Mastering Infrastructure and Project Finance

Project Finance is a highly technical and complex field that has evolved with PPPs especially as a limited-recourse facility. As a rapidly developing field of practice in connection with the rolling out of PPPs in Nigeria, a grave need for the updating of the skills of investment professionals and financial analysts involved in infrastructure projects across the country has been established

Delivered by internationally certified and recognised experts in LBS and the PPP domain of practice, this seminar is designed to assist investment professionals and financial analysts to fully understand the practical techniques, skills, and spreadsheet models needed to analyse, structure, negotiate, and ultimately complete successful project-backed financing. By presenting effective financial model design techniques, analysing case studies of project financing models, and participating in role-playing simulations to analyse and negotiate infrastructure project financing, participants in this programme will learn how to design and structure project financing models,review and critique project financing models, as well as strengthen the structure and negotiate infrastructure project financing.

As PPPs gain traction with government MDAs at national and subnational levels, the need to acquire reliable skills, tools and techniques for achieving successful outcomes becomes absolutely paramount. This need has often been expressed by private and public sector organisations dealing with PPPs as they decry the dearth of requisite technical skills to either design PPP financial models or to critically appraise and evaluate models built by third party advising firms. This inadequacy has found indisputable expression in the collapse of several PPP contracts in Nigeria based on poor financial modelling, scrutiny, and inappropriate contract design. It is therefore obvious that developing core competence in comprehensive understanding of project finance is absolutely necessary in order to decide on projects’ bankability or viability and other policy implications. Financing an infrastructure project must start with an evaluation of the financial feasibility of the project by technically interrogating the project’s bankability, premised on a given set of financial assumptions and admissible risk allocations amongst the project parties and stakeholders. To successfully create a financial picture of the project opportunity, an array of actions must be put into motion – input variables must be identified, numbers crunched and forecasts created to determine financial viability. If this systematic approach is not adopted then most PPP and infrastructure projects may not reach a financial close and even so, may eventually be caught up in costly disputes.

Key Learning Outcomes

• Understand the underlying principles and rationale for employing project finance in Infrastructure Projects
• Compare the fundamental structures of limited-recourse project financing vs. corporate and sovereign financing techniques for infrastructure
• Design, set-up, and effectively label spreadsheet models for infrastructure project financing
• Structure financial statements within project financing models including: Demand Projections, Capital Investments, Financing Sources, Income Statements, Depreciation Schedules, Debt Schedules, Cash Flow Statements, and Balance Sheet Projections
• Plan and design sensitivity analysis on key project financing variables to assess project “bankability” under different conditions.
• Network with leading PPP policy makers, transaction advisors, PPP project managers and key stakeholders

Programme Curriculum

Understanding Fundamental Requirements of Limited-Recourse Project Financing

• Review of fundamental rationale for project financing
• Key technical structures of limited-recourse project financing versus sovereign financing versus corporate financing
• Understanding the key trends and dynamics that have driven and shaped the global project financing market since 1990
• Understanding the role of financial analysis and project financing spreadsheet design and development within the project financing life-cycle
• The impact of the current global financial crisis on the requirements for projects financing analysis and spreadsheet development

Financial Analysis Skills for Project Financing Spreadsheet Models

• Understanding key practical characteristics of effective project analysis models: clarity, flexibility & robustness
• KIM STAKING – Distinguishing three key components of effective financial analysis models; inputs, data manipulations, and outputs
• Specifying the analytical needs of key project stakeholders: Users & tariff affordability; Investors & Return on Equity (ROE) and payback periods; Lenders and Debt Service Coverage Ratios (DSCRs); Governments and Value for Money (VfM) benefits; and other stakeholders (labour, local suppliers, )
• Designing, labelling, and programming key financial model worksheets: The input and results worksheet, demand projections, capital investments, financing sources, income statement, revenue projection, depreciation schedules, debt schedules, cash flow statement, and balance sheet projections

Analysing Changes to Key Project Financing Structures: Sensitivity Analyses and Credit Enhancement

• Understanding and applying sensitivity and scenario analysis techniques
• Single-iteration variable analysis vs. multi-iteration Monte Carlo simulation analysis
• Analysing the results of investment sensitivity analysis: identifying the need for additional credit enhancements to establish “bankability”
• How to structure, model, and apply project financing credit enhancement techniques: capital enhancement techniques: capital contributions, minimum demand and off-take guarantees, reserve accounts, subordinated debt, additional sources of revenue, public equity, and other credit enhancements