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Project Finance Models

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					                PROJECT FINANCE
COURSE CONTENT

Day 1


Project Finance Overview
• Contrast with whole firm and other forms of limited recourse financing
• Definitions of a project
• Quantities of project finance – global statistics

Why Project Finance?

• The rationale for using project finance and trends
• The cost of capital – choice of discount rate
• Modigliani-Miller theory and current cost of capital debates

Exercise: Comparing cost of capital approaches for different firms susceptible to project
finance analysis


Agency Costs

• What are the agency costs
• Debt overhang and risk mitigation
• Real world problems

Case Studies in European and Middle East project finance

Project Finance - the Parties

Stages in the Deal
• Stage 1: The Feasibility Study & Cost comparisons
• Stage 2: Planning
• Stage 3: Arranging and Structuring the Finance
• Stage 4: Monitoring the Financing

Case Study: Putting together a project finance deal in the Gulf. Delegates taking different
roles and perspectives will work together to produce a project finance deal
Ownership Structures

• Considerations in selecting a structure
• Project finance structures
• Special purpose vehicle (“SPV”)
• General and limited partnerships
• Joint ventures (“JVs”)

Exercise: Evaluating a project finance proposal and recommending improvements to
structure and financing

Day 2

Sources of Funding

• Financing choices
• Types of equity and debt
• Methods of obtaining finance
• Structure of capital markets
• International issues
• Bond issues and securitisation

Case Study: airport financing

Project Finance Risks

• Classification and identification of risks
• Risk matrices
• The role of due diligence
• Risk allocation and mitigation

Case Studies: refinery financing risks

The Lender’s Perspective

• Key figures in the financial projections
• How to value a project finance project
• Ratio analysis and limitations
• Financial, covenant and country risk ratios

Privitisation models – PPP and its alternatives
The Sponsor’s Perspective

• Methods of evaluating investment decisions
• Factors influencing the cashflows

Credit Enhancement and Security

Types of Project Finance Models

• Inputs to project finance models
• Model structure, useful Excel features

Case Study: simple and complex project finance models compared

• Differences between models
• How to use the models in practice


Exercise: Constructing a project finance model for a Saudi company

Course Conclusion

				
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