Mastering Infrastructure Project Finance Training Course

You will leave the course with a detailed practical understanding of:

• How lenders analyse infrastructure and PPP/PFI projects – from both a qualitative and a quantitative perspective
• How to examine the risks effectively and be prepared for the common obstacles that surround such projects
• How project financings are sized and tailored to the cash flow of a specific project
• The loan documents which govern a financing and how they interface with the other project documents

Scroll down for agenda or book onto the course.

THE PROJECT FINANCE "TOOLBOX"


Project Finance Essentials

• What is project finance – definition
• Differences between corporate & project lending
• The cash flow "envelope"; Cash Flow Available for Debt Service (CFADS)
• Why do sponsors choose project finance?
• The risk-reward relationship with the project – sponsors & lenders

Qualitative Risk Analysis

• Sponsor risk
• Country limits/country risk mitigation
• Construction/completion risk
• Technology risk
• Supply issues
• Offtake factors
• Operation & maintenance risk & structures
• Insurance issues
• Consents & approval matters/regulatory hazard
• Environmental & social issues

Debt Sizing & Sculpting

• CFADS – the starting point
• Cover Ratios
• Using the ADSCR
• Using the LLCR / PLCR
• Cover ratios in debt sizing & stress testing
• Base case design – control of inputs and macroeconomic parameters
• Sensitivity running – what does the banker test?
• The IRR/cover ratio interface
• Impact of control accounts on sponsor return
• Getting to the optimum debt level

Project Finance Loan Documentation

• Control accounts & the cash flow "waterfall"
  - Types of control account – disbursement, revenue, compensation, debt service reserve & maintenance reserve accounts
  - The cash flow waterfall – purpose, typical priority ranking and variations
  - The documentation process
         * Keeping it tight and focused
         * The lender/borrower/counsel interface
         * Different approaches to the term-sheet
         * Designing the term-sheet for economy while covering the key commercial issues
• Documentary terms and conditions
  - The "Boiler-Plate" – understanding the jargon
  - The key "command & control" mechanisms in project finance agreements
         * Conditions precedent
         * Reps & warranties
         * Covenants
         * Events of default
• Borrower/sponsor needs and "hot-buttons" – what does everybody argue about most?
  - Accessing the loan facility
  - Pricing issues
  - Operating flexibility & control
  - Cash-traps & "IRR-Killers"

INFRASTRUCTURE & PPP PROJECT FINANCE – SECTOR PRACTICE

History of PPP/PFI

• Drivers for introduction
  - "Off-Balance-Sheet"
  - Private sector discipline/risk transfer
  - Value for money
• PFI in the UK
  - Development of the PFI process
  - The PFI Model
  - Impact of credit crunch
• The model exported – PPPs in selected international markets

Risk Features of Infrastructure Project Finance – Key Drivers for Debt Structure & Pricing, especially:

• Concession structure
• Legal & regulatory context
• Revenue basis – who takes the volume risk?
  - Capacity/availability charge + operating charge?
  - Shadow toll?
  - Real toll/farebox basis?
• Sponsor risk – a range of motivations and drivers
• Operation & maintenance regime
• Termination
  - By grantor
  - For concessionaire default
• Force Majeure

Infrastructure P/F Models – debt models for roads/rail & light rail/airports/ports

• The classic models
  - Debt/equity ratios and structures
  - Debt maturity
  - Debt pricing levels
  - Repayment profile sculpting methodologies
  - Key "command & control" features
         * Drawdown control
         * Servicing subordinated debt
         * Dividend lock-ups
         * Events of default ratio
  - Security structures
  - Third party agreements
  - Other documentation features
         * Representations & warranties
         * Conditions precedent
         * Undertakings
  - Insurance arrangements
• The impact of credit crunch on the sector

The PFI/PPP Process/Regulatory and Public Sector Oversight

• The bidding process
• Interfacing with lenders during the tendering process
• Ongoing testing after financial close – availability requirements, performance standards and key performance indicators
• State involvement on refinancing

PPP/PFI Project Finance Models for Hospitals, Schools, Prisons and Waste Management

• The classic models
  - Debt/equity ratios and structures
  - Debt maturity
  - Debt pricing levels
  - Repayment profile sculpting methodologies
  - Key "command & control" features
  - Security structures
  - Third party agreements
  - Insurance arrangements
• The impact of the credit crunch

KEY INFRASTRUCTURE/PPP FINANCING CONTRACTS – THE CONCESSION

 

As the instrument which embodies the rights and responsibilities of the grantor and the project company, as well as the mechanisms for "policing" the agreement, the concession is of particular importance for all parties to an Infrastructure/PPP financing. It is therefore worthy of particular study, especially as regards:

• Concessionaire responsibilities
• Grantor responsibilities
• Payment methods
• Penalty regimes
• Termination
• Relief & Force Majeure

KEY INFRASTRUCTURE / PPP FINANCING CONTRACTS – DIRECT AGREEMENTS

Direct Agreements are often hotly-negotiated – not least because they tie the non-bank counterparties into commitments they may be very reluctant to give. As such they merit particular analysis.

The course has been designed to:

• Provide a project financing “toolbox” incorporating project risk analysis, debt sizing/structuring and project loan documentation
• Explain clearly and in detail the financing techniques and structures typical of the infrastructure and PPP/PFI arenas
• Reinforce learning through the use of case studies, specifically tailored to illustrate the issues and techniques covered in the course

The course has a strong practical emphasis throughout, but case studies are used particularly to reinforce learning. There are three basic types of case studies:

1. Mini-Cases – shorter class-based sessions where participants are required to identify the pros and cons of a project from a bankability perspective, and also to set out requirements for additional due diligence.
2. Peer Review Committee Sessions – more intensive cases where the Course Faculty acts as presenter and four participants are selected to act as a committee to screen new transactions before they go to full Credit Committee.
3. Term-Sheet Case Studies – exercises where the course participants are required to review a project financing term-sheet for completeness and acceptability from the perspective of either the lender or the borrower.

The sector focus of the cases used will depend in part on the particular interests of each trainee group.