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Advanced Project Finance

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

Advanced Project Finance Training Course

A two-day course

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This course provides a comprehensive understanding and coverage of what is project finance or limited recourse financing from both a lender and a borrower perspective. It is supported by many detailed case studies, to illustrate the practical application of the various concepts and techniques that are presented during the programme. The course is also supported by a substantial package of takeaway materials, including books, videos, and excel files.  

The training has been designed to deliver a thorough understanding of project finance and the application of project finance in the context of infrastructure, power generation, and the extractive industries.  It will identify the criteria that are applicable to Sponsors, Lenders, and professional services organisations.

Day One 

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 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 

Day Two

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 
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 deals with many topics where project finance 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 a number of 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

The Golden Rules of Project Finance

The trainer has a unique blend of experience in Law, Corporate Banking, 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.

  • He trained as a lawyer at Cambridge and the Middle Temple and was called to the English bar.
  • 5 years with an American bank (Chase), 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.
  • 6 years: investment banking in Hong Kong and London (Wardley – the investment bank subsidiary of HSBC), primarily involved in mergers and acquisitions and corporate restructurings.
  • 6 years: CFO of a public group with a joint head office in the United States and Australia. In this role, he was engaged in some 35 acquisitions, over 20 equity raisings and a large number of complex financings, many of them structured on a limited recourse basis.
  • 18 months: responsible for the ‘workout’ of a company in severe financial difficulties, being appointed as General Manager by KPMG.
For the past 20 years, the trainer has acted as an independent consultant and financial trainer.  On the consulting side, he has been primarily involved in the financial modelling and structuring of power generation, LNG, mining, and petrochemical projects, as well as undertaking project vetting for a number of clients.  On the training side, he conducts training courses in Financial Modelling, Loan Documentation, Project Finance and Corporate Finance, Corporate Valuation and M&A.

The course commences with an overview of how the whole project financing approach works and what is involved – anticipating the content of the subsequent sessions.  These financings are a spider’s web of contracts, so we then look at the complex issue of cross-border contractual enforcement, including Alternative Dispute Resolution Procedures.  We then take a particular look at infrastructure projects, including PFI/PPP, which have characteristics that differ from other contexts of limited recourse transactions.  The 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 both the financier’s control of the project to promote debt serviceability, and 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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