Project Finance: Principles and Efficiency



By Prof. Dr. Tatiana V. Yurieva


Lyudmila N. Voropaeva, PhD

Russian Presidential Academy of National Economy
and Public Administration (RANEPA)

Moscow, Russia




The paper covers the analysis of project finance, one of the most effective mechanisms for attracting investments to implement major, complex and expensive projects under high risks and uncertainty. The notion of ‘project finance’ and its key features were redefined by analyzing scientific publications, research carried out by experts and international economic organizations. It was demonstrated that a risk management system, identifying and sharing risks among its participants and assuming the presence of an appropriate security and guarantee package, is an integral element of project finance system. Project finance is characterized by a large number of stakeholders, necessitating organization of an effective system for managing their interests and contracts. Project finance involves a comprehensive analysis, the level of detail of which depends on project scale, possible risks, and social and economic impacts of management decisions. The advantages and disadvantages of project finance were determined in comparison with other financing models with regard to the interests of their participants. A significant share of global project finance market accounts for infrastructure projects, as well as projects in oil and gas production, involving both developed and developing countries. Modern project finance market is characterized by the decreasing share of public funds in financing of major infrastructure projects, including based on PPP principles, continuously improving the mechanism for attracting new sources of financing (infrastructure bonds, etc.).  In the Russian economy, project finance is mainly used in large investment projects in oil and gas production, transport infrastructure, electric power industry, etc. Many of these projects are implemented based on PPP mechanism, allowing not only getting the financial resources required, but also increasing the efficiency of utilizing state budget funds, applying advanced production, information and management technologies, professional competencies and skills of private partners, and reducing entrepreneurial investment risks. Effective interaction between the state and private businesses is based on sound legislative base, proven bureaucracy, reasonable return on investment rates, acceptable project payback periods for public and private partners.

The research involved analysis and synthesis, comparison, classification, as well as logical and statistical analysis methods.

Keywords: project management, project finance, infrastructure projects, public-private partnership, transport infrastructure.

JEL code: G11, O22


Project management has proven to be an effective tool for initiating, planning and implementing any project. The essence of project management is using appropriate methods, tools, techniques and competencies when implementing projects (Voropaeva L.N., & Yurieva T.V., 2017). It should be considered that project management is carried out by implementing a set of processes (ISO, 2012).

Emergence of project management in major economies dates back to the 1950s. Project management techniques are traditionally used in construction, defense, oil and gas complexes and information technology. Over the last period, they have been increasingly introduced in social sector, and in state and local government system. Organizations using the project approach manage to ensure an innovation-based development, improve competitiveness, and prevent crisis amid continuous change (Kerzner H.R., 2013).

Financial security of projects is the most important part of project management. Projects can be implemented based on various financing models. Large investment project management under high risk is generally based on a special financing model, referred to as “project finance”.

Scientific publications, research carried out by experts and international economic organizations give much attention to understanding the notion of project finance.

In particular, the Basel Committee on Banking Supervision at the Bank for International Settlements defines project finance as a special financing method when funds are raised to carry out a particular project on the condition that they will be repaid from future project income with project assets being the only pledge. It is noted that a characteristic feature of project finance is the presence of a legally and economically independent project company operating based on own project initiators (sponsors) funds (Basel Committee on Banking Supervision, 2004, p.61).

The first research papers on project finance were published in such journals as Harvard Business Review and Sloan Management Review in the late 1970s and early 1980s. The most part of research on various project finance aspects was carried out during the past decade. Many of them have been published in such well-known journals as the International Journal of Project Management, the Journal of Applied Corporate Finance, the Project Management Journal, World Development, and others, and are mainly practical (Müllner J., 2017).


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Second Editions are previously published papers that have continued relevance in today’s project management world, or which were originally published in conference proceedings or in a language other than English.  Original publication acknowledged; authors retain copyright.  This paper was originally presented at the 8th Scientific Conference on Project Management in the Baltic States at the University of Latvia in April 2019.  It is republished here with the permission of the author and conference organizers.

How to cite this paper: Voropaeva, L. N.; Yurieva, T. V.  (2019); Project Finance: Principles and Efficiency; presented at the 8th Scientific Conference on Project Management in the Baltic States, University of Latvia, April 2019; republished in the PM World Journal, Vol. VIII, Issue V, June.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/06/pmwj82-Jun2019-Voropaeva-Yurieva-project-finance-principles-and-efficiency.pdf



About the Authors

Prof. Dr. Tatiana Vladimirovna YURIEVA

Moscow, Russia




Born in Moscow (Russia). Doctor of Economics, Professor Yurieva graduated from Moscow State University named M. V. Lomonosov (faculty of Economics).

Tatiana Yurieva worked at Moscow State Construction University, Moscow State University of Economics, Statistics and Informatics (MESI). Since 2011 working in the Russian Presidential Academy of National Economy and Public Administration (RANEPA) as head of the Department projects and programs management, also head scientific program “Projects and Programs Management” (RANEPA).

Member of the Russian Project Management Association. Advisor on scientific activities of the President of the Moscow Association of Entrepreneurs. Member of the editorial Board of the journal “Financial Business” (Russia), “Risk Management” (Russia), “Regional Economy and Management: electronic scientific journal” (Russia), Programme Committee “International Scientific Conference on Project Management” (Riga, Latvia).

Author of monographs, textbooks and more than 90 scientific articles on Economics and Management. Participant of more than 30 international scientific and practical conferences.

Head of scientific work of undergraduates, postgraduates and doctoral students. She participated in the implementation of projects as a manager and executor, in expert and analytical activities in the bodies of state and municipal administration. Yurieva Tatiana is Honorary worker of higher professional education of the Russian Federation.

Dr. Yurieva can be contacted at email: yuryeva@ranepa.ru or web: https://www.ranepa.ru


Liudmila Nikolaevna VOROPAEVA

Moscow, Russia




Born in Astrakhan region (Russia). L. N. Voropaeva graduated from the Moscow Institute of Civil Aviation Engineers (specialty “Air transport management”) in 1980 and the Financial Academy under the Government of the Russian Federation (specialty “Finance and credit”) in 2003. Currently, she works at Aeroflot PJSC, Deputy Director of the accounting Department, is an associate professor of the Department projects and programs management of Russian Presidential Academy of National Economy and Public Administration (RANEPA), PhD in Economics.

Experience in the civil aviation system for more than 30 years, has practical experience in foreign offices of the airline, is a leading specialist in financial management, risk management, accounting and tax accounting in civil aviation.

She has certificates of the International Civil Aviation Organization (IATA) on financial management, leading Russian institutions in the field of education on the organization of financial and management accounting, currency legislation of the Russian Federation. SheHe is the head of the working group on reorganization of financial activities of Aeroflot representative offices abroad in the SAP ERP system.

Experience of teaching since 2010 as an associate Professor at the departments of Management and Economics and Air Transport Management of the Moscow State Technical University of Civil Aviation, the higher commercial school “Aviation business”, the Center of training MGTU GA, the Department projects and programs management of RANEPA.

Experience in consulting on project management – 20 years. She has managed and participated directly in more than 20 projects for the creation of automated accounting systems for various business processes related to the international commercial and financial activities of the airline, as well as in the organization of internships abroad for specialists in the aviation industry. Author (co-author) of 2 monographs and textbooks, more than 20 articles.  Courses taught: Project financing, Effective mechanisms of financial management, Financial risk Management.

For many years of conscientious work in the field of civil aviation. L. N. Voropaeva was awarded with honorary signs “Excellent Aeroflot”, “Excellent air transport” and “Honorary worker of transport of Russia”.

N. Voropaeva can be contacted at email: l.voropaeva@mstuca.aero or web: https://www.ranepa.ru