What is project financing?

In project financing, the project's cash flow is one of the main considerations. Project financing is a financing technique that is specifically designed for large-scale projects, such as infrastructure, energy, or mining projects, that require significant capital investments. In project financing, the lender evaluates the projected cash flow of the project to determine the borrower's ability to repay the loan. The lender provides financing to a special purpose vehicle (SPV) that is set up to own and operate the project. The SPV is responsible for raising the financing, acquiring the necessary assets, and managing the project operations.