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					The Nigeria Investment Forum
           on Power
Project and Structured Finance

        March 10, 2011
Project and Structured Finance: Overview
 Introduction
   Ex-Im Bank Project & Structured Finance Experience
   Finance Options
 Core Concepts
   Project Structure
   Risk Allocation
   Government Support
   Sustainability
   Matching Cash Flows to Debt Service
Ex-Im Bank, Project & Structured Finance Activity

    Total Authorizations ($36 Billion)
                                                     Lots of activity, lots of
                                                     power . . .
                      Corporate/Structured
                      Project Finance

                                         Power Sector Authorizations ($9.2
                                                     Billion)

                                                           Corporate/Structured

                                                           Project Finance




                                                                             Africa, $900 million



                                                                                             Saharan,
                                                                                             Pow er

                                                                                             Saharan,
                                                                                             Other

                                                                                             Sub-
                                                                                             Saharan,
                                                                                             Other



                                             But so far, not a great deal in Africa
Project & Structured Finance, Options
It’s not all project finance. All options should be explored.
              Extensive                                                             Project
                                                                        Corporate   Finance
                                                                       Structured
 Ability to
 Manage
Complexity                                              Corporate
                                                                                                All that
                                                       Balance Sheet                            said,
                                                      Simple Secured
                                                                                                project
                                                                                                finance
                                                                                                has been
                                                                                                important
                                  Bank Guarantee
                                                                                                for power.
                          Sovereign

                None

                          Small                                                         Large



                                                   Deal Size
             Project Finance, Basic Structure
A contract should support each relationship.
                            Host Government


  Supply                     SPV -Sponsors                   Sales
 Contracts                                                  Contracts




             Construction                     Operation &
              Contracts                       Maintenance
                                               Contracts

                                  But, sadly it’s not that simple.
Project Finance Structures: Sadly, it’s not even this simple.
  Limited Recourse Project Finance: Risk Allocation

 Host Government Risk Assumption: Mostly Economic & Political
                                      Technical                        Economic/Financial/Political
                                    Com-        Oper-
                                                            Fuel       FOREX     Macro    Off-taker   Law Change
                                   pletion      ation

China-Tangshan                                                                                      
Colombia-Termovalle                                                                                 
Honduras-ELCOSA                                                                                     
India-Jegurapadu                                                                                    
Indonesia: PT Jawa                                                                                  
Mexico-Samalayucca                                                                                  
Pakistan-Uch                                                                                         
Peru-Aguaytia                                                                                       
Philippines-Sual                                                                                    
Turkey-Biriceck                                            n/a                                       
Key – Government Risk Assumption:  Substantial  Some  Little/none
      Project Finance: Government Support for Off-takers

Host Government Risk Assumption: More in Risky Environments

   Government Risk
     Assumption


                                                        Biricek
    High                                             Uch        ELCOSA

             Sual                              Jegurapadu

 Medium              Samalayucca

                                   Tangshan
             Jawa
    Low               Termovalle

                                          Aguaytia


             Low                     Medium                 High

                               Country Risk Environment
Power Project Finance: Sustainability
      Investor                                                                    Country Outcome
      Outcome
                                                       GOOD                                                             POOR
                           Merida III (Mexico)                       Norte Fluminense (Brazil)
                                                                  Cana Brava (Brazil)

                           Eastern Power (Thailand)

                                                            Sidi Krir (Egypt)                                       Trakya Elekrik (Turkey)
                                       Quezon (Philippines)
          GOOD                                          Uruguaiana (Brazil)

                                                        Kondapali (Egypt)                                                  Termoceara (Brazil)
                                       Adapazari (Turkey)

                                                       Paguthan (India)
                                                                                   Shaijao C (India)
                                                                                          GVK Jegurupadu (India)
                                                       Shandong Zhonghua (China)

                                                                                 PPN Power (India)                     Elcho (Poland)


                                                                               Cavite (Philippines)
          POOR

                                                                                                                       Dabhol (India)

                                                                            Meizhouwan (China)




  Source: A Political Economy of International Contracting: Lessons from IPP Experience, Eric Woodhouse, Stanford
  University, September 30, 2005, Figure 2
Project Finance: Debt Structure

          Matching Debt Service to Expected Cash to Pay Debt
           Example: Equal Payments v. Variable

         18
         16
                                                        Cash to Pay Debt
         14                                              Cash to Pay Debt
         12              P&I: Equal P: Min
                         DSCR: 1.5
   $MM




         10
         8                                                                  P&I: Equal P: Min
                                                                            DSCR: 0.7
         6
                Variable Principal
         4
         2                           Equal Principal

          -


                                                       Year

				
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