Mastering Project Finance Theory & Modelling

Understand the fundamentals of project finance to start your journey:

• Review the pre-course material to ensure knowledge of the basics
• Defining “project finance” and understanding how it differs from more conventional forms of finance
• Learn why project finance is used and its advantages / disadvantages across a range of sectors
• Introduction to project finance loan structures and the importance of cashflow
• Analysis of current trends and learn how historic defaults and recovery rates influence loan structures

Track the project finance process:

• A step-by-step guide to the implementation of a project financing – from feasibility to financial close
• Understand how feasibility analysis is conducted and how this influences loan structures
• Learn how to build a robust financing structure that effectively mitigates defined project risks
  The importance of effective financial modelling will be introduced along with key financing terms
• Discuss the role of due diligence consultants and their importance in supporting lending decisions
• Understand the availability of different forms of finance and their application under different scenarios
  • Commercial banks
  • Export credit agencies
  • Development finance institutions
  • Institutional investors
• Build confidence in contract negotiation with reference to case studies and practical role-play
• Learn how liquidity is maximized through the syndicated loan market
• Discuss how to achieve an expeditious financial close and understand the road to refinancing

Learn how to analyse and mitigate project risk from a qualitative perspective:

• Receive an introduction to our risk identification framework – the “Flowchart of Risk”
• Using case study analysis you will learn how to identify key project risks and reliable mitigants
  • Sponsor risk – the ability of sponsors to meet their practical and financial obligations
  • Country / Political risk – how a project’s location drives structure, liquidity and sources of finance
  • Construction & Technology risk – ensuring effective completion support and testing
  • Operation & Maintenance risk – the importance of achieving efficient continuous operation
  • Supply & Reserve risk – mitigation of price and volume risk and the probability spectrum
  • Revenue risk – using both practical and contractual mitigation of price and volume risk
  • Regulatory risk – understanding the requirement for effective and reliable regulation
  • Environmental, Social & Governance risk – introduction to the Equator Principles

Master proven techniques for best practice modelling resulting in better models built faster:

• Learn to work with our powerful and easy-to-follow financial modelling methodology
• Discuss and identify good vs. bad modelling techniques using real-life examples
• Greatly increase consistency amongst your team in calculation technique and presentation

Discuss the life cycle of a project finance model, from screening and structuring to financial close:

• Learn the various structural phases of project finance; understand when to use which phase
• Build your understanding of the building block components, key details and challenges of a transaction model
• Understand the design flow of the model builder, learn how to know where to go next

Develop a robust and scalable model structure that can evolve with a typical project or transaction:

• Establish key constants in the model using full scope of Excel range name function
• Build a flexible timing structure using appropriate date functions and binary flags

Construct modularised units that form the building blocks of a professional model including (but not limited to):

• Discuss the Pre-populated Capital Expenditure breakdown with contingencies controls
• Production calculations with multi-path optionality on time-series schedules
• Discuss the Pre-populated Revenues, Operational and maintenance expenses including fixed and variable items

Understand the structure of cashflow waterfalls and the importance of ‘seniority’:

• Focus on how to calculate Cash Flow Available for Debt Service
• Learn how to layout line items in an efficient and easy to communicate way
• Understand the different types of circular references and how to avoid them

Integrate project finance term (operational debt):

• Walk through of term debt structuring and annuity repayment through first principles
• Discussion of DSCR sculpted, linear and bullet repayment structures in project finance
• Understand how to effectively model debt sculpting
• Build in switches to allow different structures to be rapidly analysed

Construct and analyse debt facilities for credit or investment decisions:

• Learn the importance of credit ratios like DSCR and LLCR and their purposes in analysis
• Build commonly used ratios in banking and finance from first principles
• Extract key metrics from ratios using a range of advanced Excel functions

Calculate key returns results and understand the role of dividends policy:

• Discuss the reason and impact of dividends policy on valuations
• Integrate internal rate of returns and NPV, understand the role of the discount rate
• Learn differences between NPV and XNPV functions and common errors in their application

Share insights into effective modelling of refinancing analysis for rapid and robust analysis:

• Discuss the mechanics of a refinancing – amount, timing, fees and repayment
• Learn different ways to treat the refinance fee
• Discuss the concept of sequential refinancing

Discuss the need of Debt Service Reserve Account:

• Discuss the mechanism of Debt Service Reserve Account (‘DSRA’) from first principles

Understand critical concepts and techniques in debt sizing to support debt structuring discussions:

• Single-factor optimisation via maximum gearing or minimum DSCR to vary debt size to achieve target cover ratios
• Discuss dual-factor optimisation to achieve target cover ratios and returns

Learn a structured approach to comprehensive depreciation calculations:

• Remove the need for cumbersome tables
  Incorporate switches for multiple depreciation methods
• Easily replicate calculations for accounting and tax depreciation
• Produce geared and ungeared tax calculations to analyse the value of interest tax shelter

Understand how financial statements are constructed and how to identify common problems:

• Master the structure of completed three-way financial statements
• Learn how to continuously test and debug the integrated statements
• Incorporate all of the debt components into integrated statements

Use advanced Excel techniques for rapid and accurate multi-dimensional sensitivities:

• Develop simple macros to avoid common circularities inherent in project finance calculations
• Use VBA to control data tables so they do not adversely affect calculation speed

Master the key financial model & debt sizing concepts:

• Learn the key inputs measurement tools used to establish the amount of debt a project can sustain
• Understand how debt tenors are established and repayment profiles are sculpted
• Consider how qualitative risks are quantified and what mitigating measures are available
• Understand the use of reserve accounts and learn how they contribute to risk mitigation
• Consider how pre-completion revenues are utilized by bother borrowers and lenders
• Practice sensitivity analysis with reference to the case study and qualitative risks studied on day 1

Appreciate the environmental & social awareness dimension:

• Receive a comprehensive understanding of the Equator Principles, its origins and concept
• Understand the implications of the updates included in Equator Principles IV (2020)
• Learn the obligations and reporting requirements the Equator Principles place on project finance

Understand the momentum ESG issues have gained in the financial markets:

• Learn the origins of environmental, social and governance (ESG) concepts and their implications for projects raising project finance debt
• Understand the impact recent ESG developments have for renewable energy projects
• Learn about the ESG regulations that have been developed in addition to the Equator Principles
• Explore the new financial tools that have been developed to support sustainable project finance transactions

Develop a working knowledge of project finance insurances:

• Understand the key concepts and clauses that are required to provide effective insurance cover throughout the life cycle of a project
• Construction period insurances
• Operating period insurances
• Discuss how force majeure events can be effectively mitigated
• Learn which clauses are specifically required by lenders and how these are incorporated
• Understand how insurance proceeds are applied under various insured event scenarios

Masterclass in project finance documentation:

• Learn about the commercial contracts and finance documents used in project finance
• Review document extracts from actual project finance transactions
• Become more familiar with documentation techniques and understand key negotiation points

Discuss and examine the suite of project documents in a typical project:

• Understand EPC construction contracts and how they are drafted to mitigate completion risk
• Learn the importance of concession agreements
  Consider the key aspects of offtake agreements, including different types of Power Purchase Agreement
• Consider the key aspects of supply agreements

Discuss and examine the suite of finance documents in a typical project:

• Learn how the range of finance agreements are constructed and how they are used, including:
  • Facility agreement
  • Accounts agreement
  • Intercreditor agreement
  • Direct agreements
  • Guarantees
  • Security documents
  • Hedging agreements

Discuss and examine equity documentation in a typical project:

• Learn how the range of equity agreements are constructed and how they are used, including:
  • Equity bridge loan agreements
  • Equity subscription/retention agreements
  • Sponsor support documentation
  • Shareholder agreements

Understand why Lenders require security and what a typical security package comprises:

• Learn how the range of security agreements are constructed and how they are used, including:
  • Share and asset security
  • Security over cash balances
  • Security over contractual rights

Case studies and group exercises:

• Review and analyse documentation extracts from EPC contracts, PPAs, credit agreements and accounts agreements
• Review and discuss a document outlining intercreditor principles
• Participate in a finance term-sheet negotiation exercise