Project Finance Theory and Practice

About the Course

Project finance is a specialised financing structure that relies on the future cash flows generated by a specific project as the main source of repayment, often used for large-scale infrastructure projects or industrial developments. This intricate financial arrangement allows organisations to undertake significant ventures without exposing their overall balance sheets to the risks associated with the project. By ring-fencing the project’s assets and revenues, sponsors minimise the potential risks to other parts of their business.

This 5-day interactive Project Finance Theory and Practice training course will equip the delegates with the essential understanding and skills to navigate this complex field and to relate their learning to real-world problems and develop their ability to create a structured and well-disciplined approach to Infrastructure and Project Finance process. By pinpointing problem areas for remedial action, the delegates will have the opportunity to acquire financial skills and technical knowledge that will enable them to manage the entire capital budgeting more effectively.

Furthermore, it serves as an indispensable tool for professionals involved in project finance, providing them with the knowledge and expertise needed to manage large-scale projects effectively. Whether a novice or a seasoned expert in the field, the course offers valuable insights and hands-on experience that will enhance delegates’ ability to navigate project finance complexities successfully.

Core Objectives

The delegates will achieve the following objectives:

• Appreciate the particularities of Project Finance and PPP Markets
• Understand the key steps of structuring an Infrastructure Project
• Appreciate the different models of Valuing the Project and Project Cash Flows
• Perform a Due Diligence and Risk Mitigation
• Master Project Appraisal and Preparation of Appraisal Note

Training Approach

The delegates will increase competencies through various instructional methods, including lectures by an experienced practitioner and consultant, cases/exercises, reviewing published articles, checklists, and group discussions covering current practices and their relationship to implementing new concepts.

The Attendees

This training course will significantly benefit all individuals who wish to improve their risk mitigation skills and develop their effectiveness in Project Finance negotiation.

This training course will be valuable to professionals, including (but not limited to) the following:

• Project Managers
• CFOs, Controllers, and Treasurers
• Practising Corporate and Investment Bankers
• Finance Managers who are responsible for arranging funds for their companies’ projects
• Government Officials who are responsible for raising funds for infrastructure projects
• Investors who commit funds for special purpose vehicles and even manage portfolios of assets for large funds

Daily Discussion

DAY ONE: INTRODUCTION TO PROJECT AND INFRASTRUCTURE FINANCE

• Definition of Project Finance: Basel III Guidelines
• Leveraging Project Finance to Fund Infrastructure: A Historical Journey
• Recourse vs. Non-recourse Financing (Corporate Financing vs. Project Financing)
• Why Project Finance: Rationale and Scope
• Public-Private Partnerships (PPP) and Project Finance Loans: Conceptual Framework
• Global Project Finance Markets: Status of Projects

DAY TWO: STRUCTURING THE PROJECT AND DUE DILIGENCE

• Key Project Parties
  • Project Sponsors
  • Project Vehicle
  • Project Lenders
  • Substitution Agreement
• Key Contractual Parties
  • EPC Contractor
  • O&M Contractor
  • Government
  • Suppliers
  • Off-takers (Customers)
• Key Transaction Documents and Contracts 
• Key Project Documents 
• Financing Documents  
• The Bigger Picture: Principles of Bank Lending 
• Due Diligence: Collecting Information
• Discussions with Promoters on Due Diligence
• Selection of Experts & Engineers
• Feasibility Check: The Start of Appraisal
• Fundamentals of Appraisal by Banks

DAY THREE: FINANCIAL ANALYSIS

• Financial Analysis
  • Understanding Financial Statement
  • Horizontal and Vertical analysis
  • Financial Ratio Analysis
• Appraisal of Term Loan
• Project Debt Structuring
• Project Appraisal Note: Core Contents
• Measuring Cost of Capital
  • Levered vs Unlevered Flows
  • Cost of Equity vs Weighted Average Cost of Capital
• Ratios (in Accounting) vs Valuations (Financial Forecast)

DAY FOUR: PROJECT APPRAISAL

• Appraisal of Infrastructure Project
  • NPV (Net Present Value)
  • IRR (Internal Rate of Return)
  • DPP (Discounted Payback Period)
  • PI (Profitability Index)
• Project Valuation Methods: Direct, Indirect (Simple and Complex)
  • DCF Models (CAPM Based)
  • Comparable Analyses (Trading Multiples)
  • Precedent Transaction Analysis
  • Liquidation Valuation
  • Option Pricing Models (with Monte Carlo Simulation)
  • Real Options
  • Earning-Based Approach
  • Replacement Cost Approach
  • Asset-Based Valuation

DAY FIVE: MANAGING PROJECT RISKS

• Risk Identification: Project-specific
  • Construction Risk
  • Financing Risk
  • Operation and Maintenance Risk
• Risk Analysis: Risk Matrix, Criticality, and VAR
• The 4T Strategies of Risk Mitigation
• Controlling and Monitoring Risk: PDCA
• Hedging Risk by Using Derivatives