revenues to cover current interest and repayment of debt. Any financing plan should naturally be designed to minimise the cost of funds, as far as their availability allows it, and an attempt should be made to relate the maturity of the debt to the expected life of the project. This last point will no doubt prove difficult for the SPS project because commercial debt is rarely available for more than 12 years, whereas the project’s expected life is at least 40 years. The major sources of funds described below are the most likely possibilities for the SPS project. The suitability and eligibility of some of these sources will depend partly on the legal and national status of the project, and this factor should therefore be borne in mind when considering the financing requirements and possibilities. As has already been mentioned, the cash flow profile of the project shows high outflows at the beginning of the project during the development and construction phase, followed by substantial inflows over the expected life of the project, say 40 years, once production commences. Moreover, the risk of noncompletion for technological and other reasons also diminishes sharply as the project progresses. Accordingly, I will suggest the general shape of a financing plan which might be suitable for the SPS project and which covers the financial implications of the forecast project cash flows; the characteristics of the types of funds mentioned are then considered separately. First, the initial development costs and feasibility studies would have to be financed by equity supplemented as much as possible by finance from funds such as the United Nations Revolving Fund for Natural Resources Exploration. These funds do not bear any interest and this would reduce time pressure on the development stage. The equity injection would also be a function of perceived gearing requirements. Next, as much long-term debt as possible from multilateral and bilateral aid sources would be raised to make maximum use of the relatively low interest rates and the long maturities. Export credits on concessional interest rate terms would then be negotiated to provide finance for as much of the equipment as possible. Finally, commercial debt with the best cash flow fit would be borrowed to finance the residual, and hence the later, costs of the project, thereby minimising the quantity and the duration of commercial debt. The complexity of this financing plan points to the need for cooperation between the lenders and there should be a chance of using the growing technique for cofinancing, whereby commercial funds are provided in combination with World Bank or similar funds. EQUITY Equity shareholders are the owners of the project and therefore normally control it. The providers of equity are the greatest risk takers in that they have no guarantee of any income or even of recovering their investment; however, they also stand to make the greatest gains should the project be a success. Equity which can be provided in cash or “in kind" (e.g., technology, equipment) provides great flexibility because there is no fixed obligation to reward it on a regular or predetermined basis. It is therefore particularly well suited to funding the early development of a project when the burden of debt service would be crippling. In project financing the providers of equity are normally the project sponsors; however, as the project progresses it may be possible to sell some shares to the public. Although equity finance generally
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