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Advanced Project Finance

Learn and develop an enhanced understanding of project finance from both a lender's and a borrower's perspective

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A two-day project financing course

Advanced Project Finance Course Day One

The Characteristics of Project Finance

Project finance, advanced project financing, or limited recourse financing, has features that render it quite different from ‘normal financings’ and these differences permeate throughout the structure.

  • The limitation of recourse
  • The due diligence required
  • The choice of entity as the SPV
  • The role of the project cash flow model
  • The significance of debt risk vs. commercial risk
  • The role of contract in limited recourse financings
  • The role of security in limited recourse financings
  • The rationale for selecting project finance 

Contracts and Cross-Border Enforcement

Project financing involves a spider’s web of contracts.  These contracts are pointless unless there is an ability to enforce rights under them.  In cross-border contexts, this is often not straightforward.  Litigation is not the answer.
  • This advanced project financing course explores why enforcement can be problematic
  • The shortcomings of contractual litigation in limited recourse financings
  • Dispute resolution - typical structure and procedure
  • Arbitration and the NY Convention 

PPP and Infrastructure Projects

Because most PPPs and BOTs have a contractually-based revenue stream, their structure and characteristics are quite different from other project financings.

  • PPP projects contrasted with industrial/extractive industry projects
  • The motivations and objectives behind PPPs
  • The role of the parties and the sequence of implementation
  • Public sector procurement
  • The structure of concession agreements

Case Study: Emerging market infrastructure project 

Pre-Completion

Getting a project built and working as planned is the hardest and therefore the highest risk phase of most projects.  Particular care is required in structuring the rights and obligations.

  • Standard form contracts – e.g. FIDIC
  • Liquidated damages
  • Performance bonds and retentions
  • Fixed price, lump sum, liquidity
  • Variation and change orders
  • Turnkey EPC structures
  • Completion guarantees, refinancing risk
  • Technology, logistics and learning curve risks

Advanced Project Finance Course Day Two

Introducing Market and Operating Risks

Case Study: Power Generation Project 

Market and Operating Risks

Most projects have only one revenue source.  The cash flow coming into the project needs careful structuring and due diligence.
  • This project financing course looks at offtake agreements and the errors that often occur
  • Availability risk vs. market risk
  • Take-or-pay features
  • Hidden recourse structures
  • Exclusions
  • Implications of market volatility 
Case Study: LNG Project  

Project Cash Flow and Debt Structuring

Total dependence on a single cash flow results in structures and covenants that are not found in other financings.

 
  • Risk – solvency risk vs volatility risk
  • Free Cash Flow – why is it fundamental to the analysis
  • Cash management issues
  • Liquidity –creating ‘suspension’ for the special purpose vehicle
  • Cash Available for Debt Service (CADS)
  • Loan life cover, project life cover, debt service cover
  • Surplus cash flows, lock-up, cash sweeps
  • Cashflow waterfall - reserve accounts
  • Contingency reserves
  • Designing amortisation to match cash flows
  • Dealing with default
  • Mortgage debentures/fixed and floating charges
  • Separating risk-taking and funding 

Technical Issues in Limited Recourse Financings

This section of the advanced project finance course deals with many topics where it changes the conventional treatments

 
  • The proper calculation of IRR
  • Insurances: pre-completion and operating phase
  • Assignment and cut-through agreements
  • The options for dealing with political risk
  • Environmental risks – the limitations of insurance
  • Currency exposures – optional approaches to structuring
  • Financings involving multilateral agencies - implications
  • Direct agreements
  • Step-in rights 

Sponsor Perspective

Sponsors need to have a disciplined approach to selecting projects that are likely to deliver the benchmark IRR. There are many potential pitfalls in the analytical approach.

 
  • The investment analysis without project finance
  • The difference in approach with a limited recourse structure
  • Project IRR contrasted with Equity/Sponsor IRR
  • The drivers of Sponsor IRR: the implications of negotiation of the financing term sheet
  • Evaluation of projects in emerging markets

Project finance training finishes by exploring the golden rules

A trainer with a unique blend of experience delivers this advanced project financing course. He has expertise in Law, Corporate and Investment Banking, Corporate Financial Management, General Management and Workout. He has gained a worldwide reputation for the quality and depth of his training courses, including our project financing course, which has been developed and presented over 20+ years. Further to this, our trainer:

  • Trained as a lawyer at Cambridge and the Middle Temple where he was called to the English bar.
  • Spent 5 years with Chase, an American bank, the world’s largest financier of oil & gas projects as a corporate relationship manager in New York and London. In the 5 years in this role, he was exposed to the development of the North Sea projects and petrochemicals.
  • Spent 6 years in investment banking in Hong Kong and London (Wardley – the investment bank subsidiary of HSBC), which is primarily involved in mergers and acquisitions and corporate restructurings.
  • 6 years as CFO of a public group with a joint head office in the United States and Australia. In this role, he has engaged in 35 acquisitions, over 20 equity raisings and a large number of complex financings, many of them structured on a limited recourse basis.
  • This advanced project finance course trainer was also responsible for the ‘workout’ of a company in severe financial difficulties, being appointed as General Manager by KPMG. For the past 20 years, our advanced project finance course trainer has acted as an independent consultant and financial trainer.

On the consulting side of his career, he has been primarily involved in the financial modelling and structuring of power generation, LNG, mining, and petrochemical projects. He has also undertaken project vetting for several clients.

Whilst on the training side, he conducts training courses in Financial Modelling, Loan Documentation, Corporate Finance, Corporate Valuation and M&A, and of course this Advanced Project Finance training course.

Redcliffe’s project finance training has been designed to deliver a thorough understanding and application of project finance. This is in the context of infrastructure, power generation, and the extractive industries. It will identify the criteria that apply to sponsors, lenders, and professional services organisations.

This advanced project finance course provides a comprehensive understanding and coverage of project finance and limited recourse financing from both a lender and a borrower perspective.

It is supported by many detailed case studies which help illustrate the practical application of the various concepts and techniques. Please note this project finance training course is supported by a substantial package of takeaway materials, including books, videos, and Excel files.

This advanced project finance course starts with an overview of the entire project financing approach: how it works and what is involved. These financings are a spider’s web of contracts, so we look at the complex issue of cross-border contractual enforcement including Alternative Dispute Resolution Procedures. We then look at infrastructure projects, including PFI/PPP, which have characteristics that differ from other contexts of limited recourse transactions.

Our project financing course then moves into the structuring of the high-risk development phase of the project, followed by the structuring of risk management during the operating phase. Having identified the structuring of the project and its risk management, we then look at the financier’s control of the project to promote debt serviceability, as well as the Sponsor’s perspective of maximising the investment returns of the project.

  • Analyzing the project based on Financial and the associated possible risks and mitigations was excellent
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