What is Project Finance?
Project finance is the long-term financing of capital-intensive projects (power plants, infrastructure, mining) where lenders look primarily to the project’s future cash flows for repayment, not the sponsors’ balance sheets.
How It Works
- Sponsors create a special-purpose vehicle (SPV).
- Lenders extend non-recourse or limited-recourse debt to the SPV.
- Project cash flows service the debt and equity returns.
Saudi Context
Saudi mega-projects (NEOM, Red Sea, Diriyah) use project-finance structures with Islamic and conventional tranches led by SAMA-licensed banks and international project-finance lenders.
Example
A 1 GW Saudi solar project is financed through a SAR 3 billion SPV with 75% sukuk-based project debt and 25% sponsor equity, repaid over 25 years.