The use of project accounts in project finance

In a typical project finance transaction (see Introduction to project finance), the lenders (see Key finance parties and their roles) rely heavily on the revenues generated by the project for repayment of the loan (see Common features of project finance transactions).

As a result, project finance lenders will impose strict restrictions on how the project company (see Key project parties and their roles) uses its cash. This guidance note explains how the lenders commonly impose these restrictions in project finance transactions. Importantly, this guidance note explains how a system of bank accounts is established and the funds to be deposited into each account and that may be withdrawn from each account are detailed in the loan agreement. Common accounts that may be required in a project as covered by this guidance note include:

• • revenue account (also sometimes characterised as an operating account or proceeds account);
• • construction account;
• • insurance proceeds or compensation proceeds account;
• • debt service reserve account;
• • maintenance reserve account;
• • ramp-up account;
• • lock-up account; and
• • distributions account.

See The use of project accounts in project finance.