Meaning and transaction use
World Bank guidance says that in non-recourse financing lenders' recourse is generally limited primarily or entirely to project assets, while asking whether defined circumstances create recourse to shareholders. [S1]
World Bank project-finance material describes repayment from project cash flows with limited or no shareholder liability, with recourse shaped by project risks and agreed support. [S2]
Proposed review method: create a recourse matrix for completion support, cost overruns, equity commitments, guarantees, indemnities, termination, fraud, breach and statutory liability; link each item to amount, expiry and enforcement conditions.
Worked example
Illustrative operating-year coverage only. Assume USD 12 million of cash flow available for debt service, USD 3 million of principal and USD 5 million of interest.
Scroll the table horizontally to view all columns.
| Measure | Calculation | Result |
|---|---|---|
| Debt service | 3 + 5 | USD 8 million |
| DSCR | 12 / 8 | 1.50x |
| Cash after debt service | 12 - 8 | USD 4 million |
| Downside cash flow | 12 x 75% | USD 9 million |
| Downside DSCR | 9 / 8 | 1.125x |
Coverage falls from 1.50x to 1.125x under the stated downside. This does not establish compliance without the executed definition and waterfall.
Proposed transaction review process
Identify repayment sources
Map project revenues, reserves, insurance, termination and asset proceeds.
Map recourse
List every sponsor commitment, guarantee, indemnity and carve-out.
Allocate risks
Review construction, operations, demand, offtaker, political and force-majeure allocation.
Stress repayment
Test cash flows, reserves, covenants and recovery across the project life.
Evidence checklist
Revenue evidence
Offtake, tariff, availability and demand terms.
Support evidence
Equity commitments, guarantees, bonds and indemnities.
Security evidence
Assets, accounts, assignments, shares and direct agreements.
Model evidence
Base, downside, termination, refinancing and recovery cases.
Decision framework
| Situation | Proposed action |
|---|---|
| Completion support expires | Verify completion tests and residual defects before release. |
| Revenue depends on one offtaker | Underwrite payment security, termination and replacement rights. |
| A recourse carve-out is triggered | Quantify sponsor exposure and lender remedies. |
| Downside breaches coverage | Test reserves, cure rights, distributions and restructuring options. |
Common errors to check
- Describing limited recourse as no sponsor exposure.
- Ignoring contingent guarantees and indemnities.
- Sizing debt from the base case alone.
- Treating project assets as readily realisable collateral.
Map the recourse
Bring the project model, support documents, security and risk matrix to a non-recourse financing review. Identify every repayment source and sponsor exposure.
Discuss the transactionPrimary references and editorial scope
- World Bank PPP Resource Center: Project Finance Key Concepts
Non-recourse definition and shareholder-recourse exceptions. Reference checked 17 September 2026. - World Bank: Understanding Power Project Financing
Project cash-flow repayment and limited or no shareholder liability. Reference checked 17 September 2026.
General project-finance education. Figures are hypothetical. Recourse, security, liability and insolvency outcomes depend on executed documents and law.
General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.
