Security Arrangement.
Passive investors typically provide the hulk of the capital for a project. Generally, these investors, which include passive equity investors as well as lenders, are only interested in receiving a return on their financial investment. They are usually prepared to bear certain credit risks but extremely reluctant to hear significant operating risks or other risks not premised on the ability of the project entity to meet its financial obligations.
Consequently, project financing entails developing a network of security arrangements to insulate the passive investors from all the noncredit risks associated with the project.