International Project Finance & Cash Flow Modeling

In this 5 Day Course Participants will Learn About: Structuring large projects and accessing the most competitive funding Transactions in the oil and gas, energy, transport and water sectors Developing and using cashflow models Key legal risks in projects Current state of capital markets for project transactions Cross-border leasing Islamic finance Managing interest rate, currency and commodity price volatility Working with official providers of funds and credit support (export credit agencies, development banks and others) Approaches to cashflow modeling for project Guest Speaker - Bruno Mejean Supported By:
DAY 1 Structuring Projects and Creating a Security Package; Discovering Most Efficient Sources of Funds International Project Finance Markets Today Current challenging markets for project finance transactions 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 to private investment in public infrastructure Examples: Power projects and toll roads Risk Identification and Allocation Risks in development Construction, and operating risks Feedstock and supply Market risks Environmental risks Financial risks Political and regulatory risks Sources of Finance: Financing Checklist Domestic and foreign banks Bond markets Development Banks, ECAs and other official creditors Leasing Islamic finance Sources of equity Workshop: Cashflow Modeling Analytical Techniques and Credit Assessment Financial modeling 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: Working With Cash Flow Modeling Software to Finance a Gas Processing Plant Participants break into small groups to prepare a case study that analyzes a fertilizer project. A computer simulation will be used to model cashflows. Groups will present their solutions. DAY 2 Legal Issues: Bank Finance; Export Credit Agencies; Infrastructure Projects Transportation Case Discussion Legal Issues in Project Finance Legal environment and regulatory conditions Commercial points and legal points in various project structures: -Incorporated and unincorporated joint ventures -Partnerships and limited partnerships Key contractual agreements and structuring considerations Developing a term sheet -Limiting recourse -Tax gross up issues -Market interruption -Reps and warranties -Conditions precedent -Covenants including MAC clauses -Hedging requirements Traditional Sources of Finance: Bank Finance Current club loan market vs. traditional syndicated loan financing What security? Market interruption, and flex clauses, mini-perms Development bank "A" and "B" loans and other funding sources Inter-creditor issues Using 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 Public Private Partnerships (PPP): Roads, Airports, Ports and other Transportation Projects What is PPP? Alternative approaches and ownership structures Outright and partial government participation in roads Long-term concessions and other forms of public private partnership (PPP) for seaports vs. airport financing Exercise: Constructing a Risk Matrix for Airport Projects Case Study: Airport Finance; Negotiating a Term Sheet Participants will break into groups to work on a limited recourse 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. DAY 3 Capital Market Issuance; Leasing and Islamic Finance; Risk Management with Derivatives; Power Projects CASE DISCUSSION International and Local Capital Markets for Projects 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 Leasing Applications Leasing applications in projects Evaluating cost Case examples: Colombia and Brazil Islamic Finance for Projects Definitions, principles, and authoritative sources Structures: Murabaha, Istisna and Ijara Examples of petrochemical and other transactions that have successfully tapped the market Price Volatility and Risk Management with Derivatives in Project Finance Financial price movements today: volatility and risk Using interest rate and currency swaps to manage risk in projects Using options: caps, floors and collars Commodity-linked derivatives and securities Oil, gas and electricity hedging with case examples of application Case Study: Interest Rate and Currency Risk Management Power Markets Market forces and the effect on electrical supply Fragmentation of electricity generation Gencos/Transcos/Discos Contracted sales and PPAs Merchant Power Plants (MPPs) Rating agencies' analytical model Renewable energy projects compared to traditional fossil fuel burning plants What is driving the investment? Government incentives Case Study: Financing a Combined Gas Power and Water Desalination Plant Risk allocation among various project participants in a gas-fired cogeneration electricity and water desalination plan in the Middle East. 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? When is bond issuance a realistic option? DAY 4 Political Risk Support; Water and Sanitation Projects Power Case Discussion Developing Projects in International Markets: Sources of Credit and Risk Support Session presented by guest speaker: Bruno Mejean, Principal, BJM International and BJM Solar Energy Finance Bank and Capital Markets Availability for Projects Today Role of official political risk enhancers World Bank Group and Regional Development Banks (ADB, IADB, AfDB, EBRD, EIB, etc.) Bilateral agencies (FMO, DEG, OPIC, Proparco, etc.) ECA support Accessing local capital markets Private sector political and credit risk enhancement (AIG/Chartis and others) 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: Financing a Water Treatment Plant Participants will break into groups to prepare a case study concerned with financing a wastewater treatment plant in Latin America Self-Test and End of Program Introduction to Cashflow Modeling Session on Day 5: Ras Laffan LNG plant DAY 5 Project Finance Modeling Workshop Participants will spend a day building a model for Ras Laffan, a Liquified Natural Gas (LNG) project undertaken in Qatar. They will assess a wide range of scenarios to test a limited-recourse financing package for debt capacity and suitability for investment. With discussion of common approaches to modeling using Excel. Including “do’s” and “don’ts” as well as the practical uses for models during 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 modeling output for initial project vetting Supporting on-going negotiations Summary and Wrap-up of Modeling Workshop