Day 1 - Project Finance Workshop
Registration commences at 8:30
Programme runs from 9:00 - 5:00 daily
Key issues in project finance and risk management
• Introduction
– Activity in the project finance market
– Factors driving the demand for project finance
– Key lessons from the past
Lessons of experience
• An overview of crucial issues in project finance
– Commercial motivations for project finance
– Project finance vs. the financing of projects
– The critical issue in all project financings
– Risk and return
– Factors influencing financing techniques and the syndication process
• Qualitative risk evaluation in project financing
– Country and political risk
– Understanding the project finance process
Case study: country & political risk - structuring a project finance deal in a developing economy.
•
Assessing qualitative risks in a variety of projects.
•Identification and assessment of the key risks
– Feasibility studies and review of operating assumptions forselected projects, are the assumptions realistic?
– Review of the key aspects of a summarised feasibility study
Case study: evaluate the underlying operating assumptions for assigned projects.
• An overview of the project financial statements
– Review of a generic project finance spreadsheet to understand the main influences on the project’s viability
– The impact of capital and operating costs on project viability
– Using nominal vs. inflation adjusted figures
– Use of sensitivities and Monte Carlo simulations
– The relationship between leverage, return, DSCR and project viability
Day 2 - Project Finance Workshop
Assessing the financial viability
Case study: review of assigned case studies to examine key sensitivities.
• Building and sensitising the operating cashflow
– Useful Excel sensitivity functions
– Assessing the financial sensitivity of the assigned projects to key risks
– Key factors influencing the project IRR
•
Sources of debt financing in projects•
Financiers and their objectives– Country risk: the use of export credit agencies, development banks and political risk insurers
– Use of financial instruments: bank vs. bond markets
– Credit enhancement techniques
– Interest, FX and commodity price exposures
Case study: debt funding for selected projects. Participants develop the debt structure for their assigned case studies and identify key influences on the debt service coverage ratios.
Day 3 - Project Finance Workshop
The equity investor’s perspective, commercial aspects of documentation • Financial yardsticks used by investors: uses and limitations– Project investment appraisal techniques
– Corporate cost of capital as a basis for evaluating project returns
– How equity investors seek to mitigate risk in project finance
– The trade-off between leveraging equity returns and the need to provide credit support
– Assessing the impact of operating relationships between the project sponsors and the project company on equity returns
– Subordinated debt vs. equity and factors influencing the choice
– Determining an exit route, including IPOs
– Extracting cash from the project company
Case study: structuring project finance from an equity investment perspective.
– Are returns adequate to justify the investment?
– Key influences on equity returns.
• Commercial issues in project finance documentation
– Structure of loan documentation
– Key covenants and potential complications
– Concession agreements
– Structuring off-take agreements – dealing with market risk
– Choice of construction contract
– Completion and cost overrun guarantees
– Shareholder lock-ins
– Banking security
– Intercreditor issues
Day 4 - Project Finance Workshop
Contract structuring and problem projects
Case study: structuring third party credit support and security.
Refine a proposal which includes capital structure, proposed covenants, third party credit support and security.
• Why projects face difficulty
– Lessons from the past
– Typical reasons for failure
– Options for equity investors in problem projects and practical problems
– Mini case study illustrating some of the potential problems in project finance
Course summary and close