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Project Finance Glossary

Bank Guarantee (BG)

A financial institution can offer a bank guarantee which acts as a safety net in case one party involved in a transaction fails to fulfill their contractual obligations. 

This type of guarantee is commonly used outside of the United States and allows the bank's customer to engage in activities such as purchasing equipment, acquiring goods, or engaging in international trade. 

In the event that the bank's customer is unable to fulfill their obligations, such as making a payment or delivering goods, the bank will step in and provide coverage.

(Ref Investopedia)

B Notes

Asset-Backed Securities (ABS) are divided into various tranches or classes, each with a distinct risk profile and rate of return. Typically, these tranches are categorized as Class A, B, and C.

Similarly, mortgage-backed security (MBS), which is a type of ABS, is also structured in the same way. 

Commercial mortgage-backed security (CMBS) follows the same ABC structure and is further divided into different notes or tranches. Each tranche has its own credit quality and priority of payment. In a CMBS loan structure, the B-note is the secondary tranche.(Ref Investopedia)


Governments and corporations issue bonds to raise funds, which is essentially a loan from the bond buyer to the issuer. The issuer promises to repay the loan amount, also known as the face value, on a specific future date, and to pay interest to the bondholder regularly, usually twice a year.

When investing in bonds, you do not gain ownership rights like you would when investing in stocks. Therefore, you may not benefit from the company's growth. However, you will also not experience as much impact if the company's performance is poor, as long as they continue to make payments on their loans. (Ref Vanguard)      

Capital Expenditures (CapEx)

Investing cash flow pertains to all the purchases of capital assets and investments in other business ventures. (Ref Investopedia)

Cash Flows From Financing (CFF)

Financing cash flow pertains to all the proceeds obtained from issuing debt and equity, as well as the payments made by the company. (Ref Investopedia)

Cash Flow From Investing (CFI)

A Central Business District (CBD) is the main commercial and business hub of a city that typically comprises of office buildings and commercial spaces. 

In larger cities, it may also be referred to as the financial district. The CBD is usually located in the geographic center of a city or in the downtown area, but the two concepts aren't always interchangeable. 

Some cities may have a CBD that is situated away from its cultural or commercial center or downtown, and in some cases, there may be more than one CBD within a single urban area. (Ref Investopedia)

Central Business District (CBD)

Capital expenditures (CapEx) refer to the money utilized by a company to procure, enhance, and sustain physical assets like property, plants, buildings, technology, or equipment.


CapEx is frequently employed by companies to undertake fresh projects or investments. (Ref Investopedia)

Certificate of Deposit (CD)

A certificate of deposit (CD) is a type of savings account that allows an individual to earn interest on a lump sum over a fixed period of time. 

Unlike traditional savings accounts, the money invested in a CD cannot be accessed until the term is completed, or else penalties and loss of interest may occur. 

CDs are generally associated with higher interest rates compared to savings accounts because they require the account holder to sacrifice liquidity as an incentive for increased returns. (Ref Investopedia)

Closed-End Fund (CEF)

A closed-end fund is a mutual fund that raises its initial capital by issuing a fixed number of shares through a single IPO. After that, the shares can be traded on a stock exchange, but no additional shares will be created and no new capital will flow into the fund. 

On the other hand, open-ended funds such as mutual funds and ETFs, accept new investment capital on a continuous basis, issuing new shares and buying back shares as needed. Closed-end funds are often used for municipal bond funds or global investment funds. (Ref Investopedia)

Contingent Asset 

A contingent asset refers to a possible economic gain that is based on some future events that are mostly beyond a company's control. Such assets are sometimes called potential assets. 


As the actual realization of such gains is uncertain and their precise economic value is not determinable, they cannot be recorded on a balance sheet. 

However, they can be disclosed in the footnotes accompanying financial statements, subject to certain requirements. (Ref Investopedia)

Credit Backed Terms (CBTs)

CBTs refer to a type of financial agreement in which a lender provides credit to a borrower based on the value of certain assets that the borrower pledges as collateral. This collateral can be anything from real estate to inventory or accounts receivable.

The terms of the agreement typically require the borrower to repay the loan in installments over a set period of time, with interest charged on the outstanding balance. If the borrower fails to make the required payments, the lender has the right to seize and sell the collateral in order to recoup their losses.

CBTs are often used by businesses that need to secure financing for a specific project or to cover short-term cash flow needs. They can also be used by individuals to obtain loans for large purchases, such as a home or a car, if they don't have sufficient credit or income to qualify for an unsecured loan.

Overall, CBTs are a way for lenders to manage their risk by requiring collateral, while still providing borrowers with access to credit.


A debenture is a type of medium to long-term debt instrument used by large companies and governments to borrow money at a fixed rate of interest. It is essentially a type of bond that serves as an IOU between the issuer and the purchaser. 

Debentures are unsecured by collateral, which means that their value relies on the reputation and creditworthiness of the issuer. This type of debt instrument is commonly used by both corporations and governments to raise capital or funds. (Ref Investopedia)

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

EBITDA can be defined as the earnings or net income of a company, with the inclusion of interest, taxes, depreciation, and amortization, which are added back to the net income. (Ref Investopedia

Exchange-Traded Fund

An ETF or exchange-traded fund is a type of investment that pools together money from multiple investors and operates similar to a mutual fund. 

These funds usually follow a specific index, asset, or commodity, but the difference is that ETFs can be bought or sold on a stock exchange like regular stocks. 

They can track a wide range of securities or investment strategies, from individual commodities to diversified portfolios. (Ref Investopedia

Fixed-Income Securities

A fixed-income security is a type of investment that offers a stable interest income for a set period. 

This can include fixed-income ETFs, corporate bonds, or government bonds. 

Credit agencies are responsible for evaluating the default risk associated with these securities and assigning a credit rating. (Ref Investopedia

Hedge Fund

A hedge fund is a partnership of private investors where professional fund managers use various strategies, such as leveraging or trading of non-traditional assets, to generate investment returns higher than average. 

Hedge funds are known to be a risky alternative investment and typically require a high minimum investment or net worth, making them targeted toward wealthy clients. (Ref Investopedia

Index Fund

An index fund is a mutual fund or exchange-traded fund (ETF) that has a portfolio designed to replicate or track the constituents of a financial market index, such as the S&P 500. 

Index mutual funds are known for providing wide market exposure, low operational costs, and minimal portfolio turnover. They follow their benchmark index irrespective of market conditions. (Ref Investopedia

Internal Rate of Return (IRR)

In financial analysis, the internal rate of return (IRR) is a measure used to evaluate the potential profitability of an investment. 

It is calculated as the discount rate that makes the net present value (NPV) of all cash flows from the investment equal to zero in a discounted cash flow analysis. 

It is important to note that the IRR is not the actual dollar amount of the investment, but rather the annual return that makes the NPV zero. The formula for calculating IRR is the same as the formula for NPV. (Ref Investopedia

Investment Grade Rating

The quality of a company's credit is referred to as its Investment Grade Rating. Standard and Poor's or Moody's must give the company a rating of BBB or higher in order for it to be classified as an investment-grade issue.​


The creditworthiness of a company is referred to as its investment grade. Standard and Poor's or Moody's must rate the company at BBB or higher for it to be considered an investment-grade issue. Anything below this "BBB" rating is considered a non-investment grade.


​The likelihood that a company or bond will pay back the debt it has issued is deemed to be speculative if the rating is BB or lower, which is known as junk grade. (Ref Investopedia)

Irrevocable Master Fee Protection Agreement (IMFPA)

This agreement for protecting the fees is applicable to the original contract mentioned in it and also applies to any extensions, renewals, additions or rollovers associated with it. 

The agreement and any pay orders issued later can be assigned, transferred, and split among others but cannot be modified without the written consent of the receiving beneficiary, which must also be notarized. (Ref Law Insider)

Loan Proceeds

Loan proceeds are funds distributed from a loan, less closing costs.

Open-Ended Fund (OEF)

An open-end fund is a collection of pooled money from investors that can issue an unlimited amount of shares. 

Investors can buy and sell shares directly with the fund sponsor, and the price of these shares is determined on a daily basis based on the fund's net asset value (NAV). 

This type of fund is common in the investment industry and can include mutual funds, hedge funds, and exchange-traded funds (ETFs). (Ref Investopedia)

Net Asset Value (NAV)

Net Asset Value (NAV) is a financial metric that refers to the total value of an investment fund's assets after subtracting its liabilities, divided by the number of outstanding shares.


NAV is predominantly used for mutual funds and exchange-traded funds (ETFs), and it is the price at which the shares of these funds, registered with the U.S. Securities and Exchange Commission (SEC), are traded. (Ref Investopedia)

Net Operating Profit After Tax (NOPAT)

NEOPAT is an estimate of a company's potential cash earnings if it had no debt or leverage, which is not included in the calculation. This figure is not affected by one-time losses or charges, which are not reflective of a company's actual profitability. (Ref Investopedia)

Nonperforming Loan (NPL)

A nonperforming loan (NPL) is a type of loan that is in default because the borrower has failed to make scheduled payments for a specified period. 

While the specific conditions that determine nonperforming status can differ depending on the terms of the loan, the absence of payments, whether principal or interest, is typically defined as "no payment". (Ref Investopedia)


Non-recourse debt is a form of loan that is backed by collateral, typically property.


In the event that the borrower defaults on the loan, the lender can seize the collateral, but they cannot pursue the borrower for any additional compensation beyond the value of the collateral, even if it does not fully cover the outstanding debt. 


This means that the borrower is not personally responsible for the repayment of the loan under non-recourse debt. (Ref Investopedia)

Medium Term Notes (MTN)

A medium-term note (MTN) is a financial instrument that has a typical maturity period of 5 to 10 years. 

Companies can continuously offer a corporate MTN to investors through a dealer, with investors being given the option to select different maturities, ranging from 9 months to 30 years. However, the majority of MTNs have a maturity period that falls between one to ten years. (Ref Investopedia)

Membership Interest Purchase Agreement (MIPA)

A MIPA is used by a member of an LLC to sell all or a portion of his or her membership interest in the LLC to another party. 

The key terms in a MIPA include the purchase price, instructions for closing, and representations and warranties for each party. (Ref CollateralBase)

Middle East and North Africa (MENEA)

The Middle East and North Africa (MENA) is a term used to refer to a region that encompasses the countries located in the northern region of Africa and the southwestern region of Asia. 

The MENA region is known for its diverse cultural heritage, vast oil reserves, and a significant portion of the world's Islamic population. 

However, the term MENA lacks a standardized definition and is often subject to different interpretations by various organizations and individuals. (Ref Investopedia)

Mutual Fund

A mutual fund is a type of investment vehicle that combines money from multiple shareholders to purchase securities, including stocks, bonds, and other assets. 

These funds are managed by professional money managers who aim to generate income or capital gains for the fund's investors. 

The investment objectives stated in the fund's prospectus guide the allocation of assets in its portfolio, which is designed to match those objectives. (Ref Investopedia)

Off-Balance Sheet Financing (OBSF)

Off-balance sheet financing refers to a technique in accounting that enables companies to record particular assets or liabilities in a manner that avoids their appearance on the balance sheet.

The purpose of this method is to maintain low debt-to-equity and leverage ratios, particularly in situations where a significant expense's inclusion could violate negative debt agreements. (Ref Investopedia)

Offtake Agreement

An offtake agreement is a contract between a producer and a buyer in which the buyer agrees to purchase a certain amount of the producer's future production. 

Typically, this agreement is made before the production facility is constructed in order to secure a market and a reliable revenue stream for the producer's output. (Ref Investopedia)

Operating Cash Flow (OCF) 

Operating cash flow pertains to all cash that a company generates from its primary business operations. (Ref Investopedia)


Pari-passu—Latin for “equal footing”—is a financing arrangement that gives multiple lenders equal claim to the assets used to secure a loan. 

If the borrower is unable to fulfill the payment terms, the assets can be sold, and each lender receives an equal share of the proceeds at the same time. (Ref Investopedia)

Pledged Interest

A pledged asset is an asset offered as collateral by a borrower to a lender in exchange for a loan or to secure a debt. 

The pledged asset can be in the form of cash, stocks, bonds, or other types of equity or securities.  

By pledging an asset, a borrower can often reduce the amount of down payment required for a loan and obtain a lower interest rate. (Ref Investopedia)

PPP Trading Platform

What is a PPP trading platform? ​All trading programs in the Private Placement arena involve trade with discounted debt notes in some fashion. 

Further, in order to observe the legal restrictions, this trading can only be done on a private level. This is the main difference between PPP trading and 'conventional' trading, which is highly regulated.

Private Debt (PD)

Private debt (PD) refers to loans that are provided by investors who are not banks. Companies often use private debt to support their growth, increase their available funds for day-to-day operations, or finance the construction of real estate projects.

Institutional investors have been showing more interest in private debt as it can offer them a diversified portfolio with varying levels of return. 

Private Equity (PE)

Private equity (PE) is a term used in finance to describe investment funds, usually limited partnerships (LP), that buy and fix up financially weak companies that make goods and provide services.


A private-equity fund is both a type of asset ownership (financial equity) and a class of assets (debt securities and equity securities), which are used to manage the finances of private companies that aren't traded on a stock exchange. 

A private equity firm, a venture capital fund, or an angel investor can invest private equity capital in a target company. Each type of investor has different financial goals, management preferences, and investment strategies for making money from their

investments. (Ref Investopedia)

Private Placement

A private placement is a method of selling stocks or bonds to selected investors and institutions rather than publicly on the open market. 

This is an option for a company that wants to raise capital for expansion instead of going for an initial public offering (IPO). 

The sale of private placements is governed by Regulation D of the U.S. Securities and Exchange Commission. 

Wealthy individuals, banks, financial institutions, mutual funds, insurance companies, and pension funds are among the investors who may be invited to participate in these programs. (Ref Investopedia)

Project Owners / Project Principals

An owner / owners of a project that seeks project debt financing.

Project Sponsors

Sponsors are typically corporate entities that offer financial support within the financial services industry. Such support can involve underwriting for offerings of stocks, mutual funds, or exchange-traded funds (ETFs). (Ref Investopedia)

Safekeeping Receipt (SKR)

An SKR or safekeeping receipt is a document that serves as proof that a third-party agent is holding your assets in safekeeping. 

This receipt can be used to demonstrate ownership of the assets, and it can also be utilized to transfer ownership of the asset. Furthermore, private parties such as banking institutions may verify the SKR with prior written consent. (Ref Global Trust Depository)


A security refers to a financial asset that can be bought or sold on a market. This term can encompass various types of financial instruments, although its legal definition may vary depending on the jurisdiction. 

Securities can be represented by a certificate or be in electronic form, which means they are non-certificated and held as a book entry. Certificates can be either bearer or registered, which determines the holder's rights under the security. 

Securities include items such as shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options, limited partnership units, and other types of formal investment instruments that are tradable and interchangeable. (Ref Investopedia)

Segregated Fund

A segregated fund is an investment tool frequently utilized by Canadian insurance companies to oversee individual, variable annuity insurance products that provide life insurance and investment capital appreciation. 


Segregated funds may have higher total expense ratios as a result of their more intricate structure, and their fund objectives are generally not aggressive, leading to more moderate returns. (Ref Investopedia)

Solar Power Purchase Agreement (SPPA)

Synthetic Power Purchase Agreement - A Synthetic Power Purchase Agreement is a financial agreement between a generator and an off-taker.

Speculative illiquid securities

"Speculative illiquid securities" refers to bonds and preference shares that are not listed on a stock exchange and have a denomination or minimum investment of £100,000 or less. 

The funds raised from the sale of these securities are typically used by the issuer for purposes such as lending to a third party, investing in other companies, or purchasing and developing property. These types of securities are also known as "speculative mini-bonds". (Ref Simmins & Simmins)

Standby Letter of Credit (SBLC)

A SLOC or standby letter of credit is a legally binding document that serves as a guarantee of payment commitment by a bank to a seller if the buyer or the bank's client fails to fulfill the terms of the agreement. 

SLOCs are useful in enabling international trade between companies that operate under different regulations and may not have prior relationships. 

It's important to note, however, that while an SLOC assures payment to the seller and the delivery of goods to the buyer, it does not guarantee that the buyer will be satisfied with the goods. SLOC is also commonly abbreviated as SBLC. (Ref Investopedia)

Structured Note

A structured note is a type of debt security that is issued by financial institutions. Its return is determined by various factors such as equity indexes, individual equities, a collection of equities, interest rates, commodities, or foreign currencies. 

The performance of a structured note is associated with the return on an underlying asset, a set of assets, or an index. (Ref Investopedia)

Tear Sheet Program

A tear sheet has varying interpretations based on the industry it's used in. In finance, it refers to a concise one-page document that highlights essential information about a specific company or fund. 

This term originated from the practice of brokers tearing out a page from a larger document to present to their clients. 

Such sheets were commonly used before the widespread availability of online resources that make it simpler and less expensive to obtain company information. (Ref Investopedia)

Unlisted Company

Private companies are businesses that are not publicly traded on a stock exchange and are owned by private individuals or groups. As a result, they do not have access to public funding opportunities. 

Instead, they rely on private investors to raise capital. Shares of a private company, also known as an unlisted public company, are not available to the general public and are not traded on any stock exchange.


However, private companies can have an unlimited number of shareholders who invest capital in the company for commercial ventures. (Ref Investopedia)

Work In Progress (WIP)

A work in progress (WIP) account is a type of inventory account in accounting that comprises items that are currently being produced but are not yet completed.


This account reflects the costs of the resources utilized but not yet transformed into finished products. Another term for the work in progress account is work in process. (Ref The Economic Times)

Virtual Data Room (VDR)

A virtual data room (VDR), which is also referred to as a deal room, is a secure online storage facility used to store and share documents. 

It is commonly used during the due diligence process before a merger or acquisition, allowing companies to examine, distribute, and reveal important documentation. (Ref Investopedia)

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