The premise of project financing lies in financing of infrastructure projects undertaken by a special purpose vehicle (“Borrower”), the repayment of which is broadly dependent on the cash flows generated by the projects itself rather than the balance sheet of the Borrower or its promoter/sponsor. The onset of public private partnership (“PPP”) regime in the project financing space in India has been instrumental in implementation of multiple commercially viable projects. The PPP projects are projects based on a contract or concession agreement, between Government or statutory entity on one side and a private sector company on the other side, delivering public utility infrastructure services which can be availed on payment of user charges. It provides an opportunity for private sector participation in financing, designing, construction, operation and maintenance of public sector programme and projects. The licence to develop such projects is given by the statutory authority in various models like build, operate, transfer (BOT), build, develop, operate and transfer (BDOT), build, own, operate and transfer (BOOT) and toll, operate and transfer (TOT). In most cases, PPPs combine the best of both worlds: the private sector with its resources, management skills and technology and the public sector with its regulatory actions and protection of public interest.
Continue Reading Rapid Metro Judgment: Reinforcing the Sanctity of Contracts and Public Good