The IFF School of Project Finance Training Course

Reasons why you must attend this course:

• It contains detailed case studies that highlight structural techniques and mistakes previously made
• It is tailored specifically to your needs, focusing on the industries and sectors that YOU choose
• The residential element promotes total immersion into project risk structuring, financing structuring, cash flow modelling and legal issues
• No other course looks at the viewpoint of debt financiers, corporate sponsors, and government concession granting agencies, highlighting the negotiation and commercial issues that arise from the differences in perspective and objective.

Scroll down for agenda or book onto this course.

DAY 1

Characteristics of Project Finance

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

• The limitation of recourse
• The due diligences 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 financings involve a spider's web of contracts. These contracts are pointelss unless there is an ability to enforce rights under them. In cross-border context 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, 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
• Parallels between PPP and BOT

Case Study 1: PPP Transport 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 – eg 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 2

Case Study 2: Power Project – Developed Market

Case Study 3: Power Project – Emerging Market

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 4: 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 analysis

The Most Effective Training Programme For Project Finance Professionals

• 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 (LLCR and ADSCR)
• Surplus cash flows, lock-up, cash sweeps
• Waterfall/cascade, reserve accounts
• Contingency reserves
• Designing structures to match cash flows
• Dealing with default
• Mortgage debentures/fixed and floating charges
• Separating risk-taking and funding
• The implications for limited recourse financings

DAY 3

Case Study 5: Emerging Market Infrastructure Project

Project Cash Flow Models

Project cash flow models are exceptionally detailed. There is need for a clear focus on their objectives and
the planning/design process.

• Project dynamics, origins of cash flow volatility
• Limitations of predictive modelling
• The importance of risk-measurement or volatility models
• Modelling of cost structures
• Model design and layout
• Organisation of the worksheets
• Allocation of risks/cash flow volatilities
• Scenario testing and break-even analysis
• Summarising the outputs of the model
• Routines for assisting third party negotiations

Case Study 6:Merchant Power Project

Demonstration Exercises

Illustration is provided of various aspects of a project finance model and the planning and design process
lying behind the various worksheets.

• Pre-completion
• Depreciation
• Amortisation
• Cash sweeps
• Cash flow waterfall
• Currency schism
• Calculation of returns
• Sensitivity analysis and scenarios
• Break-even analysis

Other Modelling Issues

• Best practice
• Circular references
• Macros

Optional Evening Workshop – Free of Charge

Practical Modelling Masterclass

For participants who are actively involved in modelling and will benefit from practical and hands-on computer based exercises, this session (from approx 4.30pm to 7.30pm) will involve one or more exercises, which ard designed to develop skills. Participants will be invited to nominate which part of a model the exercises should focus upon - to address awkward issues that may have been encountered in the past. It may investigate further some of the exercises that are listed above under “Demonstration” exercises. Those wishing to participate in the masterclass should bring their own laptop/notebook.

DAY 4

Case Study 7: Telecoms Project

Technical Issues in Limited Recourse Financings

This section deals with a number of 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

Bond Financing

An increasingly important financing option, but having very distinct disadvantages as well as advantages.

• The history of bond finance of limited recourse SPVs
• Cross-border bonds – prerequisites
• Rule 144A – implications for emerging market projects
• Rating agencies – approach to different sectors
• Piercing the sovereign ceiling
• The limited window for high yield bonds
• Why use bond financing – advantages and disadvantages

Case Study 8: Gas Project – Bond Funded

Case Study 9:High Yield Bond, Mining Project

• Domestic bonds
• Credit enhancement – monoline insurance

Case Study 10:Credit-Enhanced Infrastructure Project

DAY 5

Case Study 11: Airport Project

Case Study 12: Leisure and Property Project

Sponsor Perspective

Sponsors need to have a disciplined approach to screen projects that are likely to deliver the benchmark IRR. There are 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/Sonsor IRR
• The drivers of Sponsor IRR – and implications of negotiation of the financing term sheet
• Evaluation of projects in emerging markets

Export Credit Agencies

An explanation of how ECAs and their products work and the pluses and minuses of getting them involved in the structure.

• Buyer credits
• Political and commercial risk cover
• Concessional CIRR finance rates
• Lines of credit
• Advantages/disadvantages of ECA involvement

Case Study 12: Oil & Pipeline

The Golden Rules of Project Finance

“REAL LIFE” CASE STUDIES – PUTTING THEORY INTO PRACTICE

The overall aim of the programme is to increase and optimise your practical project finance skills and in order to achieve this goal, the programme includes thirteen or more detailed and interactive case-studies covering the following sectors:

• PFI transport (rail)
• LNG
• Leisure – Resort
• PFI hospital
• Pipeline
• IPP Power
• Airport
• Oilfield
• Merchant power
• Toll-road
• Mining
• Telecoms

The recent economic climate has created challenges, but also opportunities. The adverse effect on public finances will increase the motivation for infrastructure investment to be implemented through BOT and PPP formats. Simultaneously, the voracious appetite for commodities, fuelled by the burgeoning growth of China in particular, will create strong activity in the development of energy and mining.

In Europe the ongoing implementation of the directives concerning power generation, transmission and gas, and the need to replace ageing power infrastructure will also sustain strong interest in project finance. The practical nature of this programme, with extensive case-study content, highlights the errors of planning and implementation of previous projects and identifies the structures and concepts that should have been applied.