Corporate financing refers to the overall financial management of a company, such as determining the company's financial model, raising funds, maximizing the use of funds, and improving the company's operations, whereas project financing refers to making financial decisions for a project, such as funding sources.
Answer :
Project financing is simply a method of completing a project while safeguarding the company's other assets. As the project sponsor, your firm, Big Energy Corp., would basically create a second corporation to carry out the project's construction. This tiny firm is known as a project firm; we'll refer to it as Little Energy Co. Big Energy will possess most or all of Little Energy's stock and will most likely oversee the company's day-to-day operations as well. Independent lenders will provide additional cash in the form of Little Energy loans. Little Energy will go bankrupt if the project fails for any reason, but as the project sponsor, your firm, Big Energy, will not be accountable for any of Little Energy's obligations. This type of configuration is frequently employed in energy, infrastructure, and construction projects, despite its complexity. Let's take it a step further in the case of energy initiatives.
Big Energy, as the project sponsor, may be a wind developer trying to create a new wind farm, an oil firm looking to explore a new resource, or a transmission business looking to establish a new transmission corridor. This is a well-established corporation with assets, liabilities, and equity on its balance sheet. It would also have the in-house competence to assess field projects and the contacts to complete them. Even yet, shareholders in organizations like Big Energy Corp. want to minimize their exposure in the event that the project fails.
This is similar to revenue bonds in the public sector. The project is the only source of prepayment.
General obligation bonds are safer. THE COMPANY'S OR GOVERNMENT'S ENTITIES ARE PLEDGEED AS SECURITY FOR PAYMENT.