Frequently Asked Questions
What is Project Finance?
Project finance is different to any other financing structure, all of which are predicated on assets/collateral, balance sheet and/or forecasts in a business plan or prospectus. Project finance is, uniquely, predicated on the financial stability and track record of the party contracted to buy the output from the built project and the counterparties involved in its planning, development and construction. In short, this amounts to lending against revenues from a yet-to-be-built asset, something which mainstream banking regulations prohibit.
Consequently, the only source of finance with the flexibility to fill the multi-trillion-dollar global project financing gap is that provided by over 120,000 hedge, alternative investment, private debt/equity funds and a range of other private capital fund managers. All opportunities listed on PFX must have an off-take agreement with a credible entity, or a feasibility study clearly presenting how funds will be repaid.
In which countries can PFX registered funds operate?
Any country not sanctioned by the UN.
Can PFX Financiers fund Public Private Partnership Projects?
What are our liabilities once funded?
Your financing will be structured using a Special Purpose Vehicle (SPV). If you have already set up your SPV your funder may be quite happy to use it, others may prefer to set up another one in a jurisdiction which they prefer. In either event, the financing is provided and underwritten against the track record and financial stability of whoever is contracted to buy the output from your project with the same criteria applying to your contractors, designers and all other counterparties involved in the project. All structured through the SPV. Consequently, project finance leaves you and your counterparties free and clear of any financial liability whatsoever.
How do we know that the AUM figure you show is real? Why don’t you show the names of your registered funds?
Quite simply because they do not want to be inundated with appeals for funding that are not properly researched, prepared or documented. The dichotomy for private capital funds is that they have abundant capital to lend, but cannot risk exposing themselves to the market too much and risk their intake/origination functions being overwhelmed by what are known in the market as ‘dreamers’ and ‘joker-brokers’. PFX has been set up so that they can operate in a structured market without incurring that risk and knowing that the deals they do want to engage with are all fully prepared from Elevator Pitch, thru Executive Summary to Full Deck by our Regional Managers, all of them seasoned project finance intermediaries. This is also an assurance to capital-raisers that listing their projects on PFX means that they will be taken seriously by prospective investors and lenders.
What costs can we expect to incur prior to receiving funds?
All funds are different, but you can usually expect to incur some costs which can cover due diligence, underwriting preparation, surveys and other costs. You can usually expect to make some contribution towards the legal costs in preparing your loan or other financing agreement although this is not the case with all funders. But there are countless funding structures each with their own set-up costs for the funder and client respectively.
Any costs you are expected to incur should be clearly presented in your conditional terms sheet or your funder’s equivalent document. In many cases, these costs can be recovered by having them added to your loan, but they must be paid up-front as the funder cannot incur the risks involved in covering these costs for all clients.
You are not expected to pay any fee to your PFX Regional Manager (RM). However, it is at their discretion whether to charge for improvements to your project plan or project preparation generally.
If you don’t charge to list deals on PFX or for fund managers to register, how do you make your money?
We work on the same principle that seasoned project finance intermediaries have worked on for decades. We charge the funder a completion fee, our ‘PFX Commission’. You should see the commission included in your Terms Sheet under the heading ‘Introducer Fee’ or ‘PFX Commission’. Our commission is based on real world fees which are acceptable to fund managers worldwide. In the interests of transparency the PFX Commission scale is (USD/EUR/GBP):
- Up to 250,000,000
- 250m to 500m
- 500m to $1bn
NOTE: If you are told by an intermediary that they expect a completion fee of anything up to 5% with no indication of who your funder is going to be, beware. Please go to the Submit Project zone to get your opportunity listed on PFX.
As an investor am I connected directly to the project principals when I offer to engage?
No. We take the view that you will not want to disclose your identity until you are absolutely sure you wish to proceed. Your offer to engage shows up on the dashboard of the Regional Manager (RM) handling the case, along with your contact and other details you provided on registration. They will discuss the deal with you and, if appropriate and you agree, bring the project principals into the discussion. The RM is permitted to go so far as to share the full project plan (over and above the exec summary you’ve already seen) with you. Once everyone is agreed that you are the right funder for the project the RM clicks the ‘Engage’ button on their dashboard and the link (Dropbox or other fileshare) to the Full Deck including all contracts, agreements, permits, permissions and other documentation is sent to you automatically. At that point the RM will step back while you work directly with the project principals and intervene only if and when asked. We believe that this structure will reduce or eliminate the current time wasting in deal origination. When you provide a final funded amount and completion date the RM completes these fields on their dashboard and clicks a ‘Closed’ button against the transaction. This triggers an e-mail to you with banking coordinates to which the PFX Commission should be paid.
So far we have 15 RM’s around the world with a combined 300 years corporate/project finance, banking and other relevant experience between them. We are still recruiting one more for APAC and two for LatAm. They ensure everything is submission-ready for you, and your discussions will confirm that the project is also ‘shovel ready’ or as close it can get to it at the submission stage.
In which country is PFX registered?
Is PFX regulated by any regulatory body?
No. The Private Capital market is, so far, unregulated. But some PFX registered funds are regulated dependent on their jurisdiction.
What role does PFX play between all the stakeholders?
We are essentially a media company providing a structured information channel between capital-raising projects and funders whose pre-set investment preferences those projects meet.
Which sectors can PFX Financiers fund the projects?
Agri; Airports; Aviation; Bio-Fuels; Bridges; Care Homes; Clinics/Hospitals; Commercial RE; Dams; Fisheries/Fish Farming; Hotels/Resorts; Hydro-Electricity; Infrastructure; In-Ground Assets; Leisure/Recreation; Media; Nuclear Energy; Oil & Gas; Ports; Potable Water; Power Distribution; Renewable Energy; Residential RE; Road/Rail; Satellites (Commercial); Senior Living; Shipping/Marine; Social Infrastructure; Social/Affordable Housing; Solar Farms; Spaceports; Technology, Media & Telecommunications (TMT); Trams; Transport/Distribution/Warehousing; Tunnels; Utility (gas, water, sewage etc); Waste Recycling: Waste-to-Energy; Waste-to-Fuel; Wave/Tidal Energy; Windfarms.
How do financiers separate the deals they're interested in out of the hundreds available?
They receive e-mailed Elevator Pitches for opportunities that match their pre-set preferences. As registered financiers they can then click the 'View Executive Summary' button on the Elevator Pitch which discloses much more detailed information about the project (only available to PFX registered financiers and information provided within their T&C'S which includes non-disclosure). If they still wish to pursue the opportunity they can click the 'Engage' button on the Executive Summary which presents the financier's full contact and additional information on the dashboard of the Regional Manager handling the case. From that point all contact is between the project, the RM and the financier.
Can PFX Financiers fund Governments directly?
It is always the project that is funded, not the project principals, usually through a Special Purpose Vehicle (SPV). It does not matter who or what the project principal is.
Will PFX financiers consider government projects who are looking for an EPC contractor?
No. Any project listed on PFX must have all contractors in place with agreements completed or at an advanced stage of development.
Can PFX Financiers provide Islamic financing?
What is the minimum and maximum amount considered for financing?
<$10m to no upper limit.
Is there any minimum IRR/ROE/ROI we expect on the project?
This is not relevant to project finance. Funding is provided against the financial stability and track record of whoever is contracted to buy the output from the built projects, also all counterparties including the EPC and other contractors involved in the project. The EBITDA needs to show that there is sufficient margin for the loan to be repaid within the terms of the agreement.
Can PFX Financiers provide financing as debt or equity or combination of both?
The preferred structure is long term debt, but some funds will take an equity stake.
For equity financing do PFX Financiers look for a minimum equity stake to engage into a discussion?
Not relevant to project financing.
In Debt financing is collateral needed? If yes what are the different collaterals accepted?
Collateral is not an issue in project financing, everything is predicated on the financial stability and track record of the contracted off-taker and other counterparties involved in the project.
For debt financing, what is the interest rate? Is it fixed or is it a range?
This is something to be discussed with financiers who have offered to engage with your project. There is a wide variation dependent on the financier, the nature, location, value and risk profile of the project.
Does the Project Owner/Borrower need to have a financing budget before being financed?
Not all funds or financiers need a contribution to their closing costs, but many do. It always best to ensure access to financiers closing/third party costs is available.
What costs can we expect to incur before being financed?
All those costs that go with preparing your project for financing which includes architects, land acquisition/leasing/optioning, permits, permissions, access and other essentials before the project can be considered for financing.
Does the financier provide a conditional or unconditional term sheet? If unconditional then what is the guarantee that the financier will finance the project?
In the first instance and after initial ‘desktop’ DD a conditional terms sheet is provided which lists all the requirements before an unconditional terms sheet can be issued. This will usually involve the assembly of all necessary documentation, contracts and agreements, which is all prepared with the support of your Regional Manager before your project can even be listed on PFX. Any further information requirements will be minimal.
When the financier is satisfied with all the information you have provided, and their analysts have validated everything, your unconditional terms sheet will be issued. But the final loan document and structuring still has to be completed before funds are moved.
At what stage is the due diligence done before or after signing the unconditional/conditional term sheet?
After signing the conditional terms sheet.
Who does the due diligence? The financier or an external body? One of the big five?
Most financiers have their own analysts who will conduct the major part of all due diligence. Any further verifications are usually contracted out to specialists in the market concerned whose job will be to verify information you have provided as an ‘approved’ party.
What documents do we need to submit with our application?
Too big a question to answer here, we recommend reading The RAISING PROJECT FINANCE Handbook to cover this and many other questions.
Is a feasibility study mandatory as part of the documentation?
Feasibility studies are required when there is no contracted off-taker for the project. This usually applies to hotels/resorts (unless an Operations and Management Agreement is in place with an established hotel brand or the sponsors have a proven track record), rail and other transport and other projects where the viability is dependent on known traffic flows. The study must come from a credible body that is acceptable to the financier.
How long will it take for the financier to fund the project?
Allow anywhere from two to eight weeks to get from initial engagement with the financier to conditional terms sheet stage. From conditional terms sheet to unconditional terms sheet allow a further four to 12 weeks. From signing of unconditional terms sheet allow 60 to 180 days. Sometimes more depending on the nature of the project.
Can the financing be done in the currency of the country of project?
No. The hedging cost would increase underwriting and other costs on the loan terms. PFX financiers fund in EUR, GBP and USD.