This unique 5-day training course examines the latest structuring, funding and cashflow modelling techniques.On completion of the course you will be able to:

• Analyse specific case studies, risk profiles and structuring protocols
• Analyse funding sources and credit criteria
• Simulate, arrange and document project financings
• Construct a project finance cashflow model
• Capitalise on the new horizons for projects and funding sources

Course Overview

This course will cover all the critical factors in project financing today, from identifying which projects to finance, to the negotiation tactics employed to achieve the best deals.

You will find out how to spot the pitfalls in project finance structures and identify the risks, credit criteria and funding. Through practical exercises you will learn sector specific modelling and structuring protocols and how to build a cashflow model from scratch. The also covers political risk structuring and tailoring the project to suit the funding. The programme will finish by considering the future direction and developments in the sector and how to best take advantage of these.

Methodology

• Individual project finance cases will be pre-assigned.
• Comprehensive session notes, computer models and resource material will be a key part of the teaching methodology to form an excellent balance between formal lectures and hands-on participation.

DAY 1

Critical factors in project financing today

Why choose project finance?

• Sponsor’s rationale
• Lender’s criteria
• Constructor’s objectives
• Government’s roles
• Institutions / investors

Best sectors and project types

• Difficult sectors to avoid
• Current trends

Stages in project finance

• Time, team, costs
• Information memorandum / project proposal
• Credit / investment committee considerations

Workshop: case study / modelling team assignments

• Power project
• Capital markets
• Tollway
• Banks / bond
• Oil and gas
• Political risk
• Power
• Co-financing

Risk definitions / allocations

• The 6 risk systems
• The 5 structuring formats
• The 16 risks to identify
• The 174 structures to apply

Sector-specific risk profiles and structuring protocols

• Oil and gas
• Tollways / bridges / tunnels
• Power / merchant power railways
• Ports / airports
• Water / waste water
• Hospitals / prisons
• Telecoms / satellites
• Mining / metals
• Renewable energy

Workshop: pick the risks; each team will select the top four risks and the structures that are needed in four recent cases.

Risk ‘metrics’

• Basel II
• Compliance measures

DAY 2

Structuring and trade-offs

Due diligence

• How to scope the 6 independent reviews
• Fit to credit / investment approval
• The “bankable” feasibility study
• The project development plan

Why do projects go wrong? Lessons to be learnt from:

• Eurotunnel / Eurodisney / Iridium
• OrlyVAL / Dulles Greenway / NCA / Quintette

Key documentation aspects

• The 19 participants
• The 33 contracts

Contractual architecture – risk coverage

• Concession agreements vs. BOO
• Special purpose vehicles (the 5 types)
• Operations / management (O&M) contracts
• Turnkey construction contract
• Delayed completion and systems performance insurances
• Offtake / sales contracts
• Indirect / third-party support agreements
• Government guarantees
• Dispute resolution methods

Funding documentation

• Loan agreements
• Joint venture / shareholder agreement
• Security documentation
• Assignment of contracts / insurances
• Direct and common agreements
• Offshore proceeds account
• Swaps
• Securitisation
• Inter-creditor agreement / deed of priority

Funding sources

• Debt
• Equity
• Leasing / leveraged leasing
• Commodity-based

Ratings for project financings

• Moodys / Standard & Poors / Fitch
• Key differences with bank-driven deals
• Covenants
• Pricing
• Default
• Term
• Structure
• Voting

Role of the advisor

• When to involve advisors
• How to keep the costs and timetable down

Political risk structuring definitions

• Terrorism questionnaire
• The ‘classic’ 3 - war, inconvertibility, expropriation
• The full set of 20 political risks
• Application to equity too

Export credit agencies / bilateral agencies

• US Eximbank / OPIC, US
• EDC, Canada / KfW / Hermes / ECGD, UK / JBIC / NEXI
• Tactics for approaching the ECAs

Multilateral agencies

• World Bank
• Multilateral Investment Guarantee Agency (MIGA)
• International Finance Corp (IFC)
• European Bank for Reconstruction and Development (EBRD)
• Inter-American Development Bank (IDB)
• Asian Development Bank (ADB)
• How to approach the multilaterals

Private sources

• AIG
• Sovereign

DAY 3

Credit criteria and cashflow modelling

Credit analysis

• The investors’ / financier’s / company treasurer’s measures

What model is needed for a project finance?

• The model layout
• Establishment of the key cases
• Fit to the project risks / sensitivities
• "Circularity is best"

Model designs

• Design of the input sheet / data validation
• Conventional: operations; capex; loan / tax routines

Project finance model types

• Typical layouts
• Drawdown routines / model periods (%, quarterly, overruns)
• The 8 main repayment styles
• Multi-tranche approaches
• Reserve accounts
• Debt service
• Maintenance
• Capex
• Tax
• Environmental
• FX
• Calculating liquidated damages / overrun / retention requirements

Sensitivity analyses modelling

• How to choose sensitivities
• Key ratio targets
• Contrast to sponsors' IRR, NPV, valuation analyses
• Dynamic what if?
• Scenario manager
• Graphical sensitivity techniques
• Conditional formatting
• Other tricks?

Build the course model

• Design the necessary input sheet
• Determine the loan amount required using different repayment techniques

Model auditing

• 'Straight' Excel techniques
• Advanced add-in styles

DAY 4

Modelling project finance cashflows

Key inputs

• Non-modelling assumptions
• Cyclicality
• The 5 breakeven techniques

Modelling key decision / credit criteria

• Leveraged IRR
• Annual debt service cover ratio
• Principal cover
• Loan life / project life PV ratio
• Interest cover
• Cash / equity lock-ups
• Delay algorithms
• Residual cover / cushion / ratios
• Liquidated damages
• Cash sweeps / mandatory prepayments

Modelling workshop

• Modelling tactics
• How to fiddle / finesse the model

Typical modelling errors

• Discounting / escalation
• Available cashflow
• Reserves
• Working capital
• Replacement capital
• EBITDA
• CPI-based LLR / PLR
• The danger of using unescalated models
• Some handy tools to check model imputs

Sector modelling aspects

• Power
• Tollways
• Telecoms
• Satellites
• Prisons / hospitals
• Airport / ports
• Water / waste water
• Theme parks / stadiums
• Railways Resources (oil and gas, mining)

Bidding contest using the course model - leading from the course model and the information memorandum update, decide whether you can improve on the currently offered project finance deal!

DAY 5

Outlook for project finance

Case study presentations: each team presents its allocated case with structures and solutions as well as cashflow sensitivities. Expert feedback on the deal architecture and risks.

Project finance as a competitive too

• How to integrate project financing into the bid

Practical case study: linking the tariff to the project finance structure.

Contract / tender bidding

• “Real” turnkey construction contracts

Public private projects

• The 7 variations
• Tendering criteria
• Trends / case examples

New horizons for projects and funding sources

• “Green” funds
• Emerging market funds
• Infrastructure / development funds
• Tax structures
• Capital markets
• Political risk enhancements
• FX cover
• Credit enhancements
• Credit wraps / monolines
• Weather / wind derivatives
• Islamic project finance
• Credit derivatives
• Securitisation
• CDOs / CLOs
• Takeout architectures

Course summary & close

• Richard Tinsley

  Richard Tinsley is a banker/engineer/economist with over 30 years experience, mostly as a strategic / financial advisor or as the lead banker on numerous transactions -- totalling US$14.8 billion at last count in 35 countries -- but also as CEO and CFO of a project development and operating company. (He issued one of the first true Project-Finance bonds.) He has worked in five countries: Ireland, Canada, USA, UK, and now Australia. Richard is President of International Advisory & Finance. IAF is a network of firms in the infrastructure, energy, and resources finance sectors in New York, Boston, California, Mumbai, Johannesburg, Melbourne, and London.
  
  In the finance field, Richard has been Project-Finance director at Continental Bank (Chicago); European Banking Company (London); Prudential-Bache Capital Funding (Wall St.), and Indosuez Australia (Sydney, Australia -- now Calyon).
  
  As a professional independent director, he serves as an adviser to infrastructure, energy, resources, telecoms, and water utilities companies worldwide. Richard Tinsley has many world-first Project-Finance applications and particularly relishes the cross-fertilisation of structures from one industry sector to another.
  
  Richard teaches the full range of Project-Finance courses around the world. He is the author of the self-study guide and CD-ROM on Project Finance as well as two books: Advanced Project Financing: Structuring Risk, 1st Edition, and Project Finance in Asia Pacific: Practical Case Studies for Euromoney Books.
  
  Richard is a Visiting Fellow at the Applied Finance Centre for Macquarie University throughout Asia and gives the Project Finance core and Infrastructure Finance elective for the University of Stellenbosch’s Master in Development Finance in Cape Town, South Africa.

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

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