Advanced Project Finance Workshop

This unique 5-day training course examines the latest structuring, funding and cashflow modelling techniques. On completion of the course you will be able to: Analyse specific case studies, risk profiles and structuring protocols Analyse funding sources and credit criteria Simulate, arrange and document project financings Construct a project finance cashflow model Capitalise on the new horizons for projects and funding sources Course overview: This course will cover all the critical factors in project financing today, from identifying which projects to finance, to the negotiation tactics employed to achieve the best deals. You will find out how to spot the pitfalls in project finance structures and identify the risks, credit criteria and funding. Through practical exercises you will learn sector specific modelling and structuring protocols and how to build a cashflow model from scratch. The course also covers political risk structuring and tailoring the project to suit the funding. The programme will finish by considering the future direction and developments in the sector and how to best take advantage of these. Methodology: You will receive pre-course reading notes and case study material in analysis, negotiation and structuring. Individual project finance cases will be pre-assigned. Comprehensive session notes, computer models and resource material will be a key part of the teaching methodology to form an excellent balance between formal lectures and hands-on participation. Prerequisites: This advanced course is suitable for all those who have previous experience in carrying out project financing e.g. project/structured finance executives from banks, multinationals and multilaterals. Delegates are likely to have a minimum of 3 years’ hands-on project finance experience and ideally you should know about NPVs, IRRs and cashflow analysis and should also have a basic understanding of business law.
Day 1 Critical factors in project financing today Why choose project finance? Sponsor’s rationale Lender’s criteria Constructor’s objectives Government’s roles Institutions/investors Best sectors and project types Difficult sectors to avoid Current trends Stages in project finance Time, team, costs Information memorandum/project proposal Credit/investment committee considerations Workshop: case study/modelling team assignments Power project – capital markets Tollway – banks/bond Oil and gas – political risk Power – co-financing Risk definitions/allocations The 6 risk systems The 5 structuring formats The 16 risks to identify The 174 structures to apply Sector-specific risk profiles and structuring protocols Oil and gas Tollways/bridges/tunnels Power/merchant Ports/airports power railways Water/waste water Hospitals/prisons Telecoms/satellites Mining/metals Renewable energy Workshop: pick the risks; each team will select the top four risks and the structures that are needed in four recent cases. Risk ‘metrics’ Basel II Compliance measures Day 2 Structuring and trade-offs Due diligence How to scope the 6 independent reviews Fit to credit/investment approval The “bankable” feasibility study The project development plan Why do projects go wrong? Lessons to be learnt from: Eurotunnel/Eurodisney/Iridium OrlyVAL/Dulles Greenway/NCA/Quintette Key documentation aspects The 19 participants The 33 contracts Contractual architecture – risk coverage Concession agreements vs. BOO Special purpose vehicles (the 5 types) Operations/management (O&M) contracts Turnkey construction contract Delayed completion and systems performance insurances Offtake/sales contracts Indirect/third-party support agreements Government guarantees Dispute resolution methods Funding documentation Loan agreements Joint venture/shareholder agreement Security documentation Assignment of contracts/insurances Direct and common agreements Offshore proceeds account Swaps Securitisation Inter-creditor agreement/deed of priority Funding sources Debt Equity Leasing/leveraged leasing Commodity-based Ratings for project financings Moodys/Standard & Poors/Fitch Key differences with bank-driven deals Covenants Pricing Default Term Structure Voting Role of the advisor When to involve advisors How to keep the costs and timetable down Political risk structuring definitions Terrorism questionnaire The ‘classic’ 3 - war, inconvertibility, expropriation The full set of 20 political risks Application to equity too Export credit agencies/bilateral agencies US Eximbank/OPIC, US EDC, Canada/KfW/Hermes/ECGD, UK/JBIC/NEXI Tactics for approaching the ECAs Multilateral agencies World Bank Multilateral Investment Guarantee Agency (MIGA) International Finance Corp (IFC) European Bank for Reconstruction and Development (EBRD) Inter-American Development Bank (IDB) Asian Development Bank (ADB) How to approach the multilaterals Private sources AIG Sovereign Day 3 Credit criteria and cashflow modelling Credit analysis The investors’/financier’s/company treasurer’s measures What model is needed for a project finance? The model layout Establishment of the key cases Fit to the project risks/sensitivities "Circularity is best" Model designs Design of the input sheet/data validation Conventional: operations; capex; loan/tax routines Project finance model types Typical layouts Drawdown routines/model periods (%, quarterly, overruns) The 8 main repayment styles Multi-tranche approaches Reserve accounts Debt service Maintenance Capex Tax Environmental FX Calculating liquidated damages/overrun/retention requirements Sensitivity analyses modelling How to choose sensitivities Key ratio targets Contrast to sponsors' IRR, NPV, valuation analyses Dynamic what if? Scenario manager Graphical sensitivity techniques Conditional formatting Other tricks? Build the course model Design the necessary input sheet Determine the loan amount required using different repayment techniques Model auditing 'Straight' Excel techniques Advanced add-in styles Day 4 Modelling project finance cashflows Key inputs Non-modelling assumptions Cyclicality The 5 breakeven techniques Modelling key decision/credit criteria Leveraged IRR Annual debt service cover ratio Principal cover Loan life/project life PV ratio Interest cover Cash/equity lock-ups Delay algorithms Residual cover/cushion/ratios Liquidated damages Cash sweeps/mandatory prepayments Modelling workshop Modelling tactics How to fiddle/finesse the model Typical modelling errors Discounting/escalation Available cashflow Reserves Working capital Replacement capital EBITDA CPI-based LLR/PLR The danger of using unescalated models Some handy tools to check model imputs Sector modelling aspects Power Tollways Telecoms Satellites Prisons/hospitals Airport/ports Water/waste water Theme parks/stadiums Railways Resources (oil and gas, mining) Bidding contest using the course model - leading from the course model and the information memorandum update, decide whether you can improve on the currently offered project finance deal! Day 5 Outlook for project finance Case study presentations: each team presents its allocated case with structures and solutions as well as cashflow sensitivities. Expert feedback on the deal architecture and risks. Project finance as a competitive tool How to integrate project financing into the bid Practical case study: linking the tariff to the project finance structure. Contract/tender bidding “Real” turnkey construction contracts Public private projects The 7 variations Tendering criteria Trends/case examples New horizons for projects and funding sources “Green” funds Emerging market funds Infrastructure/development funds Tax structures Capital markets Political risk enhancements FX cover Credit enhancements Credit wraps/monolines Weather/wind derivatives Islamic project finance Credit derivatives Securitisation CDOs/CLOs Takeout architectures Course summary & close