Project Finance

IFF Training

How long?

  • 3 days
  • in person

IFF Training

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About the course

This brand new agenda will enable you to:

  • Analyse why and when sponsors use project financing techniques
  • Widen your understanding of the project finance techniques and the jargon used
  • Examine of the key sources of limited-recourse debt
  • Appreciate of the lender’s approach to risk
  • Understand how key risk factors drive structure and loan pricing
  • Learn how project models are built and used to balance equity against debt
  • Appreciate how project models are used to optimise debt amounts, maturity and re-payment

Delegates study project financing challenges in the industry using case studies and interactive work/group discussions to apply the skills and knowledge they have acquired.

How You Will Learn

Real-world examples and interactive work/group discussions covering project financing challenges, will reinforce theory and knowledge acquired

Case studies include: Risk identification and using IMAAA; Prepare your Bid; Review a Term Sheet; Review of the A1 Motorway Project in Germany

Agenda Summary

What is Project Finance?

  • Definition – “Project Finance” and a comparison of the key differences between project finance and corporate finance
  • Origins of project finance
  • Who uses project finance and why?
  • Review of the market – size, industry sectors, geography and trends
  • Defaults and recovery statistics
  • What is the downside? – slow, complex, expensive etc.
  • Core learning themes - sponsor, cash & IMAAA

Sponsors and Lenders / The Lender’s Risk Analysis

  • Different risk/reward objectives of sponsors and lenders – who gets the upside when a project goes well
  • Balancing equity and debt

Qualitative Risk Assessment and Mitigation

  • The Sponsor – competence, creditworthiness & potential conflicts of interest
  • The country and the institutional framework
  • Construction & technology risk - how financiers manage construction risk
  • Offtake – the nature of the offtake contract and the impact of volatility and the impacts on debt structuring
  • The risk position and cashflow security of the offtaker.
  • Supply and resource availability
  • Operation and maintenance regimes
  • Environmental provisions and the overall regulatory regime.
  • Insurance & Force Majeure provisions

Case Study Exercise – Risk identification and using IMAAA

Quantitative Risk Assessment and Debt Structuring

  • How the cashflow models are developed and the range of inputs
  • The use of Lenders Advisors in finalising the inputs and the financial model
  • How debt capacity is used as a risk mitigation tool for lenders
  • The measurement tools used by Lenders – ADSCR, LLCR & PLCR
  • The repayment schedule – Straight line or annuity or a sculpted profile
    • how the cashflow is used to
    • size the debt capacity of the project
    • the repayment profiles
    • the amount of equity required to fully fund the project
  • Sensitivity analysis
  • Choosing/calibrating sensitivities
  • Financing risks – Interest, inflation, foreign exchange
  • Funding risks – certainty of funding – equity & debt

Case Study Exercise - Prepare your Bid This exercise requires participants to consider the inputs into a project and how a sponsor can make changes to its approach and bid the lowest price to win an auction/bid process.

Project Financing Documentation

  • The term-sheet – purpose, legal status, binding/non-binding aspects
  • Term-sheet/documentation provisions
    • purpose clause
    • interest/fees
    • repayment/prepayment
    • representations and warranties
    • covenants/undertakings
    • conditions precedent
    • security
    • control accounts/waterfalls
    • events of default
  • Legal opinions

Case Study Exercise - Review a Term Sheet Based on an Earlier Case Study

Participants will then negotiate the term sheet from the perspective of either the lenders and borrowers

The Project Finance Process

  • The players and their interests
  • Role of advisers
    • financial advisers
    • technical advisers/consultants
    • legal counsel
  • The financial feasibility study/debt structuring
  • The information memorandum
  • Debt underwriting/syndication
  • Financial close
  • Post-close monitoring

Other Sources of Debt Finance and Risk Mitigation

  • The bond markets
  • Credit enhancement through guarantees
  • Private political risk insurance market
  • Export credit agencies
  • Multilateral agencies/development banks
  • Sponsor co-financing

Sustainable Lending – The Equator Principles

  • Origins and purpose of the equator principles
  • Development and current adherents
  • Purpose and scope
    • best practice in sustainable lending
    • bank obligations
    • project classification under the equator principles
  • Practical application using examples

Power Project Finance

  • Industry background and the role of the System Operator, matching the supply of electrical energy and the demand

Must-Run Technologies – Wind & Solar Power

  • How the contracts are structured – FIT, contracts for differences, fixed price & auctions
  • The impact of priority despatch
  • Assessing the resource risk
  • Operation and Maintenance

Thermal Power Plants

  • How the contracts are structured capacity charge and energy charge
  • Fuel supply issues
  • Operation and maintenance

Offtaker

  • Risk assessment of offtaker and the drivers of their cashflow
  • Risk mitigation in emerging markets

Merchant Power Markets

  • A brief history and an assessment of the return of merchant power price risk

Infrastructure Project Finance

  • Roads, Airports, Light Rail Schemes & Ports
  • Comparing the “availability” model to the traffic/volume risk model

Case Study – Review of the A1 Motorway Project in Germany

Social Infrastructure/PFI/PPP Projects

  • Rationale for public to private projects
  • The PFI/PPP process
  • Regulatory/public sector oversight
  • Project types

    • hospitals
    • schools
    • housing
    • prisons

Oil and Gas Financing

  • Overview of the oil and gas chain
  • Upstream to downstream
  • Upstream finance – single-field finance and “borrowing bases”
  • Midstream finance – refineries and pipelines
  • Downstream finance – Liquefied Natural Gas (LNG) and petrochemicals

Case Studies and Examples

Several real-world examples and case studies will be used, in a group study/interactive setting. This will reinforce the principles taught on the course and to allow projects to be examined with greater granularity.

Experts

Neil Edmonds

Neil Edmonds has worked in the banking industry for over 35 years. Over the last few years, Neil has worked in the Loan Syndications team at Standard Chartered Bank focusing on Structured Finance transactions. Neil’s involvement in the Power and Utility sectors dates back to the privatisation of...

Videos and materials

Project Finance at IFF Training

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