Frequently Asked Questions
What is Project Finance?
Project finance is different to any other financing structure. The assets/collateral, balance sheet and/or forecasts in the business plan of the borrower are all overridden by those of whoever is contracted to buy the output from the built project, and those of the contractors and counterparties involved in the project’s 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 investors operate?
Any country not sanctioned by the UN.
Can PFX Investors fund Public Private Partnership Projects?
So, what separates PFX from all the other ‘investment platforms’ we investors have to look at?
We are not another ‘investment platform’. For the project finance market, we are ‘The Exchange’.
PFX operates through eight regional Intake Centres each overseen by their own Regional Manager. A combined 200 years’ project finance experience goes into assembling the full deck behind every PFX listing. Please download our Intake Form to see how we ensure this. As any IPO has to meet widely accepted prospectus requirements, so PFX expects its project finance opportunities to do the same. When you are satisfied that we will make a positive impact on your deal origination, please go to the Investors zone so we can welcome you into the PFX investor community.
Why should I make my private business public on the exchange?
You don’t. Look at any Elevator Pitch in our pipeline, and you will see that there is no identifying information available to the public domain. Only PFX registered investors can click through from there to the Executive Summary to see that kind of detail, and only after they have been through our initial DD when they register. The only investor details we publish are their ‘Investor Type’ followed by their country and total Investible Capital available to invest (see top of page). Investor identity is made available only to projects they wish to engage with, and only then after first contact through the PFX Regional Manager.
How do I know the investor isn’t one of the many frauds in this market?
Yes, that’s a challenge. Our initial DD is extensive and not to be disclosed here. Only those that do not show the usual ‘red flags’ can register, alternatively their integrity may already be well established in the market, or they are already known to PFX or its Regional Managers. For those we do not know, their first offer of financing including their structure, locations/ISP’s, their counterparties and other elements are investigated and further due diligence recommendations and/or suggestions are made to the client. However it is the client’s decision and responsibility to accept and move forward to closing the transaction, not PFX.
What are our liabilities once funded?
You should be left free and clear of any financial liabilities whatsoever. Your financing will usually be structured through a Special Purpose Vehicle (SPV). If you have already set up your SPV your investor may be quite happy to use it, others may prefer to set up another one in another jurisdiction. 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, which will include comprehensive insurance wraps. Consequently, project finance leaves you and your counterparties free and clear of any financial liability whatsoever.
How do we know that the Investible Capital figure you show is real? Why don’t you show the names of your investors?
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, 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, private market without incurring that risk. They know 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 investors 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 investors. But there are countless funding structures each with their own set-up costs for the investor and client respectively.
Any costs you are expected to incur should be clearly presented in your conditional terms sheet or your investor’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 investor 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 working on your submission to make it ‘submission ready’.
If you don’t charge to list deals on PFX, how do you make your money?
Your RM is a seasoned and experienced project finance intermediary. Provided they want to take your project on after reviewing your Intake Form, they will work with you on listing your project on PFX.
They will come to a compensation agreement directly with you for fees to be paid by you, and these should show on your .xls as ‘Consultancy/Professional Fees’. PFX charges its registered investors a nominal Origination/Introducer Fee for using PFX which they can allocate to ‘Origination Costs’ and which is shown in their PFX Origination/Introducer Agreement.
I am an investor. Am I connected directly to the project principals when I offer to engage?
No. 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 are your first point of contact.
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 investor 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 Completion Fee should be paid.
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 and because they actually manage funds for private individuals.
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 investors whose pre-set investment preferences those projects meet. We have an Introducer/Referral Agreement with our investors and an Operating Agreement with each Regional Manager.
Which sectors can PFX Investors 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 investors 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 investors 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 investors and information provided within their Introducer Agreement 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 investor'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 investor.
Can PFX Investors 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. Whether a team, company, local or national government the structure will always be the same.
Will PFX Investors 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 Investors provide Islamic financing?
What is the minimum and maximum amount considered for financing?
Up tp $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 any loan (outside of equity) to be repaid within the terms of the agreement.
Can PFX Investors 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 Investors 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. If the underwriters are happy to carry the risk, debt financing will be forthcoming.
For debt financing, what is the interest rate? Is it fixed or is it a range?
This is something to be discussed with investors who have offered to engage with your project. There is a wide variation dependent on the investor, the nature, location, value and risk profile of the project.
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. How much depends on the nature of the project.
Does the investor provide a conditional or unconditional term sheet? If unconditional then what is the guarantee that the investor will finance the project?
In the first instance and after initial ‘desktop’ DD a conditional terms sheet is usually 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 investor is satisfied with all the information you have provided, and their analysts have validated everything, which is when your project can be described as ‘shovel ready’ (and not before), 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?
Most investors 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 investor and their underwriters.
How long will it take for the investor to fund the project?
Much depends on the nature, size and other factors of the project. Allow anywhere from two to eight weeks to get from initial engagement with the investor to conditional terms sheet. From conditional terms sheet to unconditional terms sheet allow a further four to 12 weeks. From signing of unconditional terms sheet allow 30 to 90 days to delivery funds. Some funds work for a range of different investors and each of those may have different jurisdictional and other requirements for moving funds.
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 Investors fund in EUR, GBP and USD.