Project Finance in Singapore: What You Need to Know 

Following the end of the Second World War, Singapore, a small Southeast Asian state, has experienced significant economic developments. These changes have made Singapore one of the most economically developed nations in the world to impact the political environment in the area.

The banking sector in Singapore has developed rapidly, and this has included long-term loans and project finance. It has helped to successfully implement multi-million dollar initiatives in several fields like business, energy, trade, real estate, healthcare, and transportation.

New Financial Service tools have an impact on the expansion of big business these days, as well as global collaboration between Singaporean companies and foreign partners.

A few aspects of Singaporean project lending and financing

Large-scale investment projects can use project financing to secure long-term debt financing, with the cash flows from the project’s current and future operations serving as the basis of debt servicing. This strategy was first applied to the European market and spread to Southeast Asia through large-scale financing for oil and gas projects. 

Project finance is an unsecured or limited-liability financial structure to fund long-term facilities, industrial projects, and government services. 

Project resources, rights, and interests are held as secondary security under a loan structure that is primarily dependent on the project’s revenue for repayment. The private sector finds project finance particularly appealing since it allows businesses to finance significant initiatives off-balance sheet (OBS).

The Workings of Project Finance

The financing of long-term infrastructure and industrial improvement, typically for the electricity and oil and gas sectors is referred to as project finance. Additionally, some economic entities, like specialised vehicles (SPVs), are financed with its help. The expected cash flows serve as the sole basis for determining the funds needed for these projects.

The following organisations are a few of the frequently seen project financing sponsors:

• Contract Sponsorship: sponsors who offer unsecured or subordinated loans and stock. They are essential to the creation and functioning of business units.
• Financial Sponsorships: These sponsors are financiers who typically hope to get a high rate of return on their capital.
• Industrial Sponsors: Typically, these sponsors feel that the undertaking is relevant to their own companies.
• Public Sponsors: Authorities at all levels are among these sponsors.

Multiple essential components make up the project financing framework for a construct, work, and transfer (BOT) project. An SPV is typically a part of project finance for BOT projects. The company’s sole responsibility is to carry out the project by leasing out the majority of the construction and operational work. Debt service only takes place during the operations stage for new-build projects as there is no source of income during the development period.

For example, DBS has a dedicated team that arranges funding and offers advice for initiatives that are either greenfield or brownfield, that are acquired through mergers and acquisitions. Being an Asian bank, they are well-positioned to support the companies with intricate developments and acquisitions 

The in-depth knowledge of the area, robust regional connections, and industry-leading position in project financing in Asia has helped the sector. Some of the advantages of leading banks’ project financing are: 

Engage with a team that has won awards

Banks like DBS has guided and arranged award-winning deals in the areas of power and services, renewable energy, resources such as oil and gas, and transportation and social infrastructure, with teams based throughout Asia and the Pacific.

Take advantage of expertise

The bank can offer advice, provide the necessary structuring knowledge, and arrange the finance thanks to the wealth of expertise and proven track record. It involves identifying and allocating risks effectively to align interests and support enduring project success.

Make use of the network.

Utilising close ties to multilateral agencies and export credit agencies worldwide, the banks routinely place in the top 5 of the region’s project finance advisors in terms of agreements closed.