The Project Finance Course

Course Content:

Project Finance - the Parties

• Who is involved
• Syndication or sole sources
• Third party interests
• Government interests
• PPI schemes

Project Finance Refresher

• Definitions & basic principles
• Suitable Lending policies
• Suitable projects
• Syndication
• Participation
• Risk/reward
• Extra Curricular benefits
• Strategic/policy implications

Case Study/Exercise: Several of each throughout the session

The Objectives of Project Appraisal/Feasibility

• Key issues - budget, timing and sustainability issues
• Suitability
• The importance of independent scrutiny
• What are they expected to achieve
• What impact do they make on the project
• How much detail
• Skills needed to complete appraisals
• The “gateway” process

Project Costs

• Quality and accuracy of estimates
• What is a cost plan; preparation and limitations
• Provisional sums, allowances & contingencies
• Dealing with exclusions
• The goal of cost certainty
• Value engineering
• Factors affecting likely outturn costs
• When to walk away

Case Study: Several of each throughout the course

Programme

• Is the programme realistic
• Development programmes – identifying critical events
• Efficiency & minimising lapsed time
• Monitoring delivery and ensuring targets are met
• Dealing with inefficiency & missed targets
• Consequences of timing changes – delay or acceleration

Case Study: Several of each throughout the course

Risks

• What are the most common risks
• Conducting risk workshops
• Risk assessment during development
• Risk measurement
• Risk registers
• Dealing with risks not measured or disregarded by the project
• Development risks – delays & cost overruns
• Risk protection
• Risk transfer

Case Study: Several of each throughout the course

Funding

• Cashflow before, during and after completion
• Equity or quasi equity investment
• Debt versus equity
• Co-funding & contingent agreements
• Covering funding shortfalls
• Appropriate debt structure and terms
• Managing exposure and maximising security
• Dealing with problems
• When to cut losses and foreclose

Case Study: Several of each throughout the course

Monitoring Projects

• General principles
• Project mangers versus project monitors
• The role of monitoring reports
• Operational challenges
• The importance of cross party communication
• Resolving disagreements
• Cost effectiveness
• Managing more than one monitor
• Insurance especially PI

Case Study: Several of each throughout the course

Ownership Structures

• Considerations in selecting a structure
• Project finance structures
• Special Purpose Vehicle (“SPV”)
• General and limited partnerships
• Joint Ventures (“JVs”)

Sources of Funding

• Types of equity and debt
• Methods of obtaining finance
• Structure of capital markets
• International issues
• Bond issues and securitisation

Project Finance Risks

• Classification and identification of risks
• Risk matrices
• The role of due diligence
• Risk allocation and mitigation

The Lender’s Perspective

• Key figures in the financial projections
• Ratio analysis and limitations
• Financial, covenant and country risk ratios

The Sponsor’s Perspective

• Methods of evaluating investment decisions
• Factors influencing the cashflows
• The cost of capital – choice of discount rate

Credit Enhancement and Security

• What is available
• Funder’s requirements
• Perfecting, valuing and controlling security
• Going or gone concern measurement
• Enforcing security
• Third party security
• Practical considerations

Management Systems

• Bringing it all together
• Monitoring systems
• Establishing internal systems and reporting chains
• Communication
• Responsibilities
• Governance
• Debt servicing & Repayment
• Recording & communicating lessons learned

Discounts available for multiple participants:

• 3-4 participants: 15% discount per participant
• 5-6 participants: 20% discount per participant
• 7-8 participants: 25% discount per participant
• 9 or more participants: 30% discount per participant