A common feature of project finance is the creation of an SPV by sponsors. The SPV is an incorporated entity, with no other or previous operations other than the business of the project. Its assets are comprised solely of the assets of the project itself, and absent other arrangements, recourse to those assets will represent to the lenders their final recourse option.More speciflcally, project finance can take two forms, recourse and non-recourse.' Non-recourse project finance is a type of financing in which the lender has no ability to make claims against the sponsor in excess of the value of the SPV collateral if such collateral is insufflcient to repay the debt.' A recourse financing structure, on the other hand, gives the lenders the ability to make claims against the sponsor in excess of the SPV collateral, if such collateral is insufficient to repay the debt.In an underdeveloped market like Iraq," project flnance agreements are sometimes called upon to play both a contractual and a regulatory role among the involved parties. One example arises in the area of power generation, where project flnance augments the existing power generation grid, either through public or private models. Because the Iraqi market is lacking in competition regulation, project finance documents should attempt to fill in the gaps created by deficiencies in market regulation and competition law. For instance, such power generation schemes may include long-term contracts for the sale of the generated power to credit worthy purchasers. When such arrangements are used, they are secured via an off-take agreement that creates the type of long-term commitment needed by the power producer for the buyer to purchase the power produced at a set price. Similar utility for project finance can also be found in projects involving pipelines, storage facilities, refineries, waste disposal, water and telecommunications, just to name a few areas of application.'Another point of interest in markets like Iraq is the enforceability of the project flnance terms, which is predicated on the predictability of the legal, regulatory and political environment. Unstable markets are not good candidates for security and contractual enforcement, and therefore project finance documents must be specific in addressing potential regulatory and legal problems, as well as in allocating risk and responsibility
