PROJECT FINANCE AND PROJECT MODELLING
Part One – done by Sylvaine Chubert
Introduction
- · Introduction. Project Finance: replacing it in the spectrum of Structured Finance debt products,
- · Comparing it with asset finance and corporate finance,
- · Review of recourse finance and subordination concepts,
- · Main market players in the Project Finance business: industrial sponsors, commercial contractors, (assets manufacturer, O&M, suppliers etc..), offtaker, host countries.
First Case
- · Case study: a power plant in South East Asia,
- · Role and intervention instruments of Export Credit Agencies and Multilaterals (MLA’s),
- · Key functions of banks in the financing process: lenders, arrangers, underwriters, trust agent, swap providers, lessors,
- · Main financing structures: From B.O.T. to Design, Build & Operate (D.B.O.). The SPC as central financing structure. Legal, tax & accounting issues
Second Case
- · Case study: An example of infrastructure finance with Multilateral co – financing,
- · Introduction to the lending process and risk analysis. Credit due diligence from a banker’s perspective,
- · Going through the main practicalities of a project financial model and assessing the debt capacity of a project using a real – life project deal.
Third and Fourth Case
- · Case study: renewable energy plant in France,
- · Review of recent developments in the Project Finance industry: Public Private Partnerships and PFI.
- · Case study: drafting the term sheet of an infrastructure PPP project,
- · Review of the key covenants, Conditions Precedents and securing elements. Waterfall management issues.
Part Two – done by Philippe Duchemin
Presentation of Excel tools used for modelling
- · Present and future value : NPV, internal rate of return : TRI,
- · How to set up schedules with working days,
- · Simple, double and multiple entry table,
- · How to solve complex problems with the help of circularity.
Presentation of financial tools for modelling
- · Financing and amortizations,
- · The interest rates, the interest curve and zero coupon curve,
- · How to find the wacc – weighted asset capital cost,
- · Ratios: pay-bac, DSCR, LLCR.
Other tools for modeling
- · Conventions around the project,
- · Tools and methods to use Excel,
- · Audit and control methods.
Modelling in Excel for project finance
- · Hypotheses, constants, inflation – money terms and real terms,
- · Revenues and costs, financing with debt and capital – debt/capital ratio,
- · Taxes, retained earnings – dividends and reserves,
- · Cash flow, income statement and balance sheet.