Презентация на тему Introduction to Project Finance. Project Appraisal, Financing and Management

return on capital.
Limited Life.
Significant free cash flows.
Few diversification opportunities.
Asset

specificity.

risks:
Demand, price.
Input/supply.
Currency, interest rate, inflation.
Reserve (stock) or throughput

(flow).
Asymmetric downside risks:
Environmental.
Creeping expropriation.
Binary risks
Technology failure.
Direct expropriation.
Counterparty failure
Force majeure
Regulatory risk

governance systems
to minimize cash flow volatility and
to maximize firm

value.

“financing projects”.

sponsor investing in and owning a single purpose, industrial

asset through a legally independent entity financed with non-recourse debt.
Cash flow is security to lenders.

to build and operate the project.
Extensive contracting
As many

as 15 parties in up to 1000 contracts.
Contracts govern inputs, off take, construction and operation.
Government contracts/concessions: one off or operate-transfer.
Ancillary contracts include financial hedges, insurance for Force Majeure, etc.

to three equity sponsors.
Syndicate of banks and/or financial institutions

provide credit.
Governing Board comprised of mainly affiliated directors from sponsoring firms/ independent directors
Extremely high debt levels
Mean debt of 70% and as high as nearly 95%.
Balance of capital provided by sponsors in the form of equity or quasi equity (subordinated debt).
Debt is non-recourse to the sponsors.
Debt service depends exclusively on project revenues.
Has higher spreads than corporate debt.

than equivalent size corporate finance.
Higher transaction costs (~60bp) due

to creation of an independent entity.
Project debt is substantially more expensive (50-400 bp) due to its non-recourse nature.
Extensive contracting restricts managerial decision making.
Project finance requires greater disclosure of proprietary information and strategic deals.

Build Own Operate Transfer
BOO - Build Own Operate
BOOST -

Build Own Operate Share Transfer
BOLT - Build Own Lease Transfer
DBFO - Design Build Finance Operate
OMT - Operate Maintain Transfer

Term Loan
Bonds
Foreign Currency Loan
Export Credit
Supplier’s Credit

and financial analysis
Risk allocation through project contracts and financing

agreements
Structured financing
Security and documentation
Project monitoring and compliance

of the enterprise.






























-500
-400
-300
-200
-100
0
100
200
2000
2002
2004
2006
2008
2010
2012
2014
2016

financing
Borrowing capacity
Risk limitation
Risk spreading
Long-term finance
Enhanced credit
Unequal partnerships

or service cost
Additional investment in public infrastructure
Risk transfer
Lower project

cost
Third-party due diligence
Transparency
Additional inward investment
Technology transfer

km on NH5 on annuity basis
Concession Period : 17.5

years (incl construction period)
Promoter : GMR Group
Project Cost: Rs 315 crore
Financed in a Debt-Equity Ratio of 3:1 by way of:
Equity: Rs 1 crore
Preference Capital: Rs 78 crore
Debt: Rs 236 crore

Scott Wilson
Debt
Financing Agreements
Equity
EPC Agmnt
O&M Agemnt
Annuity
Shhldr’s Agmnt
Concession
Agreement
LE

Indep Eng

rail system, a highway project, a port, airport, inland

port.
Telecommunication – basic or cellular, radio paging, domestic satellite services, broadband network, internet services.
Energy – generation, distribution, transmission, gas supply
C&I – a water project, irrigation project, water treatment system, industrial park, SEZ, education and hospitals.