular, certain requirements for enterprises whose rights of claim under loan agreements are accepted as collateral for Bank of Russia loans (the period of activity of the borrowing enterprise must be at least three years, the bank's participation in the borrower's authorized capital or the enterprise's participation in the authorized capital banks should not exceed 20%) are initially unfeasible for bank project financing. After all, the recipient of bank loans is a new enterprise specially created for this purpose, and the participation of the bank in the authorized capital of the borrower allows full control over a large-scale and risky project. Therefore, it is necessary to soften the existing conditions for such enterprises.
• 3. In order to enhance the participation of banks in the financing of investment projects, it is necessary to abandon the establishment of an economic risk ratio per borrower (N6) for project financing transactions and not include the volume of bank claims on the borrower - a special project enterprise - in the calculation of the mandatory economic standard of the total value credit risks(H7). An essential condition to implement this regulatory norm, there should be a state guarantee for the project being financed, at least in the bank's share.
• 4. In order to increase the share of long-term resources with a minimum risk of withdrawal and increase the interest of private investors in keeping funds in a bank, it would be advisable to introduce targeted and brokerage deposits into Russian practice, conditional investment loans, social and insurance savings, general banking management funds. The Bank actually creates collective management funds and, on its own behalf, places the funds in those projects that are seen as promising by the immediate principals. The needs of the bank's savers who are inclined to individual investment of funds can be satisfied with the help of index deposits, the profitability of which is linked to the income from the project.

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 lending and financing

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 cash flow from the project (future profit), and not on the value of assets and financial indicators companies. 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 investment, 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 analyze all the subtleties of the funded event with particular care.

Project financing is still quite a rare banking service. Few Russian banks 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 Natalia 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 to implement an investment project, which usually acts as a borrower and operator of the project,” says Oksana Panchenko, head of the Corporate Clients Servicing and Financing Directorate, member of the 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 activity 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. “A commercial bank is the largest lender, and in order for a company to obtain 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. ", - explains the expert.

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 during 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 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 lender the stability of payments 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.

“In order to 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