Project Finance Academy

This 10 day intensive practical programme features everything you need to know about project finance Featuring seven highly interactive, individually bookable, modules: Days 1-3: Advanced Project Finance Workshop Day 4: Oil & Gas/LNG Project Finance Day 5: Power Project Finance Day 6: Infrastructure Project Finance Day 7: Mining Project Finance Day 8: Project Finance Risk/Recovery Days 9-10: Building Project Finance Models All workshops can be booked separately. Group discounts are available. Course Outline This unique project finance academy is designed as a modular 10-day course. The modules are separately bookable. The overall course objective is to examine advanced techniques relevant in the current stressed global financial markets and to enhance your 'sector' skills in four key areas. A 1-day session on project finance risk/recovery strategies is the followed by a 2-day module on building project-finance models. International case studies and best practices are discussed throughout, including the application and integration to public-private project financings. Who Should Attend The course will be of value to professionals in the following areas: Bankers/investment bankers Project finance modellers Financial advisors Sponsors/project joint venturers Business developers Government/PPP agencies Public sector managers Export-credit agencies Multilateral agencies Accountants/taxation advisers Financial analysts Sharemarket analysts/brokers M&A/buyout specialists Privatisation executives Company treasurers/directors Credit committee staff Rating agencies Project managers/engineers Project consultants Investment/portfolio managers Insurance advisers/brokers Course Summary The 13th annual project finance academy starts with a 3-day advanced project finance workshop which focuses on the core skills of risk analysis and structuring, with a special emphasis on political risk. Team case presentations neatly wrap together these skills along with the analysis and sensitivities of the team case-study Excel models. Four 1-day courses then bring up-to-date sectors skills in Oil&Gas/LNG, power, mining, and infrastructure. Industry fundamentals are first covered together with the key metrics and due diligence issues alongside numerous case studies. International best practices are delivered comprehensively. The 1-day module on project-finance risk/recovery examines projects that have gone wrong, including a review of the credit factors/reasons why these deals would go wrong - incorrect 'project concepts'. The legal aspects and the four methods of loan workouts are also given. Finally, the 2-day course on Building Project-Finance Models looks at the key financial ratios and credit analysis as well as the forecast basis for any cashflow projection. This course is designed as a 'Build-your-own-model-from-scratch' with the final model used in a course bidding contest! These 7 course modules are highly interactive with many cases and recent examples referenced throughout to fully explore the world of project finance. Supported by:
Day 1 Hot buttons in project finance Best sectors and project types Difficult sectors to avoid Which trends are current? Why choose project finance vs balance-sheet finance? Sponsor's rationale Lender's criteria Constructor's objectives Government's role(s) Institutions/investors Stages in project finance Time, team, costs Credit approval/information/memorandum Syndication Start case study/modelling assignments Tollway Banks/bond 144 A Power Project Bond Oil & Gas Political Risk Infrastructure Complex Bond Credit criteria Credit analysis case study Impact of leverage Calculations for global coverage ratios Calculate liquidated damages /overrun/retention requirements Credit factors How to choose sensitivities Key ratio targets Contrast to sponsors' IRR, NPV, valuation analyses How to determine the correct structure for each risk The 7 risk systems The 16 risks to identify The 81 structures to apply Operating Inputs/reserve Cost Sponsor/participant Technical Management Force majeure Legal Political Foreign exchange Infrastructure Interest/funding Syndication Market/revenues Environmental Engineering/design Completion/construction Day 2 Funding and documentation Funding sources Debt - Local currency - Cross-border - Mezzanine Credit wraps Equity - Preference capital - Convertibles - IPOs/floats for projects Capital markets. Leasing/leveraged leasng Export-credit agencies Multi-lateral agencies Commodity-based - Offtake contracts Derivatives Ratings for project financings How to get one from Moodys/Standard & Poors/Fitch Contractual architecture PPP architecture including concession agreements /BOO/BOOT Special purpose vehicles (the 6 types) Operations/management (O&M) contracts Turnkey construction contract - Delayed completion and systems performance insurances Offtake/sales contracts Support agreements/direct agreements - Indirect supports/comfort letters Government guarantees/PPP architecture Funding documentation Loan agreements Joint venture/shareholder agreement Security documentation - Assignment of contracts/insurances Offshore proceeds account Swaps Securitisation Information memorandum Due diligence How to scope the review Independence of the reviewer Fit to credit approval/compliance The “Bankable” feasibility study Role of the advisor(s) When to involve advisors How to keep the costs down Day 3 Political risk and case presentations Political risk structuring Definitions Terrorist questionnaire The classic three – expropriation; war; inconvertibility The full set of 21 political-risk categories Export-credit agencies/bilateral agencies KfW-Ipex/Hermes, Germany ECGD, UK EDC, Canada JBIC/NEXI, Japan US Eximbank OPIC, USA ECIC, SA Tactics for approaching the ECAs Multilateral agencies World bank Multilateral investment guarantee agency (MIGA) International Finance Corp (IFC) European Bank for Reconstruction & Development (EBRD) African Development Bank (AfDB) Development Bank of Southern Africa (DBSA) Africa Trade Insurance (ATI) How to approach the multilaterals Case study presentations: Each team presents its allocated case with structures and solutions as well as cashflow sensitivities. Expert feedback on the team’s presentation of the deal architecture, risks, and financial sensitivities. Project finance as a competitive tool How to integrate project financing into the bid Contract/tender bidding “Real” turnkey construction contracts PPP bidding - practical case study Croydon Tramlink, UK The ‘PPP’ Sydney model New horizons for projects and funding sources “Green” funds Emerging-market funds Tax structures Performance insurances Infrastructure/development funds Capital markets - Wraps - Partial risk - Credit guarantees Islamic project finance Credit derivatives Note the pre-course pack/CD includes the project finance risks chapter and the suite of cases and cashflow models. Oil & Gas/LNG Project Finance Day 4 Varied dimensions of petroleum project financing Field development (Upstream) Platforms/production facilities Pipelines/oil terminals Refineries/petrochemicals Coal/gas-to-liquids LNG/regasification/shipping How does the oil/gas/LNG/refining industrys’ cashflows work? Converting reservoir engineering and the other 15 risks into cash flows Reserve tail/PV loan life ratios Case study: Indonesian LNG What are the bankers looking for in large scale syndications? Reservoir engineering Seismic studies ‘Proven’ vs ‘Probable’ reserves Production aspects Special petroleum-industry project finance structures Production payments Throughput agreements Hedging/options Royalty trusts Securitisation Tankers Case studies: Centragas: How can high-leverage pipeline infrastructure be funded in the capital markets and cover political risk Ekofisk Pipeline: How far can a borrower push a throughput agreement? Sasol Gas Pipeline: Field facilities enhance this project’s cashflows First International Petroleum Transport: How does Shell spin off six tankers onto the capital markets, firstly as a private placement then as a public issue? Floating-Production-Storage-Offloading (“FPSOs”) Vessels: Novel financing techniques are required in this new financing sector Ras Laffan LNG: The world’s largest Project Finance bond issue at the time even given the political risks PNG LNG: Examine the tranches in this blockbuster deal. Sweet and sour - PFI? Jubilee: How do borrowing bases work? Power Project Finance Day 5 Power industry risk analysis Technology and costs: cogen, cocycle Heat rates Capex/MW Degradation Maintenance reserves Availability Fuel costs Emissions Renewables LNG Stages in power financing - Concession/power purchaser - Tenders/unsolicited - Financing Case study: Tejo Energia ("Pego"), Portugal. How can banks take 30 yr risk on a 12-year deal? What is a cash sweep? Credit analysis Coverage calculations Reserve accounts Liquidated damages Case study: Petropower. How could such a ‘beside-the-fence’ project attract 100% LDs Renewable energy projects Wind Hydro/mini-hydro Biomass Wave Solar/photovoltaics Merchant power plants Price Fuel = f(Price electricity) Price Gas=f(Market)/Reset Fuel subordination Anchor tenant/Host Energy conversion Agreement Lender friendly* Cost curve Other services Portfolio Traders Case studies: Milford. How does this merchant deal handle ‘deemed dispatch’? What is the subordination structure? Wind energy: Overcome the difficulties in fitting wind into the grid and the complexities of the renewables payment regimes. Mine-Mouth power: How can the fuel supply be co-financed with the power plant? Infrastructure Oil & Gas / LNG Project Finance Project Finance Day 6 Risk allocation for each sector Highways/tollways/bridges/tunnels Airports Ports Railways/undergrounds Hospitals/prisons Water/sewage PPP infrastructure sectors of interest Transportation Communications Social Services Government/military Services Traffic studies Methods Ramp-up Due diligence Urban mass transit Case Studies: N3 Tollway, S. Africa: The government traffic studies were flawed. Learn what the banks did to correct this problem Gautrain: Why this could never be a true Project Finance deal. What is the BEE aspect? Superhighway BOO/BOT: How much of a real estate component should be counted in a tollway financing? Are the interchanges and corridor developments bankable? Laem Chabang Port: How can banks achieve a full market-risk on such a project financing? How can FX risks be packaged? Are there technology aspects in the project forecasts? Chengdu No.6 Water: Examine China’s first water supply BOOT with the imaginative structuring of EIB alongside ADB. The first time municipality risk was assumed (no central government counter-guarantee). Contractor usage of project finance Tender conditions Delay/completion architecture PPP ‘shell’ Special-Purpose-Vehicles (SPVs) - Insurances Case Study: Croydon Tramlink. The PPP parties surely had the best shot at winning this concession. Learn why the tender overturned them? Mining Project Finance Day 7 Which commodities to project finance? Minerals to avoid Stages in financing the minerals industry Exploration Development Operations Credit analysis criteria Economic rent Reserves Capital markets Case studies: Ranger Uranium, Australia: How can banks provide US$55million as a rehabilitation guarantee to shut the mine down? Industrial minerals: How to structure sales contracts to support a project financing? Colowyo, USA: How does the capital markets judge a monetisation of coal supply contracts? Reserves due diligence Geology/drilling Reserve estimation Mining recoveries Gold instruments Commodity swaps Commodity-linked bonds Case Studies: Iduapriem Gold Mine, Ghana. Find out how the gold fee works? Can subordinated debt work within a gold loan? Batu Hijau, Indonesia: A two-step financing weaving in KfW, US Exim, JBIC plus the sponsors’ subordinated debt Newmont, Zarafshan, Uzbekistan: How to fit OPIC, MIGA, and EBRD together with a political-risk project financing. Lumwana: look at the mix of funding applied (plus political-risk approach). Project Finance/ Risk Recovery Day 8 Project finance default history Non-performing loans Bond default/recoveries Evidence of repetition Long-cycle events New fashions Customer relationships Syndications/Loan trading Basel II Case studies: Iridium World. Why does Motorola consider this satellite telephony project to be a success! Besides the technology risk what market-risk pointers were evident? OrlyVAL – Why did the French banks support an airport-city link when urban mass-transit traffic Project Finance history is so appalling? Risk linkages Investor conflicts Case study: EuroDisney. Why were Disney’s prior real-estate failures not recognised? Due diligence Case studies: Victoria Hospitals Cogen, Australia. See how the risk management study identified grid weaknesses near the main generator Mumbai-Pune Tollway, India: Why is the traffic so slow when the alternative route is so difficult and unattractive to use? Eurotunnel: There are so many key lessons from this massive conflict of interest(s) Australian Magnesium: Why was this project aborted after the Project Finance and investment funding had been committed? Dulles Greenway: How is it possible to be so wrong on traffic in the automobile/driver-mad USA? Murrin Murrin: Although the Independent Engineer identified the risks, the bond project financing defaulted immediately Role of the credit/investment committee Credit scoring Loan compliance Approvals matrices Compliance Pre-committee screening process Anticipating problems/failures The Rule of 3 Risk Matrices Building in hazards into the forecasts/scenarios Case study: Western Harbour Crossing. Although traffic across Hong Kong Harbours is readily understood, why did this carefully-controlled structure fail? Default Legal states of play Bankruptcy Informal insolvency Administration Receivership Liquidation Styles New monies Break-up/reshaping Equity/mezzanine Patience Prep for scale ‘War’ Project financier’s toolkit New management Default derivatives Debt: equity swaps Securitisation Alternate dispute resolution Expert/delphi technique Role of regulator Re-regulation Regulator’s position New techniques Case study: Citibank’s project finance CLO. See the international and sector approach taken on the third Project Financed CLO in the Project Finance bond market. Building Project Finance models Day 9 Credit and modelling Project finance modelling objectives Link to project finance’s 16 Risks Model usage at different stages of project finance process Liquidated damages Project finance layouts Conventional: operations; cashflows; loan/tax routines - Drawdown routines (%, quarterly, overruns, etc and the ‘split-year’ solution) - Amortisation Styles (linear, annuity/mortgage, and % dedication, and the six others) Cofinancings: multiple tranches/maturities/payment priorities Reserve accounts Currency mismatches Interest rates and inflation Build logic into course model Input sheet Capex/construction Revenues Cashflows Working capital Opex Equity Reserves Summary Loan Taxation Debt service P&L Balance sheet What-if? Compliance Macros Log Practical exercise: You will start to build your own project finance model from the information memorandum inputs. The special aspects of completion delays and overruns will be assessed in the first hands-on modelling then building the capex sheet. Project finance ratio analysis Debt service cover ratio Principal cover Interest cover Loan life PV ratio PV ratios – project/reserve Residual cover/cushion Accounting ratios: profitability; efficiency; liquidity; etc. Practical case study, you will: Discuss the discrepancies in the many different definitions of these ratios Discriminate among the 24 different versions of the DSCR Examine these for the course project finance model you are building Day 10 Sensitivities and bidding competition The design and structure of financial models Objectives Flowchart Modules Menu and structure Help Testing Practical exercise: You will audit the course model for errors using three different auditing techniques, including one not generally recognised within Excel. Another excellent non-Microsoft audit add-in is demonstrated. Sensitivity analyses modelling What if? Other tricks? Scenario analysis Breakeven Practical exercise: You will produce all the classic (deterministic and dynamic) sensitivities expected in Project Financing. The two Excel techniques are done as class/coursework as well as tips on the best ways to present the results graphically. How to massage/finesse the model Ratios Loan amounts Discount rates/leveraged IRR Term Reserves Tax Non-modelling inputs The key input assumptions can overwhelm the accuracy of any model. Six different information sources and approaches are outlined along with actual examples. How does each delegate keep up to date on the choices of input assumptions? Practical exercise: Your task is to find at least three ways to improve the financing result from manipulating the course cashflow model. Typical modelling errors Discounting/escalation Available cashflow Working capital Reserves Replacement capex Residual value Bidding contest using course project finance model. The way to translate the modelling (bidding competition) results into the termsheet is the final aspect of the course. The winning team will defend its bid and show how the model achieved the winning result. The final course model itself is often used as a screening model by delegates after the course. Course summary and close