Economics · Infrastructure Project Financing Mechanisms
In the context of project financing for large-scale infrastructure, lenders often implement a 'Waterfall Mechanism' within a Trust and Retention Account (TRA). What is the primary purpose of this mechanism?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1To grant the government the first right of refusal on all surplus cash generated by the project.
- 2To ensure that the project's revenue is first used for the diversification of the sponsor's other business portfolios.
- 3To allow sponsors to withdraw their entire equity contribution as soon as the project reaches the commercial operation date.
- 4To prioritize the application of project cash flows, ensuring debt service and statutory payments are met before any funds are distributed to equity investors.✓
Correct answer
To prioritize the application of project cash flows, ensuring debt service and statutory payments are met before any funds are distributed to equity investors.
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