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Third: The Concept of Project Funding

Project funding is a funding method about the idea that the output of the project will suffice to repay any loans obtained
by the loanee for project implementation, instead of the project being guaranteed by project sponsor. To this end, both
the assets and output of the project and its liabilities and obligations are estimated each separately and entirely
independent of the project sponsor's assets. That sureties and guarantees provided by project sponsors are of minor, if
any, importance, project funding is hence described as a '' no‐return'' funding or, at least, a ''limited‐return'' one.

Normally, integral structure projects implemented by way of project funding are primarily funded by Debt Capital. Such
capital can be found in stock markets and procured particularly by means of loans which commercial banks offer to
project sponsors or the chief company of project. The banks employ in the conventional process funds arising from short
or medium‐term deposit acts for which these banks pay variable interest rates.

Accordingly, commercial‐bank‐granted loans are likewise subject to variable rates of interest, the maturity of which is
shorter than the project's lifespan. The risk likely to be faced by lenders in the system of project funding are far greater
than that faced in traditionally performed, secure transactions, even further compounded in the case of integral structure
projects. It is due to the fact that the value guaranteeing the project's physical assets (for instance roads, bridges and
tunnels) can barely cover the entirety of the project's financial costs, since no '' market'' is found in sight to convert such
assets to cash. Lenders thus hardly opt to utilize large sums that integral structure projects require only on the mere basis
of expected cash flow or of sole assets of the project.

In fact, integral structure projects are frequently funded in an appropriate manner which first rely on the project's cash
flow and assets while having recourse to the chief company of the project. Favorably enough, the same method reduces at
the same time the risks encountered by lenders in their making of several backup or secondary arrangements of security
and by other means of credit provided by the local government, the project sponsor, the clients and those concerned.

Besides Payable Debt, integral structure projects are also funded by way of stocks. Share Capital is mainly obtained
from project sponsors and other individual investors that have keen interest in possession of shares in the project's chief
company. Such share Capital only reflects, in large part, a portion of the total cost of integral structure projects. To be
able to obtain commercial loans or to use further sources for meeting project's capital, sponsors and individual investors
of the project are to offer lenders and other capital providers earliest repayment, thus having their interests incurred on
their private investments only after others have paid their ones. Main promoters of the Project, project sponsors are
consequently to confront the greatest of the financial risks, while, once investments are paid, at the same time being
assigned largest proportion of profits.

Additional sources of Share Capital may include investment funds and other forms of '' principal investors'' such as
insurance companies, collective‐investment and retirement pension funds. Such entities usually possess large amounts of
funds allowing for long‐term investment and can constitute a vital supplementary source of integral structure projects.
Capital in this sense is made available in the form of debt or by way of contribution via investment funds to the capital,
and in this manner only participate principal investors in the establishing of the project and operating of the facility. The
main reason behind their willingness to compromise themselves in the risky provision of capital to integral structure
projects is to attain profits and to diversify investment.