Essentials of Project Finance

Pre course questionnaire and training methodology

 A pre course questionnaire will be sent to participants upon registration to help the Course Director deliver a training programme relevant to the participants’ needs.

 During the training there will be one core case study used. The core case study will be either in a typical area of Infrastructure (such as Roads and Transport and Social Infrastructure (e.g. public sector hospitals and schools) or a Renewable Energy project.

There will also be discussion on / examples of the use of Project Finance in other business sectors

Participant existing pre - requisites

It has been assumed that participants will have limited or no practical experience of Project Finance. However, to obtain maximum benefit from this training participants should already be familiar with the core aspects of:-

• Corporate financial analysis

• The principal banking and Capital Markets debt products

• Investment appraisal techniques ( e.g. IRR, NPV) and the essential principles of company valuation
• Banking documentation

Module 1 - An overview of key issues in Project Finance

• Project Finance vs financing of projects vs Corporate Finance
• Overview of activity in Project Finance
• The Project Finance “route map” - an overview of the key issues in evaluating and structuring a Project Finance transaction
• The typical structure of a Project Finance transaction
• Review of a Project Finance transaction to illustrate key aspects of the transaction
• Exercise: review of background on a core case study to identify the motivations and objectives of the main parties to the project

Module 2 - Risk evaluation in Project Finance

• Key risks –macro, construction, operating, financial and environmental
• Typical approaches to risk allocation and mitigation
• Overview of the main elements of a credit analysis for a project to illustrate key elements of a rating
• Lessons from the past – what can be learned from past transactions about the value of forecasts
• Exercise: participants review background on a core case study project and prepare a summarized “risk assessment” based on the risks and mitigants in the project, and a forecast and sensitivity for the operating cashflows

Module 3 - Sources of debt financing in projects and debt capacity

• Rationale for Project Finance vs. other debt financing techniques
• Debt capacity - Using projected cash flows as a basis for assessing debt servicing capacity
• Export Credit Agencies and Development Banks; bank debt vs. bonds; senior vs. subordinated debt
• Interest , foreign exchange and commodity price management issues in Project Finance
• Potential use of credit enhancement
• Financial covenants – DSCR and LLCR
• Cash flow waterfall and typical reserve accounts in a Project Finance
• Exercise: review of a case study project to determine a possible structure of the debt financing

Module 4 - Financial yardsticks used by equity investors and the relationship of sponsors to the project company

• An overview of the main project investment appraisal techniques, and implications in terms of risk and return and capital structuring of Project Finance transactions
• Understanding the equity investor’s approach to achieving returns from the project company, including operating relationships with the project company, and cash extraction through re – financing
• Mini exercise: calculation and comparison of investment returns from selected projects
• Case study: sensitizing financials for the core case study to develop an appropriate capital structure

Redcliffe’s  Project Finance training is delivered by a trainer who has had a career in the financial services industry and financial training for over 45 years. He started his career with National Westminster Bank (now part of RBS) before moving to Mellon Bank NA, a major regional US bank (now part of Bank of New York Mellon). At Mellon Bank, he held several credit analysis and account management positions in London, focusing on large UK corporations and UK subsidiaries of US corporations. He also had two extended work assignments in the USA, on the second occasion as an account officer responsible for a group of US subsidiaries of non-US multinationals.

After 11 years at Mellon Bank, he joined Swiss Bank Corporation (now UBS) in London where he was actively involved in the development and ongoing management of the bank's UK Commercial Real Estate lending activities. His Real Estate skills were further developed at Debenham Tewson Financial, a subsidiary of one of the world’s leading Real Estate advisory firms.

Since 1992 he has been primarily focused on training in the areas of Corporate Credit Analysis, Financial Restructuring, Project, Infrastructure and Structured Debt Finance, such as Real Estate Finance and Asset Securitisation. He has designed and delivered tailored and public courses in more than 60 countries, including commercial real estate debt finance training. In these areas he has worked with a wide range of corporate and investment banking firms; Development Finance Institutions; public sector organisations; Export Credit Agencies; property investment and many major corporations.

Participants in his courses range from recent graduates to experienced line managers, and in areas as diverse as bond sales and trading to credit research and Relationship Management positions in financial institutions, as well as project engineers, professional advisers and public sector employees in the area of Project Finance.

In the area of Real Estate Finance, the trainer has run both public and tailored training programmes on a global basis with participants working in banks, Real Estate companies, Real Estate investors, Public Sector organisations and professional services firms.

Whether in developed or developing markets there is a massive financing need for infrastructure and the transition to a green economy. An increasing part of such investment in infrastructure and Renewable Energy is by necessity being, and will be, financed on a project – or limited recourse – basis.

Project Finance enables companies to raise focused, risk sharing, finance in key industries and is also an increasingly important method for governments to introduce private sector skills, disciplines, and funding in a range of sectors. Factors such as the ongoing impact of COVID, the impact of technology , experience with large cost overruns on projects and operating risks, as well as macroeconomic considerations, however require careful analysis and mitigation of ongoing risks.

This programme will provide participants with an intensive overview , with examples of the use of Project Finance, of the following essential elements of a Project Finance:

• Business risk analysis and main sectors where Project Finance is being used
  • Main sectors in which Project Finance has been used and recent developments
  • Review of key drivers of project viability, motivations of the parties involved in a Project Finance and their approach.

• Risk assessment
  • Overview of key risks, risk allocation and risk mitigation

• Funding
  • Principal options for financing infrastructure and other projects, including PPP
  • Debt funding sources and structuring of Project Finance transactions
  • Project Finance vs. other corporate funding options
  • Understanding the equity investors’ perspective – investment appraisal techniques and links to cost of capital
  • Capital structuring issues – debt vs. equity and influencing factors

• Structuring
  • The principal documents in a Project Finance;
  • Covenants and credit ratios

For participants seeking to focus on financial modelling, we suggest that Redcliffe Training’s Project Finance modelling courses will be more appropriate.

This programme is designed for personnel working on large scale projects, with limited or no practical experience of Project Finance, working in organisations such as:

• Project developers and investors
• Investment banks
• Equipment suppliers
• Commercial Banks
• Development Finance Institutions
• Export Credit Agencies
• Infrastructure Funds and Institutional Investors
• Construction companies
• Accountancy firms
• Law firms
• Financial advisors
• Government and other Public Sector Agencies working on PPP and other large scale Infrastructure projects

This intensive Project Finance course is intended for participants with no or limited previous practical Project Finance experience, but with an understanding of the key elements of a financial analysis. Using a mixture of presentations , group discussion and a core case study project this course will provide an introduction to issues relating to the main areas in which Project Finance has been used, risk analysis, allocation and mitigation and capital structuring of Project Finance transactions.

Whilst there will be a review of a simplified spreadsheet for a Project Finance transaction,  for participants seeking a detailed analysis of financial modelling , Redcliffe Training’s programme on Project Finance modelling would be more appropriate.