The nature of credit risk in project finance（信用风险在项目融资的性质）.pdf

Marco Sorge +41 61 280 8514 Marco.Sorge@bis.org The nature of credit risk in project finance1 In project finance, credit risk tends to be relatively high at project inception and to diminish over the life of the project. Hence, longer-maturity loans would be cheaper than shorter-term credits. JEL classification: F34, G12, G28, G32. For decades, project finance has been the preferred form of financing for large- scale infrastructure projects worldwide. Several studies have emphasised its critical importance, especially for emerging economies, focusing on the link between infrastructure investment and economic growth. Over the last few years, however, episodes of financial turmoil in emerging markets, the difficulties encountered by the telecommunications and energy sectors and the financial 2 failure of several high-profile projects have led many to rethink the risks involved in project financing. The question whether longer maturities are a source of risk per se is crucial to understanding the distinctive nature of credit risk in project finance. Large- scale capital-intensive projects usually require substantial investments up front and only generate revenues to cover their costs in the long term. Therefore, matching the time profile of debt service and project revenue cash flows implies that on average project finance loans have