How a project financing is built
In a typical project financing, a special purpose company owns the project, and lenders look mainly to the project's revenues and assets for repayment rather than to the sponsors' balance sheets. That means the project contracts carry great weight: the offtake or concession agreement that produces revenue, the engineering, procurement, and construction contract, the operation and maintenance agreement, and supply or land rights. Lenders review each contract to see whether risks such as construction delay, cost overruns, or a buyer's nonpayment are allocated to someone able to bear them. Sponsors usually provide limited support, such as equity commitments or completion guarantees, and negotiating that support is often a central issue.
Lenders, security, and cross-border risk
International projects often bring together commercial banks, export credit agencies, development finance institutions, and sometimes bond investors, each with its own requirements. Agencies such as the U.S. Export-Import Bank or the Export-Import Bank of Korea may support financing tied to their countries' exports, and many lenders apply environmental and social standards such as the Equator Principles. The security package typically includes the project company's shares, accounts, contracts, and assets, and its enforceability depends on the host country's law. Political risks like currency transfer restrictions, expropriation, and changes in law are addressed through contract terms, insurance, and, where available, investment treaties. Sanctions and anti-corruption compliance are reviewed throughout.
What we look at early
Early on, we review the project contracts and term sheets to see whether the risk allocation is financeable and where lenders are likely to push back. We consider which law governs each document, commonly New York or English law for the financing, and how disputes will be resolved, often through international arbitration. We coordinate with counsel in the host country on permits, security, and enforcement. For sponsors from Korea or elsewhere working on projects in third countries, we also look at how home-country financing support and approvals fit into the timeline.
