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.
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.
- 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.
- 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.
Critical factors in project financing today
- Why choose project finance?
- Sponsors rationale.
- Lenders criteria.
- Constructors objectives.
- Governments roles.
- 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.
- Power/merchant power railways.
- Water/waste water.
- 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.
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:
- 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.
- Inter-creditor agreement/deed of priority.
- Funding sources.
- Leasing/leveraged leasing.
- Ratings for project financings.
- Moodys/Standard & Poors/Fitch.
- Key differences with bank-driven deals.
- 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.
Credit criteria and cashflow modelling
- Credit analysis.
- The investors/financiers/company treasurers 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.
- 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.
Modelling project finance cashflows
- Key inputs.
- Non-modelling assumptions.
- 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.
- Available cashflow.
- Working capital.
- Replacement capital.
- CPI-based LLR/PLR.
- The danger of using unescalated models.
- Some handy tools to check model imputs.
- Sector modelling aspects.
- 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!
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/development funds.
- Tax structures.
- Capital markets.
- Political risk enhancements.
- FX cover.
- Credit enhancements.
- Credit wraps/monolines.
- Weather/wind derivatives.
- Islamic project finance.
- Credit derivatives.
- 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; PrudentialBache 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
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