Project Finance - Introduction
The objective of the Project Finance - Introduction training is not only to provide the delegates with a better understanding of the key principles of Project Finance risk but also to help them to analyse and react to those risks. All courses are interactive and are taught via case studies. The attendants will be encouraged to express their own credit risk opinion.
The financial and non-financial risk analysis key principles will not be viewed in an academic manner but through discussion, dialogue and case studies. It will help the attendants to freely express their thoughts, to analyse the risks by themselves, to utilize their brain, their experience and their common sense to react to credit issues.
Techniques and academic knowledge are important but useless if they are not used for to quantify the credit risks and decide whether or not the risk is acceptable to the bank. The attendants will be encouraged to focus on the essential credit risk issue: is the risk acceptable for the bank and is the bank really going to be repaid?
Tailored Learning Architecture
This programme is not only targeted for credit “specialists” but should be of interest to the professionals who directly or indirectly are involved in Project Finance.
This programme is an « à la carte menu ». Your teams have varying priorities: some may have already mastered accounting but struggle with budget management, while others may require a comprehensive refresher. The course will be customised to your challenges.
The duration, ideally 3 days, can vary depending on your needs.
The course will be interactive. Case studies will enlighten the risk analysis and the credit approach
Introduction
Definition of Project Finance
“Project Finance” as opposed to “financing of a project”
Limited-recourse and non-recourse finance
Main features of Project Finance
Why choose Project Finance
Project Finance Market
Origin and evolution of Project Finance
Project Finance figures:
Volumes, number of deals
Europe, Americas, Asia & Pacific, Africa & Middle East
Oil & gas, Power, Infrastructure, Mining, Telecom
League table: MLA, Bond arrangers, Sponsors
FThe main parties in a Project Finance
Project company/borrower
Sponsors/Shareholders
Banks
Multilateral and export credit agencies
Insurers
Construction company
Operator
Host Government
Risks and Mitigants
Country and political risks
Industry risks
Project risks
Environment risks
Demand and supply risks
Contractor risks
Operator risks
Funding risks
Currency and Interest rate risks
Credit analysis by the lenders
Getting started with Credit
Business/Commercial Risk
Risk evaluation framework
Macro – Country - Political
Industry Products/markets Suppliers / contracted purchases
Project Production facilities/infrastructure/Technical/contractors
Management – Project’s sponsors
The Financial Statements
Balance Sheet and Leverage
Income Statement and Cash Flow
Ratios Ratings
Advanced Cash Flow Analysis
Net Operating Cash Flow
Free Cash Flow
Discounted cash flow
Structuring a Project Finance
Key Project Finance Ratios: the Sponsors’perspective
IRR –The Internal Rate of Return
NPV –The Net Present Value
Key Project Finance Ratios: the Lenders’ perspective
CADS–Cash Flow available for Debt Service
DSCR– Debt Service Cover Ratios
PLCR – LLCR –Project and Loan Life Cover Ratios
Financial projections
Why are financial models used?
Volatility
What is the project and why should it take place?
What are the key operating assumptions?
The Financial Modelling:
Assumptions
Construction Cost
Operation: revenues, expenses, taxes
Financing: Debt / Equity
Cash Flow: CADS – DSCR / NPV - IRR
The Projection Cases
Appropriate debt and Equity financing
The Documentation
Shareholder/Sponsor arrangements
Project documents
Legal and Structuring issues
Seniority, Senior Debt, Junior Debt , Equity
Cash flow Waterfall
Guarantees / Securities / Covenants
Loan Documentation