In cash-flow based project finance transactions, it is customary that banks require distributions to sponsors to be limited or subjected to certain tests. As such, cash distributions will regularly be permitted only if no event of default or potential event of default has occurred, is continuing or would occur as a result of a distribution […]
The cash flow from infrastructure investments often exceeds the accounting profit of the company. This is principally because infrastructure assets typically have high depreciation charges (due to high upfront capital expenditure requirements) but relatively low ongoing capital expenditure requirements. Since dividends on ordinary shares can only be paid out of retained profits, this creates a […]
Typically, for infrastructure projects, the return requirement of investors reduces over time as the risks involved in the project reduces. For example, for a greenfield toll road the risk premium will depend on the stage of the road development. A higher risk premium is required during the early years, recognizing construction and traffic uncertainties. As […]