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 advanced project finance course

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Download: Course Outline

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.

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 differ greatly 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

Advanced Project Finance Course 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

Advanced Project Finance Training 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.

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

Advanced Project Finance Course 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 advanced project finance training 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 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

Advanced Project Finance Training: The Golden Rules & Wrap-Up

Redcliffe’s Advanced Project Finance course trainer has a unique blend of experience: with 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, which have 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.
He 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 this Advanced Project Finance training.

Redcliffe’s advanced 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 advanced project finance training is supported by a substantial package of takeaway materials, including books, videos, and Excel files.

Advanced Project Finance training begins 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, with characteristics that differ from other contexts of limited recourse transactions.

Training 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.