Lack of project finance, major setback

The Romanian market has a huge potential for attracting investments by project finance, which could mainly benefit the railway, road, utilities, energy, and water supply service infrastructure. This is the conclusion of the “Project Finance” seminar organised by FinMedia on Tuesday.
The only company to have used the project finance method so far is Apa Nova Bucharest, concessionaire of the water and sewerage services in the Capital and a project company. The financing comes from the European Bank for Reconstruction and Development (EBRD) and a German bank specialising in this kind of investment – DEG. The sponsors (capital investors) in this case are French group Vivendi Water and the Bucharest General Council.
Project finance traditionally means financing an industrial or commercial project, with the financing supplier using the potential revenues the project may generate as means to assess the repayment capacity. At the same time, the lender accepts only the goods associated to the project in question as security, the representatives of law firm Nestor Nestor Diculescu Kingston Petersen explain.
Banca Romana pentru Dezvoltare (Romanian Development Bank – BRD)- Groupe SociA©tA© GA©nA©rale has not been involved in project finance so far, but hopes to find such opportunities on the Romanian market in the next two years, as explained by general manager Patrick Gelin.
According to Gelin, this type of financing is better than the traditional methods because “the State no longer has to secure the loan (which does not impact on the public debt), the credit comes with a longer maturity, and repayment is covered by the revenues generated by the project, instead of any other assets of the borrower.”
As for companies, the project finance is a way to raise funds that do not show up in their financial statement like other financing instruments do (credits, bonds or shares).
When project finance is sought, the collateral must usually cover only 10%-15% of the investment, as the banks (financing suppliers) want to see the project generate enough cash flows to have the loan (principal and interests) repaid.