Via Matt Smith in agbi.com: Project finance is a funding model often used for infrastructure, in which repayment comes from revenue generated by the completed facility rather than being guaranteed by the owners. “Repayment depends on the project succeeding,” says Rahul Bajaj, director of Mena equity research at Citi in Dubai. As such, banks expect a premium for accepting the higher risk. “These are usually not low-margin products,” adds Bajaj. The project finance model is expected to play a bigger role in supporting the Gulf’s economic development. As governments push ahead with mega-projects, especially in Saudi Arabia and the UAE, the need for alternative financing mechanisms has grown, bankers say.
