Question 1

What is project finance and how is it different from corporate lending?

Accepted Answer

Project finance is non-recourse or limited-recourse lending — the lenders look primarily to the project's cash flows and assets as repayment, rather than the sponsor's general creditworthiness. The project is ring-fenced in a special purpose vehicle (SPV). This allows sponsors to finance large projects off-balance-sheet and align the risk profile of the financing with the specific risks of the project.

Question 2

What role does the government play in UAE project finance?

Accepted Answer

For regulated infrastructure sectors (power, water, transportation), the government or its entities typically provide the off-take or concession agreement that underpins the project's revenue stream. Government support documents — direct agreements, letters of support, step-in rights and, in some cases, guarantees — are critical to lender comfort. We advise on government support documentation from both the lender and sponsor perspective.

Question 3

How is Islamic project finance structured?

Accepted Answer

Islamic project finance uses Sharia-compliant instruments instead of conventional interest-bearing debt. Common structures include: Istisna'a for the construction phase (a manufacturing contract where the bank contracts to deliver a completed asset), Ijara for the operational phase (a lease arrangement), and Diminishing Musharaka for equity-like structures. We work with leading UAE Islamic banks and their Sharia supervisory boards on these structures.

Question 4

What security can lenders take over UAE project assets?

Accepted Answer

UAE project security typically covers: mortgage over project real estate (registered with the relevant land authority), assignment of project documents (concession, off-take, EPC, insurance policies), pledge of SPV shares, pledge of accounts, and in some cases assignment of government receivables. DIFC-domiciled SPVs benefit from a more flexible security regime under DIFC law. We advise on the most effective security package for each transaction.

Question 5

Can foreign banks lend to UAE project companies?

Accepted Answer

Yes. Foreign banks are active lenders in the UAE project finance market — including European banks, Asian development institutions and Islamic finance providers. Some regulatory considerations apply to foreign lenders operating without a UAE branch, but the documentation and security structures are well-established. We advise both UAE-licensed and foreign lenders on UAE project finance transactions.

پراجیکٹ فنانس دبئی میں۔

دبئی اور UAE میں پراجیکٹ فنانس قانونی خدمات

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Frequently Asked Questions

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