Why has there been an upsurge in project finance and development work, particularly in the Midwest?
Machlin: There are several principal reasons for the upsurge in project finance and development work recently. As long as such projects are economically viable, the rating agencies and most lenders view limited recourse projects as being especially credit worthy owing to the fact that such projects are isolated (i.e., “ring fenced”) from the credit exposure of the sponsoring corporate parties. Another reason is that it is very hard and risky to do some of the novel, large transactions on company balance sheets. For instance, there is a significant upsurge in interest in nuclear power generation in America now after a twenty or thirty year hiatus. Nuclear power developments require enormous amounts of time – maybe up to ten years for permitting and development – and enormous amounts of capital – in the billions. The credit needs of one such nuclear project may be too large for the sponsoring utility or company to use their general corporate credit/balance sheet for support. A second exa
