1. Project financing
It is critical that the project have a definite ending point at which all debt/equity being
repaid. It is a stand-alone investment so all of its cash flows are used to run it, not to reinvest
for growth. Therefore, the project’s returns have to be attained in a finite period.
Examples of project finance include some of the largest individual investments
undertaken in the past three decades, namely British Petroleum’s financing of its interest
in the North Sea, and the Trans-Alaska pipeline.
Big, risky projects cost so much that several companies often team up and share the
costs and risks through a joint venture.