Question

Briefly discuss the significance and role of four major sponsors in project finance

Answer 1

The four major sponsors of project financing are:

1. Equity shareholders / Investors : The equity shareholders and the investors are the first and foremost important sponsor of any project financing. Significance of their being is that they are the legal owner of the company and provide initial funding to execute the project. Their role is to provide initial fund and appoint an executive team to execute and oversee the project.
2. Lenders : The lenders like bankers and financial institutions are the next sponsor of any financing of the project. The significance of lenders being in the picture is that they fill the gap of financing / funding in the execution of the project. The role is defined as providing finance as and when required against fixed expense ie. Interest.
3. Contractors and Equipment providers : The contractors and equipment providers are the sponsors who works towards the execution, providers and suppliers of equipments and labors against a rent or monthly fixed revenues. Their role is to follow the execution of provide project with equipments and labor for execution purpose.
4. Technical advisors : The technological advisors are the other sponsor who provide the technical knowhow and direction to project to complete on time with least execution costs. Their role is to comply with implementation chart and technical activities on the project against the fees charged.

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