International Project Finance

In this environment the need for skilled analysis of project structures is acute. Banks, private investors, project developers, equipment suppliers, official creditors, and p roviders of credit risk enhancement all must all be properly equipped to assess project risk and prospects for future performance — both in existing portfolios and new transactions.

  • Course Instructor

    The Course Director specialises in capital markets, risk management, and international project finance. She has considerable professional experience with the oil and gas, power, transport, and telecom sectors. She has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures.


COURSE BACKGROUND:

Today global markets for project finance are being redefined. In this environment the need for skilled analysis of project structures is acute. Banks, private investors, project developers, equipment suppliers, official creditors, and providers of credit risk enhancement all must all be properly equipped to assess project risk and prospects for future performance — both in existing portfolios and new transactions. While differentiating between countries and industrial sectors, this program is designed to help participants break the project analysis process into its component parts. They are exposed to techniques for assembling market information and making qualitative judgments, as well as being given tools for conducting thorough quantitative financial analysis and cash flow forecasting. Cases and examples from around the world that have successfully weathered recent market upheavals, as well as those that have deteriorated, are used extensively to ensure understanding and give participants practice in the application of concepts.

The program also examines differences between sources and providers of finance and risk support. This includes the bank market, euro-bond issuance, 144A private placements and even sources of local currency funding. Lectures cover many recent examples of securitization, leasing, and structured financing techniques used in creative ways in project financing and other deals. Additionally, careful attention is paid to the many techniques for enhancing the terms of funding including Multilateral Agencies such as the World Bank IFC/MIGA, as well as official providers such as regional Development Banks like IADB or EBRD, Export Credit Agencies and even Private Sector Insurance providers.

COURSE OBJECTIVES:

Participants will learn about:

  • Structuring Large Projects and Accessing the Most Competitive Funding in the Oil and Gas, Energy,Transport and Other Infrastructure Sectors
  • Using and Analyzing Pro Forma Estimates and Cashflow Models
  • Key Legal Risks in Projects
  • How to Work with Export Credit Agencies, Multilateral Institutions and Other Official Players
  • Using the Capital Markets for Project Transactions
  • Cross-Border Leasing
  • Managing Interest Rate, Currency and Commodity Price Volatility
  • Energy Derivatives and their Applications

WHO SHOULD ATTEND?

  • Heads of Training
  • Project Finance Managers
  • Credit Managers
  • Financial Analysts
  • Senior Executives
  • Securities Managers
  • Corporate Banking Officers

DAY 1:

THEMES: STRUCTURING PROJECTS AND CREATING A SECURITY PACKAGE; FINDING THE MOST EFFICIENT SOURCES OF DEBT FINANCE; CASH FLOW MODELING
(Meg Osius & Bruno Mejean)

INTRODUCTION: INTERNATIONAL PROJECT FINANCE TODAY

  • Challenging Markets for Project Finance Transactions
  • Understanding BOO, BOT, BOOT, BLT and Other
  • Approaches to Private Investment in Public Infrastructure
  • Who are the Players?
  • Identifying and Allocating Risks
  • Examples: Financing Pipelines, Power Projects and Toll Roads
  • What Can Go Wrong - Markets in Distress

SOURCES OF FINANCE: Financing Checklist

TRADITIONALAND CONTEMPORARY SOURCES OF FINANCE: BANK LOANS

  • Syndicated Loan Financing: Primary and Secondary Distribution
    Participation, Assignment, and Novation
  • What Security do Banks Want?
  • Of fshore Accounts and Trustees
  • Mortgages on Fixed Assets
  • Contract Assignments
  • Development Bank “A” and “B” Loans
  • Current Inter-creditor Issues

CASHFLOW MODELING WORKSHOP: ANALYTICAL TECHNIQUES AND CREDIT ASSESSMENT

  • Financial Modeling and Cash Flow Analysis
  • The View of Lenders: DSCR and PV Coverage
  • Equity Considerations: IRR and NPV
  • Approaches to Evaluating the Cost of Capital
  • Project Returns vs. Equity Returns
  • Forecasting Techniques and Limitations

CASE STUDY:Working With Cash Flow Modeling Software to Finance a Gas Processing Plant
Participants break into small groups to prepare a case study concerned with a fertilizer plant. A computer simulation will be used to model cashflows. Groups will present their solutions.

DAY 2:

THEMES: INFRASTRUCUCTURE PROJECTS; POWER; EXPORT CREDIT AGENCIES

CASE DISCUSSION: LEGAL ISSUES IN PROJECT FINANCE

  • Legal Environment
  • Commercial Points and Legal Points in Various Project Structures:
    Incorporated and Unincorporated Joint Ventures
    Partnerships and Limited Partnerships
  • Key Contractual Agreements and Structuring Considerations

USING CAPITAL INTERNATIONALAND LOCAL MARKETS IN PROJECT FINANCE

  • U.S. Private Placements - Traditional and 144A
  • Comparing Bond Issuance to Bank Loans
    Nature of Investors
    Timing and Flexibility
    Project Size and Relative Cost
    Security Requirements
    Negative Arbitrage Issues
    The Due Diligence Process / Road Shows
  • Rating Agency Considerations

EXPORT FINANCE TECHNIQUES

  • Guarantees and Insurance vs. Funding
  • Buyer and Supplier Credits
  • Bank Incentives Inherent in ECA Programs
  • Costs and Availability
  • Securitization of ECA Guarantees
  • Choosing a Special Purpose Vehicle

CASE STUDY: FINANCING A POWER PLANT
Risk allocation among various project participants in an Asian Power project. Testing the project’s cash flows under varying scenarios with a cash-flow simulation model (E.g. what are acceptable DSCR levels? What returns does equity look for?)

DAY 3:

THEMES: OTHER SOURCES OF FINANCE AND POLITICAL RISK SUPPORT; TRANSPORT AND OTHER INFRASTRUCTURE PROJECTS; WATER AND SANITATION

MERCHANT POWER PLANTS (MPPs)

  • Market Forces and the Effect on Electrical Supply
  • Fragmentation of Electricity Generation
  • Gencos/T ranscos/Discos
  • Rating Agencies’ Analytical Model
  • Understanding California

FURTHER ROLES FOR MULTILATERAL DEVELOPMENTAGENCIES (MLAs): POLITICAL RISK SUPPORT (Bruno Mejean)

  • IADB’ s Partial Risk Guarantee
  • World Bank (IBRD)
  • Multilateral Investment Guarantee Agency (MIGA)
  • Inter -American Development Bank (IADB)
  • Asian Development Bank (ADB)
  • European Bank for Reconstruction and Development (EBRD)
  • Overseas Private Investment Corp. (OPIC)
  • Corporacion Andian de Fomento (CAF)
  • CABEI and Other Regional Agencies
  • European Investment Bank (EIB)

OTHER SOURCES OF POLITICAL AND OTHER RISK INSURANCE

  • Private Sector Providers
  • Lloyds, AIG, Sovereign, Chubb, ACE, XL, Centre Solutions, EIC
  • Mono-line Insurers: MBIA and Ambac

FINANCING AIRPORTS, PORTS AND OTHER TRANSPORTATION PROJECTS

  • Ownership Structure
  • Outright and Partial Government Ownership
  • Long-T erm Concessions
  • Privatization of Seaports
  • Airport Financing Compared to Seaports
  • Exercise: Constructing a Risk Matrix for Airport Projects

CASE STUDY: AIRPORT FINANCE
Participants will break into groups to work on this limited recourse project structure. An airport in Latin America is financed privately in the capital markets. Discussion will focus on project risks, their allocation through contracts, mix of financing, cash flow projections, and even rating agency considerations in evaluating the proposed financing structure. A cash flow simulation model is used.

DAY 4:

THEMES: WATER AND SANITATION PROJECTS; LEASING RISK MANAGEMENT WITH DERIVATIVES; ENERGY DERIVATIVES AIRPORT CASE DISCUSSION WATER INFRASTRUCTURE AND INTERNATIONAL PROJECT FINANCE TODAY (Bruno Mejean, Nord/LB)

  • Special Features of Limited Recourse Projects in Water and Sanitation
  • An array of Structures from Service Agreements to Leasing to BOT
  • Who are the Players? Investors and Lenders?
  • Desalination and Electricity Projects
  • Case Examples:

          - Barkha Power and Desalination Project in Oman

          - Wastewater treatment in Mexico with a peso-denominated private placement

CASE STUDY: FINANCING AWATER TREATMENT PLANT
Participants will break into groups to prepare a case study concerned with financing a wastewater treatment plant in Latin America

LEASING APPLICATIONS

  • Leasing Applications in Projects
  • Evaluating Cost
  • Case Examples: Colombia and Brazil

PRICE VOLATILITY AND RISK MANAGEMENT IN PROJECT FINANCE

  • Financial Price Movements Today: Volatility and Risk
  • Using Interest Rate and Currency Swaps to Realize Cost
  • Savings and Managing Risk in Projects
  • Using Options: Caps, Floors and Collars
  • Applications: Support for a Petrochemical Project in Venezuela

CASE: INTEREST RATE AND CURRENCY RISK MANAGEMENT IN POWER PROJECTS

GUEST SPEAKER: USING ENERGY DERIVATIVES

DAY 5:

THEMES: “RAS LAFFAN” PROJECT FINANCE MODELING WORKSHOP
(Meg Osius and Andreas Maestle, PROFINTOOLS)
Participants will spend this final day building a model for Ras Laffan — a Liquefied Natural Gas (LNG) project in Qatar — using advanced project finance software from PROFINTOOLS. Modeling the construction and operation of the plant, they will assess a wide range of scenarios in order to test a limited recourse financing package for debt capacity and suitability for investment. Participants will receive a demo copy of the “ProFin Tools” project finance modeling software for use beyond the session.

MODELING WORKSHOP OVERVIEW

  • Introduction to the “ProFin Tools”
  • Model Variations by Project Type

STRUCTURING THE MODEL AND ORGANIZING THE DATA
Construction Costs and Timing Operating Cost, Plant Capacity Usage, Fixed and Variable Costs, Reinvestment, Plant Expansion, Productivity Shifts

  • Factoring in Reserves
  • Considering Currencies
  • Tax Calculations

FINANCING SECTION
Equity First or Pro Rata manually designed equity subscription draw-down of debt linked to specific contracts or expenditures or in a hierarchy.

SENSITIVITYANALYSIS: OBJECTIVES AND LIMITATIONS

  • Measuring Debt Capacity and Investor Return
  • Using Modeling Output for Initial Project Vetting
  • Supporting on-going Negotiations
  • The Course Director specialises in capital markets, risk management, and international project finance. She works with  corporations, financial institutions, public agencies, law firms, and private equity investors. She has considerable professional experience with the oil and gas, power, transport, and telecom sectors.

    She began her career at JP Morgan Chase Manhattan Bank, where she structured highly leveraged transactions and project financings and advised clients on foreign exchange and other price risk management strategies. She was responsible for a team of analysts responsible for evaluating the quality of the bank’s global loan portfolio as well as that of its newly acquired affiliates. In that role she had extensive experience with workout and distressed debt.

    She has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures. The World Bank has published her articles on approaches to financial analysis in emerging markets.

    From 2000 to 2007 she was a member of the Technical Advisory Panel (TAP) of the Public Private Infrastructure Advancement (PPIAF) managed by the World Bank. In 2006 and 2007 she was the TAP’s chairperson. The fund provides technical assistance to emerging market governments in order to encourage private involvement in  infrastructure development. She received an M.B.A. from INSEAD, the European Institute of Business  Administration, in Fontainebleau, France. Her B.A. degree is from Princeton University.

    Courses run by this instructor