Question

critically discuss why firms sometimes use project finance structures rather than corporate finance structures

Answer 1

Project finance structures enable the firm to take the financing off the corporate balance sheet into an SPV structure having separate assets and liabilities. This enables the firm to take higher amounts of debt and external financing. As it is untouched by the main corporate balance sheet, the issues if any in the balance sheet will not be carried over into the separate balance sheet.Thus, there is freedom on the part of SPV to carry out external financing. Moreover, there would be higher focus of the management on the project which otherwise could be lost on account of corporate worries.