International Project Finance

5 days 12-16 Mar 2018, Hong Kong Hong Kong $6,800.00 Download brochure Add to basket
5 days 12-16 Mar 2018, Paris France 6,020.00 + VAT* Download brochure Add to basket
5 days 15-19 Oct 2018, New York United States $7,140.00 Download brochure Add to basket
3 days 19-21 Nov 2018, Dubai UAE £3,395.00 Download brochure Add to basket

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Overview

This 5-day program teaches participants how to analyse project financing opportunities. Delegates will learn how to properly structure transactions to minimize risks and improve the prospects for future strong performance, both in existing portfolios and new transactions.

By the program's conclusion participants in this program will have developed a framework for recognizing and analysing qualitative and quantitative project risks when financing green field projects as well as facility upgrades. Numerous examples of projects from around the world are employed to ensure understanding and application of concepts. Detailed breakout cases are drawn from various industrial sectors including oil and gas, conventional and renewable energy, transportation and other infrastructure. Participants learn how excel models are used to assess project debt capacity, return on investment, and other metrics common to attractive deals.

Besides discussing many recent examples of financing structures attractive to Banks, Institutional Investors, and Equity providers, careful attention is paid to credit enhancers such as Export Credit Agencies, Development Banks, Private insurers, mon-lines and others.

Cashflow Modelling

The program's fifth day session is a stand-alone cash flow modelling workshop. Using excel software, participants create a model for an LNG Plant suitable for examining project debt capacity as well as return on investment.

Who should attend

The courses will be valuable to professionals in the following areas:
  • Bankers/Investment Bankers
  • Project Finance Modellers
  • Financial Advisors
  • Sponsors/Project Joint Ventures
  • Project Developers
  • Government/PPP Agencies
  • Public Sector Managers
  • Export Credit Agencies
  • Multilateral Agencies
  • Accountants/Taxation Advisers
  • Financial Analysts
  • Share market Analysts/Brokers
  • M&A/Buyout Specialists
  • Privatization Executives
  • Company Treasurers/Directors
  • Credit Committee Staff
  • Rating Agencies
  • Project Managers/Engineers
  • Project Consultants
  • Investment/Portfolio Managers
  • Insurance Advisers/Brokers

Instructors

We work with a series of expert instructors, please select the course location of interest to review the credentials of who will be delivering the programme.

Paris
Meg Osius
The Course Director specializes in capital markets, risk management, and international project finance. She works with corporations, financial institutions, public agencies, law firms, and private equity investors. She has had extensive transactional experience in the oil, gas, power, transport, and telecom sectors.

She began her career at JP Morgan Chase Manhattan Bank, where she structured highly leveraged deals and project financings also advising clients on foreign exchange and other price risk management strategies. Before that she was responsible for evaluating the quality of the bank’s global loan portfolio as well as that of its newly acquired affiliates. In that role she had extensive experience with workout and distressed debt.

She has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures. The World Bank has published her articles on approaches to financial analysis in emerging markets.

Previously she was Chairperson of the Technical Advisory Panel (TAP) of the Public Private Infrastructure Advancement Fund (PPIAF) managed by the World Bank. The fund provides technical assistance to emerging market governments in order to encourage private involvement in infrastructure development. She is currently a Director of British Caribbean Bank and Waterloo Holdings Ltd. She received an M.B.A. from INSEAD, the European Institute of Business  Administration, in Fontainebleau, France. Her B.A. degree is from Princeton University.
New York
Margaret E. Osius

The Course Director specializes in capital markets, risk management, and international project finance. She works with corporations, financial institutions, public agencies, law firms, and private equity investors. She has had extensive transactional experience in the oil, gas, power, transport, and telecom sectors.

She began her career at JP Morgan Chase Manhattan Bank, where she structured highly leveraged deals and project financings also advising clients on foreign exchange and other price risk management strategies. Before that she was responsible for evaluating the quality of the bank’s global loan portfolio as well as that of its newly acquired affiliates. In that role she had extensive experience with workout and distressed debt.

She has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures. The World Bank has published her articles on approaches to financial analysis in emerging markets.

Previously she was Chairperson of the Technical Advisory Panel (TAP) of the Public Private Infrastructure Advancement Fund (PPIAF) managed by the World Bank. The fund provides technical assistance to emerging marketThe Course Director specializes in capital markets, risk management, and international project finance. She works with corporations, financial institutions, public agencies, law firms, and private equity investors. She has had extensive transactional experience in the oil, gas, power, transport, and telecom sectors.

She began her career at JP Morgan Chase Manhattan Bank, where she structured highly leveraged deals and project financings also advising clients on foreign exchange and other price risk management strategies. Before that she was responsible for evaluating the quality of the bank’s global loan portfolio as well as that of its newly acquired affiliates. In that role she had extensive experience with workout and distressed debt.

She has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures. The World Bank has published her articles on approaches to financial analysis in emerging markets.

Previously she was Chairperson of the Technical Advisory Panel (TAP) of the Public Private Infrastructure Advancement Fund (PPIAF) managed by the World Bank. The fund provides technical assistance to emerging market governments in order to encourage private involvement in infrastructure development. She is currently a Director of British Caribbean Bank and Waterloo Holdings Ltd. She received an M.B.A. from INSEAD, the Eur governments in order to encourage private involvement in infrastructure development. She is currently a Director of British Caribbean Bank and Waterloo Holdings Ltd. She received an M.B.A. from INSEAD, the European Institute of Business  Administration, in Fontainebleau, France. Her B.A. degree is from Princeton University.

Dubai
Ed Bodmer
Ed has created innovative forward pricing, productivity measurement and investment valuation software for consulting clients throughout the United States. He has taught energy economics and finance throughout the world, and formulated significant government policy and corporate strategy in the U.S. 

His consulting clients include investment banks, commercial banks, research institutions and government agencies on a wide variety of complex valuation and advisory matters. He has constructed a unique framework for electricity price forecasting and valuation using production cost modelling techniques combined with option price theory and Monte Carlo simulation.

He is also an adjunct professor at leading University where he teaches courses in microeconomics. Along with his practical experience that covers a multitude of major advisory projects, he has taught specialised courses in financial modelling, electricity pricing, option valuation, mergers and acquisitions and contracting to investment banks, commercial banks, industrial corporations and electric utility companies.

He was formerly Vice President at the First National Bank of Chicago where he directed analysis of energy loans and also created financial modelling techniques used in advisory projects. He has used the models in providing expert testimony on subjects ranging from capital structure to investments in multi-billion dollar nuclear plants to complex valuation of new investments.

He received an MBA degree specialising in econometrics (with honours) from the University of Chicago and a BS degree in finance from the University of Illinois (with highest university honours). He has written many articles and is in the process of completing a textbook on valuation of electricity assets.
Hong Kong
Meg Osius
The Course Director specializes in capital markets, risk management, and international project finance. She works with corporations, financial institutions, public agencies, law firms, and private equity investors. She has had extensive transactional experience in the oil, gas, power, transport, and telecom sectors.

She began her career at JP Morgan Chase Manhattan Bank, where she structured highly leveraged deals and project financings also advising clients on foreign exchange and other price risk management strategies. Before that she was responsible for evaluating the quality of the bank’s global loan portfolio as well as that of its newly acquired affiliates. In that role she had extensive experience with workout and distressed debt.

She has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures. The World Bank has published her articles on approaches to financial analysis in emerging markets.

Previously she was Chairperson of the Technical Advisory Panel (TAP) of the Public Private Infrastructure Advancement Fund (PPIAF) managed by the World Bank. The fund provides technical assistance to emerging market governments in order to encourage private involvement in infrastructure development. She is currently a Director of British Caribbean Bank and Waterloo Holdings Ltd. She received an M.B.A. from INSEAD, the European Institute of Business  Administration, in Fontainebleau, France. Her B.A. degree is from Princeton University.

Venue

Paris

Centrally located hotel in Paris

This programme takes place on a non-residential basis at a hotel in central Paris. 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.

Hong Kong

4-5 Star Hotel in Hong Kong

All of our courses are held in 4 – 5 star hotels, chosen for their location, facilities and level of service. You can be assured of a comfortable, convenient learning environment throughout the duration of the course.

Due to the variation in delegate numbers, we will send confirmation of the venue to you approximately 2 weeks before the start of the course. 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.

New York

New York Hotel

This program takes place on a non-residential basis at a New York 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.

As with all programmes on-site administrators are with you throughout the programme to ensure smooth administration and group interaction.

Dubai

Dubai Hotel

This programme takes place on a non-residential basis at a central Dubai 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.

Dubai has an incredible number of hotels. Courses held here are mainly held at the J.W. Marriot hotel, Sheraton Dubai Creek and Le Meridien all in central Dubai.
 
J.W. Marriott Hotel – Abu Baker Al Siddique Road, PO Box 16590, Dubai, U.A.E
Phone +971 4 607 7811; Fax +971 4 607 7011
www.marriott.com
 
At the JW Marriott Dubai you will enjoy luxury on your terms; impeccable service and elegant surroundings allow you to relax and focus on your own agenda. With 344 luxuriously appointed rooms and suites the J.W. Marriott provides an oasis of calm in a busy city while the award-winning restaurants have the recipe for satisfying a taste for international flavour.        
 
Sheraton Dubai Creek – Baniyas Street, PO Box 4250, Dubai, U.A.E
Phone +971 4 228 1111; Fax +971 4 221 3468
www.starwoodhotels.com
 
After undergoing a complete renovation, the Sheraton Dubai Creek Hotel& Towers reopened October 10th, 2002 with a fully refurbished interior and exterior. The 255 room hotel now offers more creek-view rooms, redesigned atrium lobby, outstanding food and beverage facilities, upgraded rooms with state-of-the-art data connectivity, and Dubai's newest conference facilities. 

Le Meridien – PO Box 10001, Airport Road, Dubai, U.A.E
Phone +971 4 282 4040; Fax +971 4 282 5540
www.lemeridien-dubai.com
 
Le Meridien Dubai is a five star deluxe hotel built on two floors and surrounded by 38 acres of landscaped gardens. The hotel is elegantly furnished with a french accent that incorporates the individual character and flair of the local culture. The hotel is minutes away from the commercial districts and shopping centres and a short distance from Dubai International Airport. Facilities include a choice of 15 restaurants and bars, 24-hour room and laundry service, two fully equipped business centres and a state-of-the-art Spa and fitness club.

 
 

Related Courses

Inhouse


 

Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company's exact requirements? If you'd like to do either of these, we can bring this course to your company's office. You could even save up to 50% on the cost of sending delegates to a public course.

To find out more about running this course in-house:





Our Tailored Learning Offering

If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

We produce learning solutions that are completely unique to your business. We'll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.

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We can offer any of our public courses delivered at your office or we can devise completely tailored solutions:


Read more about our offering or complete a call back request to speak to a learning specialist.

 

Agenda

Agendas are localised, please select your preferred location.

Day 1

Themes: Structuring Projects and Creating a Security Package; Discovering the Most Efficient Sources of Finance;
Cashflow modelling.
Project Finance Today
  • Current challenges in Southern Africa for project finance
  • Who are the players?
  • Identifying and allocating risks
  • What can go wrong?

Examples: Financing a pipeline, tankers; other oil and gas projects.

  • PPP and project finance: financing infrastructure
  • BOO, BOT, BOOT, DBFO and other approaches
  • Private investment in public infrastructure

Examples: Power projects and toll roads.

Projects and Risk Identification

  • Risks in development
  • Construction and operating risks
  • Feedstock and supply
  • Market risks
  • Environmental risks
  • Financial risks
  • Political and regulatory risks

Examples: Gas field development and infrastructure, oil refineries, LNG, Electricity plants.

Sources of Finance: Financing Checklist

  • Domestic and foreign banks
  • Bond markets
  • Development banks, ECAs and other official creditors
  • Leasing
  • Islamic finance
  • Sources of equity

Day 1 – cont.

Cashflow Modelling Approaches

  • Financial modelling and cash flow analysis
  • The view of lenders: DSCR and PV coverage
  • Equity considerations: IRR and NPV
  • Approaches to evaluating the cost of capital
  • Project returns vs. equity returns
  • Forecasting techniques and limitations

Case Study: Financing a Gas Processing Plant.

Participants break into small groups to prepare a case study. A computer simulation will be used to model cashflows. Groups will present their solutions.
End of Day 1

Day 2

Themes: Legal Issues; Bank Finance; Export Credit Agencies; PPP for Transportation and other Infrastructure Projects
Case discussion
  • Legal Issues in Project Finance
  • Legal environment and regulatory conditions
  • Commercial points and legal points in various projects
  • SPV Structures
  • Key contractual agreements
  • Developing a term sheet
    - Limiting recourse
    -Tax gross up issues
    - Market interruption
    - Reps and warranties
    - Conditions precedent
    - Covenants including MAC clauses
    - Hedging requirements

Sources of Finance: Bank Loans

  • Banks and club loans
  • Syndicated loan financing
  • What security do banks want?
  • Market flex clauses
  • “Mini-perms”
  • Inter-creditor issues

Export Finance Techniques (ECAs)

  • Guarantees and insurance vs. funding
  • Buyer and supplier credits
  • Bank incentives inherent in ECA programs
  • Costs and availability
  • Securitization of ECA guarantees
  • Choosing a special purpose vehicle

Day 2 – cont.

  • PPP: Roads, Railroads, Airports, Ports and Other Transportation Projects
  • Public Private Partnerships (PPP) Principles
  • Roles for the Public and Private Sector
  • Different Structures and Degrees of Private Participation
  • Outright and partial government ownership
    - Long-term concessions and DBFO
    - Privatization of seaports; airport financing

Exercise: Constructing a risk matrix

Case Study: Airport finance; Negotiating a term sheet. (Could be a roadway case or a railroad)

Participants will break into groups to work on this PPP project structure. Discussion will focus on project risks, their allocation through contracts, the mix of financing, cash flow projections, as well as rating agency considerations in evaluating the proposed financing structure.

End of Day 2

Day 3

Themes: Capital Market Issuance for Projects

Using Capital Markets

  • Private placements and Eurobond issuance for projects
  • Comparing bond issuance to bank loans
  • Nature of investors, timing and flexibility
  • Project size and relative cost
  • Security requirements
  • Negative arbitrage issues
  • The due diligence process / road shows
  • Rating agency considerations

Islamic Structures

  • Murabaha, Istisna and Ijara in Projects

Examples

Leasing

  • Leveraged Leases
  • Advantages

Liberalizing Power Markets

  • Market forces and the effect on electrical supply
  • Fragmentation of electricity generation
  • Gencos/Transcos/Discos
  • Merchant power plants (MPPs)
  • Rating agencies' analytical model

Renewable Energy Projects

  • Growth of the market and various types of renewable energy projects
  • Comparing renewable to traditional fossil fuel burning plants
  • Project economics
  • What is driving the investment?
  • Government incentives in various countries

Case Study: Financing a Gas-fired Power Plant
Risk allocation among various project participants to finance and construct a power plant. Testing the project's cash flows under varying scenarios with a cash-flow simulation model. What are acceptable DSCR levels? What returns does equity look for?
End of Day 3

Day 4

Themes: Risk Management with Derivatives, Development Agencies, Funding Power Projects

 
Price Volatility and Risk Management with Derivatives in Projects

  • Financial price movements today: volatility and risk
  • Commodity-linked derivatives and securities
  • Using interest rate and currency swaps to manage risk in projects
  • Options: caps, floors and collars

Roles for Development Banks and Agencies
        - World Bank Group
        - Regional multilateral development banks (ADB, IADB, EBRD, EIB, 
        - Islamic Development Bank, etc)
        - Bilateral agencies (FMO, DEG, OPIC, Proparco, etc.)

Water Infrastructure

  • Special features of limited recourse projects in water and sanitation
  • Array of structures: Service Agreements Leasing, BOT, Privatization
  • Who are the players? Investors and lenders?
  • Desalination and electricity projects
  • Case examples and PPP transactions

Case Study: Water Treatment facility
Participants will break into groups to prepare a case study concerned with financing a wastewater treatment plant in Latin America

Social Infrastructure 

  • Financing Hospitals, Schools, Prisons, Others
  • Concessions and Contract Terms
  • Risk Evaluation and Allocation
  • Monitoring Requirements

Self-Test and End of Program

Introduction to Cashflow Modeling Session Day 5:
Ras Laffan LNG plant
End of Day 4

Day 5

Themes: Modelling Workshop 


Participants will spend a day building a model for an LNG facility. They will assess a wide range of scenarios in order to test a limited-recourse financing package for debt capacity and suitability for investment. With discussion of common approaches to modeling with Excel, “dos’ and ‘don’ts” as well as the practical use models for negotiations.

Modeling Workshop Overview: Objectives and Approaches

  • Constructing a Model / Common Myths
  • Variations by Project Type

Structuring the Model and Organizing the Data to Create a Cashflow Statement

  • Developing the Assumptions Page
  • Construction Costs and Timing
  • Operating Cost, Plant Capacity Usage, Fixed and Variable Costs
  • Reinvestment, Plant Expansion, Productivity Shifts

Developing the Profit and Loss and Balance Sheet

  • Factoring in Reserves
  • Considering Currencies
  • Tax Calculations

Financing Section

  • Equity First or Pro Rata
  • Manually Designed Equity Subscription
  • Draw-down of Debt Linked to Specific Contracts or Expenditures or in a Hierarchy

Ratios and Sensitivity Analysis: Objectives and Limitations

  • Measuring Debt Capacity and Investor Return
  • Using Modelling Output for Initial Project Vetting
  • Supporting on-going Negotiations

Summary and Wrap-up of Modeling Workshop

End of Program

Day 1

Themes: Structuring Projects and Creating a Security Package; Discovering the Most Efficient Sources of Finance;
Cashflow modelling.
Project Finance Today
  • Current challenges in Southern Africa for project finance
  • Who are the players?
  • Identifying and allocating risks
  • What can go wrong?

Examples: Financing a pipeline, tankers; other oil and gas projects.

  • PPP and project finance: financing infrastructure
  • BOO, BOT, BOOT, DBFO and other approaches
  • Private investment in public infrastructure

Examples: Power projects and toll roads.

Projects and Risk Identification

  • Risks in development
  • Construction and operating risks
  • Feedstock and supply
  • Market risks
  • Environmental risks
  • Financial risks
  • Political and regulatory risks

Examples: Gas field development and infrastructure, oil refineries, LNG, Electricity plants.

Sources of Finance: Financing Checklist

  • Domestic and foreign banks
  • Bond markets
  • Development banks, ECAs and other official creditors
  • Leasing
  • Islamic finance
  • Sources of equity

Day 1 – cont.

Cashflow Modelling Approaches

  • Financial modelling and cash flow analysis
  • The view of lenders: DSCR and PV coverage
  • Equity considerations: IRR and NPV
  • Approaches to evaluating the cost of capital
  • Project returns vs. equity returns
  • Forecasting techniques and limitations

Case Study: Financing a Gas Processing Plant.

Participants break into small groups to prepare a case study. A computer simulation will be used to model cashflows. Groups will present their solutions.
End of Day 1

Day 2

Themes: Legal Issues; Bank Finance; Export Credit Agencies; PPP for Transportation and other Infrastructure Projects
Case discussion
  • Legal Issues in Project Finance
  • Legal environment and regulatory conditions
  • Commercial points and legal points in various projects
  • SPV Structures
  • Key contractual agreements
  • Developing a term sheet
    - Limiting recourse
    -Tax gross up issues
    - Market interruption
    - Reps and warranties
    - Conditions precedent
    - Covenants including MAC clauses
    - Hedging requirements

Sources of Finance: Bank Loans

  • Banks and club loans
  • Syndicated loan financing
  • What security do banks want?
  • Market flex clauses
  • “Mini-perms”
  • Inter-creditor issues

Export Finance Techniques (ECAs)

  • Guarantees and insurance vs. funding
  • Buyer and supplier credits
  • Bank incentives inherent in ECA programs
  • Costs and availability
  • Securitization of ECA guarantees
  • Choosing a special purpose vehicle

Day 2 – cont.

  • PPP: Roads, Railroads, Airports, Ports and Other Transportation Projects
  • Public Private Partnerships (PPP) Principles
  • Roles for the Public and Private Sector
  • Different Structures and Degrees of Private Participation
  • Outright and partial government ownership
    - Long-term concessions and DBFO
    - Privatization of seaports; airport financing

Exercise: Constructing a risk matrix

Case Study: Airport finance; Negotiating a term sheet. (Could be a roadway case or a railroad)

Participants will break into groups to work on this PPP project structure. Discussion will focus on project risks, their allocation through contracts, the mix of financing, cash flow projections, as well as rating agency considerations in evaluating the proposed financing structure.

End of Day 2

Day 3

Themes: Capital Market Issuance for Projects

Using Capital Markets

  • Private placements and Eurobond issuance for projects
  • Comparing bond issuance to bank loans
  • Nature of investors, timing and flexibility
  • Project size and relative cost
  • Security requirements
  • Negative arbitrage issues
  • The due diligence process / road shows
  • Rating agency considerations

Islamic Structures

  • Murabaha, Istisna and Ijara in Projects

Examples

Leasing

  • Leveraged Leases
  • Advantages

Liberalizing Power Markets

  • Market forces and the effect on electrical supply
  • Fragmentation of electricity generation
  • Gencos/Transcos/Discos
  • Merchant power plants (MPPs)
  • Rating agencies' analytical model

Renewable Energy Projects

  • Growth of the market and various types of renewable energy projects
  • Comparing renewable to traditional fossil fuel burning plants
  • Project economics
  • What is driving the investment?
  • Government incentives in various countries

Case Study: Financing a Gas-fired Power Plant
Risk allocation among various project participants to finance and construct a power plant. Testing the project's cash flows under varying scenarios with a cash-flow simulation model. What are acceptable DSCR levels? What returns does equity look for?
End of Day 3

Day 4

Themes: Risk Management with Derivatives, Development Agencies, Funding Power Projects

 
Price Volatility and Risk Management with Derivatives in Projects

  • Financial price movements today: volatility and risk
  • Commodity-linked derivatives and securities
  • Using interest rate and currency swaps to manage risk in projects
  • Options: caps, floors and collars

Roles for Development Banks and Agencies
        - World Bank Group
        - Regional multilateral development banks (ADB, IADB, EBRD, EIB, 
        - Islamic Development Bank, etc)
        - Bilateral agencies (FMO, DEG, OPIC, Proparco, etc.)

Water Infrastructure

  • Special features of limited recourse projects in water and sanitation
  • Array of structures: Service Agreements Leasing, BOT, Privatization
  • Who are the players? Investors and lenders?
  • Desalination and electricity projects
  • Case examples and PPP transactions

Case Study: Water Treatment facility
Participants will break into groups to prepare a case study concerned with financing a wastewater treatment plant in Latin America

Social Infrastructure 

  • Financing Hospitals, Schools, Prisons, Others
  • Concessions and Contract Terms
  • Risk Evaluation and Allocation
  • Monitoring Requirements

Self-Test and End of Program

Introduction to Cashflow Modeling Session Day 5:
Ras Laffan LNG plant
End of Day 4

Day 5

Themes: Modelling Workshop 


Participants will spend a day building a model for an LNG facility. They will assess a wide range of scenarios in order to test a limited-recourse financing package for debt capacity and suitability for investment. With discussion of common approaches to modeling with Excel, “dos’ and ‘don’ts” as well as the practical use models for negotiations.

Modeling Workshop Overview: Objectives and Approaches

  • Constructing a Model / Common Myths
  • Variations by Project Type

Structuring the Model and Organizing the Data to Create a Cashflow Statement

  • Developing the Assumptions Page
  • Construction Costs and Timing
  • Operating Cost, Plant Capacity Usage, Fixed and Variable Costs
  • Reinvestment, Plant Expansion, Productivity Shifts

Developing the Profit and Loss and Balance Sheet

  • Factoring in Reserves
  • Considering Currencies
  • Tax Calculations

Financing Section

  • Equity First or Pro Rata
  • Manually Designed Equity Subscription
  • Draw-down of Debt Linked to Specific Contracts or Expenditures or in a Hierarchy

Ratios and Sensitivity Analysis: Objectives and Limitations

  • Measuring Debt Capacity and Investor Return
  • Using Modelling Output for Initial Project Vetting
  • Supporting on-going Negotiations

Summary and Wrap-up of Modeling Workshop

End of Program

Day 1

Themes: Structuring Projects and Creating a Security Package; Discovering the Most Efficient Sources of Finance;
Cashflow modelling.
Project Finance Today
  • Current challenges in Southern Africa for project finance
  • Who are the players?
  • Identifying and allocating risks
  • What can go wrong?

Examples: Financing a pipeline, tankers; other oil and gas projects.

  • PPP and project finance: financing infrastructure
  • BOO, BOT, BOOT, DBFO and other approaches
  • Private investment in public infrastructure

Examples: Power projects and toll roads.

Projects and Risk Identification

  • Risks in development
  • Construction and operating risks
  • Feedstock and supply
  • Market risks
  • Environmental risks
  • Financial risks
  • Political and regulatory risks

Examples: Gas field development and infrastructure, oil refineries, LNG, Electricity plants.

Sources of Finance: Financing Checklist

  • Domestic and foreign banks
  • Bond markets
  • Development banks, ECAs and other official creditors
  • Leasing
  • Islamic finance
  • Sources of equity

Day 1 – cont.

Cashflow Modelling Approaches

  • Financial modelling and cash flow analysis
  • The view of lenders: DSCR and PV coverage
  • Equity considerations: IRR and NPV
  • Approaches to evaluating the cost of capital
  • Project returns vs. equity returns
  • Forecasting techniques and limitations

Case Study: Financing a Gas Processing Plant.

Participants break into small groups to prepare a case study. A computer simulation will be used to model cashflows. Groups will present their solutions.
End of Day 1

Day 2

Themes: Legal Issues; Bank Finance; Export Credit Agencies; PPP for Transportation and other Infrastructure Projects
Case discussion
  • Legal Issues in Project Finance
  • Legal environment and regulatory conditions
  • Commercial points and legal points in various projects
  • SPV Structures
  • Key contractual agreements
  • Developing a term sheet
    - Limiting recourse
    -Tax gross up issues
    - Market interruption
    - Reps and warranties
    - Conditions precedent
    - Covenants including MAC clauses
    - Hedging requirements

Sources of Finance: Bank Loans

  • Banks and club loans
  • Syndicated loan financing
  • What security do banks want?
  • Market flex clauses
  • “Mini-perms”
  • Inter-creditor issues

Export Finance Techniques (ECAs)

  • Guarantees and insurance vs. funding
  • Buyer and supplier credits
  • Bank incentives inherent in ECA programs
  • Costs and availability
  • Securitization of ECA guarantees
  • Choosing a special purpose vehicle

Day 2 – cont.

  • PPP: Roads, Railroads, Airports, Ports and Other Transportation Projects
  • Public Private Partnerships (PPP) Principles
  • Roles for the Public and Private Sector
  • Different Structures and Degrees of Private Participation
  • Outright and partial government ownership
    - Long-term concessions and DBFO
    - Privatization of seaports; airport financing

Exercise: Constructing a risk matrix

Case Study: Airport finance; Negotiating a term sheet. (Could be a roadway case or a railroad)

Participants will break into groups to work on this PPP project structure. Discussion will focus on project risks, their allocation through contracts, the mix of financing, cash flow projections, as well as rating agency considerations in evaluating the proposed financing structure.

End of Day 2

Day 3

Themes: Capital Market Issuance for Projects

Using Capital Markets

  • Private placements and Eurobond issuance for projects
  • Comparing bond issuance to bank loans
  • Nature of investors, timing and flexibility
  • Project size and relative cost
  • Security requirements
  • Negative arbitrage issues
  • The due diligence process / road shows
  • Rating agency considerations

Islamic Structures

  • Murabaha, Istisna and Ijara in Projects

Examples

Leasing

  • Leveraged Leases
  • Advantages

Liberalizing Power Markets

  • Market forces and the effect on electrical supply
  • Fragmentation of electricity generation
  • Gencos/Transcos/Discos
  • Merchant power plants (MPPs)
  • Rating agencies' analytical model

Renewable Energy Projects

  • Growth of the market and various types of renewable energy projects
  • Comparing renewable to traditional fossil fuel burning plants
  • Project economics
  • What is driving the investment?
  • Government incentives in various countries

Case Study: Financing a Gas-fired Power Plant
Risk allocation among various project participants to finance and construct a power plant. Testing the project's cash flows under varying scenarios with a cash-flow simulation model. What are acceptable DSCR levels? What returns does equity look for?
End of Day 3

Day 4

Themes: Risk Management with Derivatives, Development Agencies, Funding Power Projects

 
Price Volatility and Risk Management with Derivatives in Projects

  • Financial price movements today: volatility and risk
  • Commodity-linked derivatives and securities
  • Using interest rate and currency swaps to manage risk in projects
  • Options: caps, floors and collars

Roles for Development Banks and Agencies
        - World Bank Group
        - Regional multilateral development banks (ADB, IADB, EBRD, EIB, 
        - Islamic Development Bank, etc)
        - Bilateral agencies (FMO, DEG, OPIC, Proparco, etc.)

Water Infrastructure

  • Special features of limited recourse projects in water and sanitation
  • Array of structures: Service Agreements Leasing, BOT, Privatization
  • Who are the players? Investors and lenders?
  • Desalination and electricity projects
  • Case examples and PPP transactions

Case Study: Water Treatment facility
Participants will break into groups to prepare a case study concerned with financing a wastewater treatment plant in Latin America

Social Infrastructure 

  • Financing Hospitals, Schools, Prisons, Others
  • Concessions and Contract Terms
  • Risk Evaluation and Allocation
  • Monitoring Requirements

Self-Test and End of Program

Introduction to Cashflow Modeling Session Day 5:
Ras Laffan LNG plant
End of Day 4

Day 5

Themes: Modelling Workshop 


Participants will spend a day building a model for an LNG facility. They will assess a wide range of scenarios in order to test a limited-recourse financing package for debt capacity and suitability for investment. With discussion of common approaches to modelling with Excel, “dos’ and ‘don’ts” as well as the practical use models for negotiations.

Modelling Workshop Overview: Objectives and Approaches

  • Constructing a Model / Common Myths
  • Variations by Project Type

Structuring the Model and Organizing the Data to Create a Cashflow Statement

  • Developing the Assumptions Page
  • Construction Costs and Timing
  • Operating Cost, Plant Capacity Usage, Fixed and Variable Costs
  • Reinvestment, Plant Expansion, Productivity Shifts

Developing the Profit and Loss and Balance Sheet

  • Factoring in Reserves
  • Considering Currencies
  • Tax Calculations

Financing Section

  • Equity First or Pro Rata
  • Manually Designed Equity Subscription
  • Draw-down of Debt Linked to Specific Contracts or Expenditures or in a Hierarchy

Ratios and Sensitivity Analysis: Objectives and Limitations

  • Measuring Debt Capacity and Investor Return
  • Using Modelling Output for Initial Project Vetting
  • Supporting on-going Negotiations

Summary and Wrap-up of Modelling Workshop

Day 1

Introduction to project finance

The course begins with introductory comments about the skills and general objectives in project finance analysis with an emphasis on the difficulty in measuring and valuing risk. Project finance terminology, the structure of project finance debt, project contracts and other issues are discussed in the context of a case study and a completed project finance model. Subjects discussed in the first module include:

Overview of project finance terms/project finance versus corporate finance

  • Project finance definition and definition of selected terms
  • Phases in project financing
  • Structure and contracts in project financing
  • Characteristics of project finance debt and debt service coverage
  • Project finance analysis compared to traditional corporate finance
  • Advantages and disadvantages of project finance sponsor
  • Advantages and disadvantages of project finance
  • Government/off-taker
  • Excel Case exercise: simple project finance model

Industry sectors and different risks in project finance

  • Sectors that are not applicable (high-technology/innovation)
  • Commodity pricing: oil and gas
  • Commodity pricing: mining
  • Take or pay contracts: electricity independent power and water
  • Merchant power plants: electricity independent power
  • Renewable energy and resource analysis
  • Infrastructure with traffic risk
  • Infrastructure, public finance and availability payments

Case study risk identification and general terms in a project finance transaction

  • Overview of transaction structure
  • Reasons for use of project finance
  • Risk classification – risks during different project phases; political, market
  • Risk identification – description of different risks
  • Risk mitigation – alternative techniques and limitations
  • Risk coverage – break even analysis and debt service coverage
  • Cash exercise: measurement of break even using DSCR

Issues addressed in the first session include:

  • What is the big deal about project finance and what makes project finance different from other forms of financing?
  • Where does debt and equity money come from these days in project financing?
  • What are the benefits of project finance relative to the high fees received by lawyers and bankers?
  • Where has project finance been used and what have been the largest project financings?
  • What type of risks should be evaluated in project finance to test when projects go bad?


Day 2

Technical mechanics of project finance

The second part of the course covers technical mechanics of project finance transactions as well as valuation and credit analysis. The valuation section addresses appropriate use of equity and project internal rate of return and net present value. The credit analysis describes use of debt service cover and other ratios to measure the credit risk and debt capacity of a project. Issues addressed in this part of the course include:

General contract structure in project finance using case study

  • Concession agreements and build own operate
  • Relationship between contracts and back-to-back contracts
  • Insurance and third party support
  • Government guarantees
  • Structuring special purpose vehicles
    - Structure of financing and dividends
    - Flip structures
    - Conflicts of interest and limits on negotiation
    - Case exercise with Excel: cash flow flip and risk transfer
  • Concession contract/off-take contract
    - Applicability to different industries
    - Structure and Usage versus availability payments
    - Timing and costs of delay
    - Termination issues
    - Case exercise with Excel: bidding for contracts
  • Construction ontract
    - Lump-sum fixed price versus cost plus
    - Limited recourse and responsibility for cost over-runs
    - Milestones and conditions precedent for draw down
    - Relationship with operation contract and off-take contract
    - Force majure and limitations on responsibility of contractor
    - Completion tests
    - Liquidated damages for performance
    - Liquidated damages for delay
    - Case Exercise with Excel: computation of liquidated damages for delay
  • Operation and maintenance contract and supply contracts
    - Relation with construction contract
    - Incentives in operation contract
    - Responsibilities of operator
    - Take or pay supply contracts
  • Political risk insurance
    - Basic three
    - Applicability to debt and equity
    - Additional risk insurance
    - Payment conditions for risk insurance
    - Development institutions and leverage

Analysis of debt sizing, debt structuring and returns in project finance

  • Bank loans versus bonds
  • Debt structuring in tight transactions versus loose transactions
  • Debt structuring
  • Key Features
    - Timing of debt and equity draws during construction
    - Treatment of cost over-runs
    - Pricing of debt and changing spreads
    - Debt tenor and grace periods
    - Alternative debt repayment methods (level, annuity, sculpted)
    - Debt service reserve account
    - Covenants
    - Cash flow sweeps
    - Case exercise: Excel exercise with debt structuring and debt sizing

Some of the issues addressed in this session include:

  • How are project IRR’s and the equity IRR’s used in making investment decisions?
  • What is the difference between equity cash flow, free cash flow and cash flow for debt service?
  • What debt service coverage ratio is appropriate for various types of projects?
  • Why do bankers use the LLRC and PLCR in measuring the credit risk of a project?


Day 3

Understanding project finance models and financial statements

After the introductory discussion, participants construct a basic project finance model to become familiar with the structure of a project finance model, equity cash flow and free cash flow. The model is then used to demonstrate how interest during construction, multiple equity sources and target debt service cover can be added to a model. Once the fundamental model is built, it is used in the context of simple applications involving debt capacity, contract pricing, debt structuring, break-even analysis and probability of default. Construction of a simple model involves the following:

Objectives of project finance models

  • Structuring and tight DSCR projects
  • Computation of contract prices and other contract terms
  • Risk analysis and sizing in downside cases
  • Development of assumptions and alternative scenarios
  • Key parameters in project finance models
  • Analysis of models and evaluation of key decisions
  • Project finance models versus other kinds of models

Mechanics of project finance models

  • Setting-up project phases in model
  • Sources and uses of funds statement during the construction period
  • Debt schedule and connection with cash flow statement for sweeps, traps, defaults, and DSRA
  • Income statement to compute income taxes
  • Cash flow statement and cash flow waterfall
  • Computation of model outputs – equity IRR, DSCR, LLCR, and debt IRR

Avoiding bad practices in modelling

  • Best practice objectives
  • Inputs and organization
  • Transparent calculations
  • Simple formulas
  • Auditing, balance sheet and model checks

Technical issues after construction

  • Computation of tax depreciation and amortisation of fees
  • Cash flow waterfall mechanics and issues
    - Debt service reserve account cost and benefits
    - Working capital facilities
    - Cash flow sweeps
    - Cash flow trap covenants
    - Subordinated debt
    - Maintenance reserve accounts
  • Alternative computation of debt service coverage ratio
  • Equity cash flow and free cash flow

Project finance valuation with models

  • Cash flow as basis for valuation
  • Project IRR to screen projects
  • Equity IRR to structure projects
  • Modified IRR and NPV versus unadjusted IRR
  • Payback and other valuation metrics

Reading and interpreting models

  • Re-creating models
  • Testing models for extreme changes in key variables
  • Computation of equity IRR

Some of the issues addressed in this session include:

  • What basic components should be included in a project finance model?
  • How should the model be developed to assure flexibility in debt terms?
  • How can a project finance model be used to compute the debt capacity of a project?
  • What techniques should be used in computing the financial ratios for a project?
  • How can a project finance model be used in determining contract prices?
  • How can interest during construction be incorporated in a model?
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