This 10 day intensive practical programme features everything you need to know about project finance.
Featuring 7 highly interactive workshops:
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Advanced Project Finance Workshop (days 1-3).
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Oil & Gas/LNG Project Finance(day 4).
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Power Project Finance (day 5).
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Infrastructure Project Finance (day 6).
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Mining Project Finance (day 7).
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Project Finance Risk/Recovery (day 8).
- Building Project Finance Models (days 9 and 10).
All workshops can be booked separately. Group discounts are available.
Course Outline
This unique Project Finance Academy is designed as a modular 10-day course. The modules are separately bookable. The overall course objective is to examine advanced techniques relevant in the current stressed global financial markets and to enhance your 'sector' skills in four key areas. A 1-day session on Project Finance Risk/Recovery strategies is the followed by a 2-day module on building project-finance models. International case studies and best practices are discussed throughout, including the application and integration to public-private project financings.
Who Should Attend
The course will be of value to professionals in the followingareas:
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Bankers/Investment Bankers.
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Project Finance Modellers.
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Financial Advisors.
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Sponsors/Project Joint Venturers.
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Business Developers.
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Government/PPP Agencies.
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Public Sector Managers.
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Export-Credit Agencies.
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Multilateral Agencies.
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Accountants/Taxation Advisers.
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Financial Analysts.
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Sharemarket Analysts/Brokers.
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M&A/Buyout Specialists.
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Privatisation Executives.
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Company Treasurers/Directors.
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Credit Committee Staff.
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Rating Agencies.
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Project Managers/Engineers.
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Project Consultants.
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Investment/Portfolio Managers.
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Insurance Advisers/Brokers.
Course Summary
The 12th Annual Project Finance academy starts with a 3-day Advanced Project Finance Workshop which focuses on the core skills of risk analysis and structuring, with a special emphasis on political risk. Team case presentations neatly wrap together these skills along with the analysis and sensitivities of the team case-study Excel models. Four 1- day courses then bring up-to-date sectors skills in Oil&Gas/LNG, Power, Mining, and Infrastructure. Industry fundamentals are first covered together with the key metrics and due diligence issues alongside numerous case studies. International best practices are delivered comprehensively. The 1-day module on Project-Finance Risk/Recovery examines projects that have gone wrong, including a review of the credit factors/reasons why these deals would go wrong - incorrect 'project concepts'.
The legal aspects and the four methods of loan workouts are also given. Finally, the 2-day course on Building Project-Finance Models looks at the key financial ratios and credit analysis as well as the forecast basis for any cashflow projection. This course is designed as a 'Build-your-own-model-from-scratch' with the final model used in a course bidding contest!
These 7 course modules are highly interactive with many cases and recent examples referenced throughout to fully explore the world of Project Finance. As a 10-day Academy, this intense approach isn't presented anywhere else in the world!
Day 1
Hot buttons in project finance
Best sectors and project types.
- Difficult sectors to avoid.
- Which trends are current?
Why choose project finance vs balance-sheet finance?
- Sponsor's rationale.
- Lender's criteria.
- Constructor's objectives.
- Government's role(s)
- Institutions/investors.
Stages in project finance.
- Time, team, costs.
- Credit approval/information/memorandum.
- Syndication.
Start case study/modelling assignments:
- Tollway.
- Banks/Bond.
- 144a Power Project.
- Bond.
- Oil & Gas.
- Political Risk.
- Infrastructure Complex.
- Bond.
Credit criteria.
Credit analysis case study.
- Impact of leverage.
- Calculations for global coverage ratios.
- Calculate liquidated damages /overrun/retention requirements.
Credit factors.
- How to choose sensitivities.
- Key ratio targets.
- Contrast to sponsors' IRR, NPV, valuation analyses.
How to determine the correct structure for each risk.
- The 7 Risk Systems.
- The 16 risks to identify.
- The 81 structures to apply.
Operating:
- Inputs/Reserve.
- Cost.
- Sponsor/Participant.
- Technical.
- Management.
- Force Majeure.
- Legal.
- Political.
- Foreign Exchange.
- Infrastructure.
- Interest/Funding.
- Syndication.
- Market/Revenues.
- Environmental.
- Engineering/Design.
- Completion/Construction.
Day 2
Funding and documentation
Funding sources.
- Debt.
- Local currency.
- Cross-border.
- Mezzanine.
- Credit wraps.
- Equity.
- Preference capital.
- Convertibles.
- IPOs/floats for projects.
- Capital markets.
- Leasing/Leveraged leasing.
- Export-credit agencies.
- Multi-lateral agencies.
- Commodity-based.
- Derivatives.
Ratings for project financings.
- How to get one from Moodys/Standard & Poors/Fitch.
Contractual architecture.
- PPP architecture including concession agreements /BOO/BOOT.
- Special Purpose Vehicles (the 6 types).
- Operations/management (O&M) contracts.
- Turnkey construction contract.
- Delayed completion and systems performance insurances.
- Offtake/sales contracts.
- Support agreements/direct agreements.
- Indirect supports/comfort letters.
- Government guarantees/PPP architecture.
Funding documentation.
- Loan agreements.
- Joint venture/shareholder agreement.
- Security documentation.
- Assignment of contracts/insurances.
- Offshore proceeds account.
- Swaps.
- Securitisation.
- Information memorandum.
Due diligence.
- How to scope the review.
- Independence of the reviewer.
- Fit to credit approval/compliance.
- The “Bankable” feasibility study.
Role of the advisor(s).
- When to involve advisors.
- How to keep the costs down.
Day 3
Political risk and case presentations
Political risk structuring.
Definitions.
- Terrorist questionnaire.
- The classic three – expropriation; war; inconvertibility.
- The full set of 21 political-risk categories.
Export-credit agencies/bilateral agencies.
- KfW-Ipex/Hermes, Germany.
- ECGD, UK.
- EDC, Canada.
- JBIC/NEXI, Japan.
- US Eximbank.
- OPIC, USA.
- ECIC, SA.
- Tactics for approaching the ECAs.
Multilateral agencies.
- World bank.
- Multilateral Investment Guarantee Agency(MIGA).
- International Finance Corp (IFC).
- European Bank for Reconstruction & Development (EBRD).
- African Development Bank (AfDB).
- Development Bank of Southern Africa (DBSA).
- Africa Trade Insurance (ATI).
- How to Approach the multilaterals.
Case study presentations: Each team presents its allocated case with structures and solutions as well as cashflow sensitivities. Expert feedback on the team’s presentation of the deal architecture, risks, and financial sensitivities.
Project finance as a competitive tool.
- How to integrate project financing into the bid.
Contract/tender bidding.
- “Real” turnkey construction contracts.
PPP bidding - practical case study.
- Croydon Tramlink, UK.
- The ‘ABN Amro’ Sydney model.
New horizons for projects and funding sources.
- “Green” funds.
- Emerging-market funds.
- Tax structures.
- Performance Insurances.
- Infrastructure/development funds.
- Capital markets.
- Wraps.
- Partial risk.
- Credit guarantees.
- Islamic project finance.
- Credit derivatives.
Note the pre-course pack/CD includes the project finance risks chapter and the suite of cases and cashflow models.
Oil & Gas/LNG Project Finance
Day 4
Varied dimensions of petroleum project financing:
- Field development (Upstream).
- Platforms/production facilities.
- Pipelines/oil terminals.
- Refineries/petrochemicals.
- Coal/gas-to-liquids.
- LNG/regasification/shipping.
How does the oil/gas/LNG/refining industrys’ cashflows work?
- Converting reservoir engineering and the other 15 risks into cash flows.
- Reserve tail/PV loan life ratios.
Case study: Indonesian LNG What are the bankers looking for in large scale syndications?
Reservoir engineering.
- Seismic studies.
- ‘Proven’ vs ‘Probable’ reserves.
- Production aspects.
Special petroleum-industry project finance structures:
- Production payments.
- Throughput agreements.
- Hedging/options.
- Royalty trusts.
- Securitisation.
- Tankers.
Case studies:
- Centragas: How can high-leverage pipeline infrastructure be funded in the capital markets and cover political risk.
Ekofisk Pipeline: How far can a borrower push a throughput agreement?
- Sasol Gas Pipeline: Field facilities enhance this project’s cashflows.
- First International Petroleum Transport: How does Shell spin off six tankers onto the capital markets, firstly as a private placement then as a public issue?
- Floating-Production-Storage-Offloading (“FPSOs”) Vessels: Novel financing techniques are required in this new financing sector.
- Ras Laffan LNG: The world’s largest Project Finance bond issue at the time even given the political risks.
- PNG LNG: Examine the tranches in this blockbuster deal. Sweet and sour - PFI?
- Jubilee: How do borrowing bases work?
Power Project Finance
Day 5
Power industry risk analysis.
- Technology and costs: Cogen, Cocycle.
- Heat Rates.
- Capex/MW.
- Degradation.
- Maintenance Reserves.
- Availability.
- Fuel Costs.
- Emissions.
- Renewables.
- LNG.
- Stages in power financing.
- Concession/power purchaser.
- Tenders/unsolicited.
- Financing.
Case study: Tejo Energia ("Pego"), Portugal. How can banks take 30 yr risk on a 12-year deal? What is a cash sweep?
Credit analysis.
- Coverage calculations.
- Reserve accounts.
- Liquidated damages.
Case study: Petropower. How could such a ‘beside-the-fence’ project attract 100% LDs.
Renewable energy projects.
- Wind.
- Hydro/Mini-hydro.
- Biomass.
- Wave.
- Solar/Photovoltaics.
Merchant power plants.
- Price Fuel = f(Price electricity).
- Price Gas=f(Market)/Reset.
- Fuel Subordination.
- Anchor Tenant/Host.
- Energy Conversion Agreement.
- Lender Friendly*.
- Cost Curve.
- Other Services.
- Portfolio.
- Traders.
Case studies: Milford. How does this merchant deal handle ‘deemed dispatch’? What is the subordination structure?
Wind energy: Overcome the difficulties in fitting wind into the grid and the complexities of the renewables payment regimes.
Mine-Mouth power: How can the fuel supply be co-financed with the power plant?
Infrastructure Oil & Gas / LNG Project Finance Project Finance
Day 6
Risk allocation for each sector
- Highways/Tollways/Bridges/Tunnels.
- Airports.
- Ports.
- Railways/Undergrounds.
- Hospitals/Prisons.
- Water/Sewage.
PPP infrastructure sectors of interest.
- Transportation.
- Communications.
- Social Services.
- Government/Military Services.
Traffic studies.
- Methods.
- Ramp-up.
- Due diligence.
- Urban mass transit.
Case Studies:
N3 Tollway, S. Africa: The government traffic studies were flawed. Learn what the banks did to correct this problem.
Gautrain: Why this could never be a true Project Finance deal. What is the BEE aspect?
Superhighway BOO/BOT: How much of a real estate component should be counted in a tollway financing? Are the interchanges and corridor developments bankable?
Laem Chabang Port: How can banks achieve a full market-risk on such a project financing? How can FX risks be packaged? Are there technology aspects in the project forecasts?
Chengdu No.6 Water: Examine China’s first water supply BOOT with the imaginative structuring of EIB alongside ADB. The first time municipality risk was assumed (no central government counter-guarantee).
Westralian Airport: How was the financing blended with a monocline tranche?
Contractor usage of project finance.
- Tender conditions.
- Delay/completion architecture.
- PPP ‘shell’ Special-Purpose-Vehicles (SPVs).
Case Study: Croydon Tramlink.
The PPP parties surely had the best shot at winning this concession. Learn why the tender overturned them?
Mining Project Finance
Day 7
Which commodities to project finance?
Stages in financing the minerals industry.
- Exploration.
- Development.
- Operations.
Credit analysis criteria.
- Economic rent.
- Reserves.
- Capital Markets.
Case studies:
FMG finance: An untried junior/explorer raises US$2,05b in project finance notes via Citigroup.
Ranger Uranium, Australia: How can banks provide US$55million as a rehabilitation guarantee to shut the mine down?
Industrial minerals: How to structure sales contracts to support a project financing?
Colowyo, USA: How does the capital markets judge a monetisation of coal supply contracts?
Reserves due diligence.
- Geology/drilling.
- Reserve estimation.
- Mining recoveries.
Gold instruments.
- Commodity swaps.
- Commodity-linked bonds.
Case Studies:
Iduapriem Gold Mine, Ghana. Find out how the gold fee works? Can subordinated debt work within a gold loan?
Batu Hijau, Indonesia: A two-step financing weaving in KfW, US Exim, JBIC plus the sponsors’ subordinated debt.
Newmont, Zarafshan, Uzbekistan: How to fit OPIC, MIGA, and EBRD together with a political-risk project financing.
Lumwana: look at the mix of funding applied (plus political-risk approach).
Project Finance/ Risk Recovery
Day 8
Project finance default history.
- Non-performing loans.
- Bond default/recoveries.
- Evidence of repetition.
- Long-cycle events.
- New fashions.
- Customer relationships.
- Syndications/Loan trading.
- Basel II.
Case studies: Iridium WORLD. Why does Motorola consider this satellite telephony project to be a success! Besides the technology risk what market-risk pointers were evident? Orly VAL – Why did the French banks support an airport-city link when urban mass-transit traffic Project Finance history is so appalling?
Risk linkages.
Case study: EuroDisney. Why were Disney’s prior real-estate failures not recognised?
Due diligence.
Case studies: Victoria Hospitals Cogen, Australia. See how the risk management study identified grid weaknesses near the main generator.
Mumbai-Pune Tollway, India: Why is the traffic so slow when the alternative route is so difficult and unattractive to use?
Eurotunnel: There are so many key lessons from this massive conflict of interest(s).
Australian Magnesium: Why was this project aborted after the Project Finance and investment funding had been committed?
Dulles Greenway: How is it possible to be so wrong on traffic in the automobile/driver-mad USA?
Murrin Murrin: Although the Independent Engineer identified the risks, the bond project financing defaulted immediately.
Role of the credit/investment committee.
- Credit scoring.
- Loan compliance.
- Approvals matrices.
- Compliance.
- Pre-Committee screening process.
Anticipating problems/failures.
- The Rule of 3.
- Risk Matrices.
- Building in Hazards into the Forecasts/Scenarios.
Case study: Western Harbour Crossing. Although traffic across Hong Kong Harbours is readily understood, why did this carefully-controlled structure fail?
Default
Legal states of play.
- Bankruptcy.
- Informal Insolvency.
- Administration.
- Receivership.
- Liquidation.
Styles.
- New monies.
- Break-up/reshaping.
- Equity/mezzanine.
- Patience.
- Prep for scale.
- ‘War’.
Project financier’s toolkit.
- New management.
- Default derivatives.
- Debt: equity swaps.
- Securitisation.
- Alternate dispute resolution.
- Expert/Delphi technique.
Role of regulator.
- Re-Regulation.
- Regulator’s Position.
New techniques.
Case study: Citibank’s project finance CLO. See the international and sector approach taken on the third Project Financed CLO in the Project Finance bond market.
Building Project Finance models
Day 9
Credit and modelling
Project finance modelling objectives.
- Link to project finance’s 16 Risks.
- Model usage at different stages of project finance process.
- Liquidated damages.
Project finance layouts.
- Conventional: operations; cashflows; loan/tax routines.
- Drawdown routines (%, quarterly, overruns, etc and the ‘split-year’ solution).
- Amortisation Styles (linear, annuity/mortgage, and % dedication, and the six others).
- Cofinancings: Multiple Tranches/Maturities/Payment Priorities.
- Reserve accounts.
- Currency mismatches.
- Interest rates and inflation.
Build logic into course model.
- Input sheet.
- Capex/construction.
- Revenues.
- Cashflows.
- Working capital.
- Opex.
- Equity.
- Reserves.
- Summary.
- Loan.
- Taxation.
- Debt service.
- P&L.
- Balance sheet.
- What-if?
- Compliance.
- Macros.
- Log.
Practical exercise: You will start to build your own Project Finance model from the Information Memorandum inputs. The special aspects of Completion delays and overruns will be assessed in the first hands-on modelling then building the Capex sheet.
Project finance ratio analysis.
- Debt service cover ratio.
- Principal cover.
- Interest cover.
- Loan life PV ratio.
- PV ratios – project/reserve.
- Residual cover/cushion.
Accounting ratios: profitability; efficiency; liquidity; etc.
Practical case study, you will:
- Discuss the discrepancies in the many different definitions of these ratios.
- Discriminate among the 24 different versions of the DSCR.
- Examine these for the course Project Finance model you are building.
Day 10
Sensitivities and bidding competition
The design and structure of financial models.
- Objectives.
- Flowchart.
- Modules.
- Menu and structure.
- Help.
- Testing.
Practical exercise: You will audit the course model for errors using three different auditing techniques, including one not generally recognised within Excel. Another excellent non-Microsoft audit add-in is demonstrated.
Sensitivity analyses modelling.
- What if?
- Other tricks?
- Scenario analysis.
- Breakeven.
Practical exercise: You will produce all the classic (deterministic and dynamic) sensitivities expected in Project Financing. The two Excel techniques are done as class/coursework as well as tips on the best ways to present the results graphically.
How to massage/finesse the model.
- Ratios.
- Loan amounts.
- Discount rates/Leveraged IRR.
- Term.
- Reserves.
- Tax.
Non-modelling inputs.
- The key input assumptions can overwhelm the accuracy of any model. Six different information sources and approaches are outlined along with actual examples. How does each delegate keep up to date on the choices of input assumptions?
Practical exercise: Your task is to find at least three ways to improve the financing result from manipulating the course cashflow model.
Typical modelling errors.
- Discounting/escalation.
- Available cashflow.
- Working capital.
- Reserves.
- Replacement Capex.
- Residual value.
Bidding contest using course project finance model.
The way to translate the modelling (bidding competition) results into the termsheet is the final aspect of the course. The winning team will defend its bid and show how the model achieved the winning result. The final course model itself is often used as a screening model by delegates after the course.