Project Finance and Risk Management : A Case Study of an Independent Power Project

Financing of industial and infrastructure projects through project finance structure has gained importance in the post liberalization period. Although project finance structure has several merits over the traditional corporate finance, it is embedded with various operational and financial risks. Therefore, evolving a risk management structure and sharing of risks among various parties is essential for success of the project. The present case demonstrates risk-management framework of an independent power project. The sensitivity analysis demonstrates profitability sensitivity of the project with reference to plant load factor and auxiliary consumption. The case also highlights tariff structure and statutory and non-statutory clearances required for a project in India. It also demonstrates other constraints for success of an independent power.