Agenda

• 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 role, cash flow focus & ESIA requirement

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

• 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 off taker
• supply and resource availability
• Operation and maintenance regimes
• Environmental provisions and the overall regulatory regime
• Insurance & Force Majeure provisions

• Risk identification and using IMAAA

• 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

Analysis of the minimum amount of equity required by debt providers and the expected return on equity to sponsors and other investors

Project Agreements

• Offtake
• Contracting Authority, e.g. PPP structures

Sub-contracts and other agreements

• Engineering, Procurement & Construction
• Operation & Maintenance
• Feedstock/input supply provision

Loan Agreement provisions

• Security/collateral liens
• Control accounts/waterfalls

• 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 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

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

• 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

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

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

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

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

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

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

• Review of the A1 motorway project in Germany

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

• 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

• 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