It is a method of financing very large capital intensive projects, with long gestation period, where the lenders rely on the assets created for the project as security and the cash flow generated by the project as source of funds for repaying their dues.
Q.What are the typical characteristics of Infrastructure Projects?
A. Some of the typical characteristics are
borrowing may be in foreign currency
Large capital costs
Long gestation periods
Assets are not easily transferable
Services provided are not tradable
Revenues only in local currency;
borrowing may be in foreign currency
Tariffs are politically sensitive
Social aspects involved
Vulnerable to regulatory policies
Limited recourse financing needed.
Q. What are the features of limited recourse/ non-recourse financing? Some of the features are?