Course dates
A 3-day course on the fundamentals of:
- Necessary market conditions for the successful development of IPPs
- Renewable energy projects
- Power Purchase Agreements
- Power sector tariff structures
- Contract negotiation
- Risk analysis in IPPs
- Project Finance
- Financial modelling
- Financing documentation
- Cost of capital
Course Overview of Fundamentals of Developing an Independent Power Project
The last 20 years has seen significant global development of IPPs resulting from:
- Deregulation of gas and electricity markets;
- The growth of the Public Private Partnership model for the development of key infrastructure;
- Economic growth in developing markets requiring additional power generation capacity; and
- An increased focus on the development of renewable and sustainable sources of energy production.
These market conditions continue to provide new opportunities for IPPs but the successful development of projects in terms of delivering environmentally acceptable and cost efficient plant in the required timescales and at affordable electricity tariffs remain the key challenges to face developers, equipment suppliers and the providers of finance for these projects.
The approach to procurement and structuring of IPPs also varies from country to country, requiring different strategies for and approaches to the development and financing of projects.
The objectives of this course are to provide participants with a greater understanding of:
- The necessary conditions (legal, regulatory, market/commercial, technical, financial) for the successful development of IPPs including renewable energy projects;
- The risk management tools and techniques available to maximise value and to understand, calculate and manage risk in IPPs including renewable energy projects; and
- The requirements of lenders necessary to be met to secure project financing for IPPs including renewable energy projects.
Methodology of Fundamentals of Developing an Independent Power Project course
The course will use a number of recent “real life” core case studies and related exercises, drawing on the extensive global experience of the Course Director as a former banker, lender and advisor on IPPs who is still actively involved in advising Governments and private sector sponsors on the procurement, commercial structuring and financing of IPPs and related projects in the energy sector. These case studies and exercises are designed to involve participants in an interactive manner and stimulate discussion of the key issues, including sharing of experiences amongst the participants.
The case studies and exercises will be supplemented by power point presentations illustrating key data/principles and providing participants with additional examples.
Participants will receive copies of all presentation material, including case studies and an “essential toolkit” for project analysis and financing used during the course in both hard and soft copy forms for future reference.
Who should attend the Fundamentals of Developing an Independent Power Project course
- Power project developers
- Finance managers in power project development companies
- Bankers involved in the project financing of IPPs
- Lawyers involved in the commercial and financing documentation of IPPs
- Procurement managers in state utilities purchasing power from IPPs
- Government officials involved in promoting IPP developments
- Technical and insurance advisors involved in IPPs
Day 1
History, market conditions for successful IPP development and introduction to project finance
Background
- What is an IPP – the basic IPP contractual structure?
- Definitions: IPP, IWPP, HPP, CCGT, BOT, BLT, BOOT, PPP, PPA etc. What do these terms mean?
- A review of IPP developments Europe, US, Asia & the Middle East
- What have been the “lessons learned” from the past history of IPPs?
The IPP development process
- Who are the various participants involved in the process?
- When should the different participants become involved in the process?
- Managing the process effectively and efficiently
- Different markets, different approaches (“single buyer” vs. deregulated market models)
- Impacts of regulation on independent power generation
Case study: Understanding the role of competitive tendering and assessing potential competition for IPP projects – a review of a recent Middle East IPP procurement.
Introduction to Project Finance
- How is project finance different from other forms of finance?
- What does “limited” or “non-recourse” finance mean?
- The project finance approach and process
- Advantages and disadvantages of project finance
- Criteria for a successful project financing
Exercise: Developing the criteria necessary for the successful project financing of an IPP.
Current trends and issues
- The growth in renewable energy projects & its impact on related infrastructure requirements
- Environmental & social issues and the Equator Principles
- Impacts of the global financial crisis on financing for IPPs
- Alternative and additional financing sources for IPPs
- Issues for IPPs in developing markets
Case study: The development of the coal fired power generation expansion project in Southern Africa.
Day 2
Understanding risk in IPPs, Power Purchase Agreement and Tariff Structures
Risk Analysis
- Risk identification
- Principles of risk allocation
- Risk mitigation
- Developing the risk matrix for an IPP
IPP risk allocation under Power Purchase Agreements & other Project Agreements
- Alternative Power Purchase Agreement risk allocation models
- Capacity and variable payment structures
- “Take or pay” obligations
- Tolling contracts
- Contracts for differences (“CfDs”)
- Floor price agreements
- Construction risk allocation
- Fuel supply risk allocation
- Operating and maintenance cost risk allocation – the role of the long term service agreements
- Financial risk allocation
Risk mitigation techniques in IPPs
- Insurance
- Capital structures (including guarantees and other forms of credit enhancement)
- Due diligence reports
- Mitigating “merchant” (market) based risks in IPPs
- Political risk mitigation
Case Study: Review of the risk allocation and mitigation for a European gas fired IPP.
Tariff Structures
- Issues in determining the structure and level of capacity and variable payments
- Regulated tariff structures
- “Feed in” tariffs and other sources of revenues in renewable energy projects (carbon emissions trading)
Measuring risk
- Project ratings
- Basel II “Supervisory Slotting Criteria”
- Developing financial models for IPPs
- Using financial models to establish debt capacity, risk sensitivity and monitoring performance for projects
- Modelling assumptions and risks
Case Study Exercises: Assigning a project rating for the European IPP Case Study Using an EXCEL model to determine debt capacity and the risk ensitivity of the European IPP Case Study, including discussion of the implications of the results of the risk sensitivity analysis.
Day 3
Financing sources, structures, documentation and the cost of capital
Sources of Project Finance
- Commercial banks and the role of the syndication market
- Government and Multilateral Agency Funding
- Bilateral institutions
- Export Credit Agencies
- International bond markets
- Infrastructure investment funds
- Host country sources of debt and equity
Financing Structures
- “Fragmented” financing plans and the role of the Inter-creditor Agreement
- Preserving the commercial contractual framework following a default and the role of “Direct” Agreements
- Controlling the cashflows: Documenting reserve accounts and the cashflow waterfall in the Accounts Agreement
- Managing interest and foreign exchange rate risks through “swaps”
Case Study: Review of the terms of a typical Inter-creditor Agreement and a Direct Agreement and discussion of the implication of these terms for the parties to the Agreements.
Financing Documentation
- Developing the financing term sheet
- Security
- The covenant package: representations, undertakings and events of default
Case Study Exercise: Developing and negotiating the undertakings for the project financing of the European IPP Case Study.
The cost of capital
- Determinants of the cost of capital in power projects
- Project Finance debt pricing
- Cost of equity – the Capital Asset Pricing Model
- Sources of equity returns in IPPs
Hong Kong Hotel, Hong Kong, Hong Kong
This programme takes place on a non-residential basis at a central Hong Kong hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Jeremy Dolphin
Jeremy Dolphin is a trainer who specialises in providing training on infrastructure project development and finance. Jeremy continues to be active advising on projects in these markets and is able to bring a wealth of current and relevant experience to his training courses.
Prior to consulting Jeremy was a Managing Director and Head of Power for the EMEA region for Société Générale in London and Paris and previously had been a Director and Co-head of the Project Finance team for Dresdner Kleinwort Benson in London and a Vice President in the project finance team of Deutsche Bank, where he set up the team responsible for power project finance activities of the bank at the time of privatisation of the UK’s electricity sector. He has over 25 years experience of project finance as both a lender and an advisor.
Jeremy is a chartered accountant and holds a Combined Honours degree in Chemistry and Operational Research from the University of Exeter.
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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Course dates