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.
- Examine the effects of the Global Financial Crisis on Project Finance.
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 course 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:
- You will receive pre-course reading notes and case study material in analysis, negotiation and structuring.
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.
Prerequisites:
- This advanced course is suitable for all those who have previous experience in carrying out project financing e.g. project/structured finance executives from banks, multinationals and multilaterals.
- Delegates are likely to have a minimum of 3 years’ hands-on project finance experience and ideally you should know about NPVs, IRRs and cashflow analysis and should also have a basic understanding of business law.
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
- Infrastructure – mega
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 – Ports/airports
- Railways – Steel
- Water/waste water – Hospitals/prisons
- Telecoms/satellites – Mining/metals
- Renewable energy – Schools/Universities
- LNG plants – LNG ships
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 7 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 22 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 PRI sources
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 tool
- 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/ – Tax structures development funds
- 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
-
The course director is the president of a global network of investment bankers, project advisors and industry specialists.
He has over 25 years of hands-on project finance experience, in both debt and equity. He has been the lead banker and chief advisor for some US$28.3 billion of project financing world-wide (in over 37 countries). He now specialises in the integration of political risk structures into BOO/ BOOT and independent power project financing.
He has pioneered a number of applications by cross-fertilising practices from one region or industry sector to another. He is a widely recognised author and expert on risk mitigation techniques in project finance structuring.
Now based in Sydney, Australia, he has worked at every level of international project financing, for institutions such as Continental Bank, a commercial bank in Chicago; European Banking Company, a consortium merchant bank in London; Prudential–Bache Capital Funding, a Wall Street investment bank in Australia and as the Project Finance Director of Indosuez Australia, now Credit Agricole.
Courses run by this instructor
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.
2-13 Sep 2013 (Johannesburg, South Africa)
This 10 day intensive practical programme features everything you need to know about project finance.
28-30 Oct 2013 (Johannesburg, South Africa)
29-31 Jan 2014 (Johannesburg, South Africa)
20-22 Oct 2014 (Johannesburg, South Africa)
A 3-day financial training workshop on Renewable Energy Project Finance where you will learn about structuring renewable energy projects, risk assessment and allocation in renewable and much more.
11-14 Nov 2013 (Johannesburg, South Africa)
A 4-day course designed to support analysts within an organisation’s project finance, business development and treasury divisions to create and analyse financial models on a consistent and focussed basis.
22-26 Jul 2013 (Nairobi, Kenya)
3-6 Feb 2014 (Accra, Ghana)
A four day financial training course on Oil & Gas Project Finance where you will learn how suitable financial structures for oil, gas and electricity projects are created.
10-12 Feb 2014 (Lagos, Nigeria)
This three-day workshop will increase participants' understanding of the process leading to the creation of a suitable financial structure for various types of cross border telecom projects and transactions.
2-5 Dec 2013 (Lagos, Nigeria)
1-4 Dec 2014 (Lagos, Nigeria)
A four day financial training course on Oil & Gas Project Finance where you will learn how suitable financial structures for oil, gas and electricity projects are created.
8-11 Oct 2013 (Nairobi, Kenya)
A 4-day intermediate training course covers a wide range of knowledge and experience of project finance and public private partnership.
2-4 Sep 2013 (Johannesburg, South Africa)
The 3-day Advanced Project Finance Workshop 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.
5 Sep 2013 (Johannesburg, South Africa)
A 1-day course on Oil&Gas/LNG Project Finance. Industry fundamentals will be covered, together with the key metrics and due diligence issues alongside numerous case studies. International best practices will be delivered comprehensively.
6 Sep 2013 (Johannesburg, South Africa)
A 1-day on course Power Project Finance. Industry fundamentals will be covered, together with the key metrics and due diligence issues alongside numerous case studies. International best practices will be delivered comprehensively.
9 Sep 2013 (Johannesburg, South Africa)
A 1-day on course Infrastructure Project Finance. Industry fundamentals will be covered, together with the key metrics and due diligence issues alongside numerous case studies. International best practices will be delivered comprehensively.
10 Sep 2013 (Johannesburg, South Africa)
A 1-day course on Mining Project Finance. Industry fundamentals will be covered, together with the key metrics and due diligence issues alongside numerous case studies. International best practices will be delivered comprehensively.
11 Sep 2013 (Johannesburg, South Africa)
A 1-day course on Project-Finance Risk and Recovery, examining projects that have gone wrong, including a review of the credit factors/reasons why these deals would go wrong - incorrect 'project concepts'.
12-13 Sep 2013 (Johannesburg, South Africa)
A 2-day course on Building Project-Finance Models, looking 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.