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Project Financing

2021/2022
Учебный год
ENG
Обучение ведется на английском языке
4
Кредиты
Статус:
Курс по выбору
Когда читается:
2-й курс, 1, 2 модуль

Course Syllabus

Abstract

The course focuses on how private investors are taking decisions about investing in large infrastructure projects from the standpoint of equity, debt, and hybrid instruments. The course concentrates on the practical aspects of project finance: the most frequently used financial techniques for infrastructure investments. In the end of the course, students will be capable of analyzing a complex transaction, identifying the key elements of a deal, and suggesting proper solutions for deal structuring from a financial advisor's perspective.
Learning Objectives

Learning Objectives

  • To be able to find the optimal financial structure for funding large infrastructure projects
  • To recognize, value and mitigate risks of project financing
  • To develop a financial model for a large infrastructure projects
Expected Learning Outcomes

Expected Learning Outcomes

  • To know the specifics of Project Finance
  • To identify different types of contracts and the parties involved in the PF
  • To understand the role of Project Finance in liquidation of inequalities
  • To know different types of syndication strategies
  • To be able to calculate the fees that each bank or industrial partner receives
  • To be able to calculate the total fee (contract price) for the customer
  • To be able to recognize and map risks common to PF
  • To be able to assess risks and to propose actions for risks mitigation
  • To know how real options may be used for maximizing the value of a risky project in PF
  • To be able to forecast and calculate project cash flows for its shareholders
  • To be able to prove a project sustainability
  • To be able to develop a capital budget for a project
  • To learn how lendera can protect themselves by using loan agreements
  • To know how to app;y different types of covenants
  • To be able to use different types of loan amortization and to compare them
Course Contents

Course Contents

  • Introduction to Project Finance
    The specifics of Project Finance. Major stakeholders. Projects that are suitable for PF. Financial contracts. Industrial contracts. Project Finance as a tool of coping with inequalities. Government participation in PF. Are there ethical issues in PF decisions?
  • The process of Syndication
    Syndicates and their participants. The roles of participants and their distribution. Syndication strategies. Fees distribution
  • Risk analysis and distribution of risks in Project Finance
    Risks in Project Finance: classification of risks. Pre-completion risks. Post-completion risks. Risks common to both phases of a project. Risk analysis. Risk management. Real options in PF
  • Financial Model of a Project
    Features of an Infrastructure Project and the Consequences on the Setup of Capital Budgeting. Setting up the Budget of the Construction Phase. How to Finance Construction: Equity Contribution, Base Facility, VAT Facility, Stand by Facility and Working Capital Facility Setting up the Budget of the Operational Phase. Profitability for Shareholders Profitability for Creditors From Profitability to Financial Sustainability Cover Ratios
  • Loan Agreements, Structuring and Lenders Protection
    Types of loan agreements Security package for project lenders Covenants of the credit agreement Technical aspects of project loans: application of different amortization methods
Assessment Elements

Assessment Elements

  • non-blocking Class activity
  • non-blocking Case analysis
    A group case on developing the financial model for a PF project and its presentation to a class
  • Partially blocks (final) grade/grade calculation Examination test (70 minutes + 10 minutes for reading and preparation), closed-book.
Interim Assessment

Interim Assessment

  • Interim assessment (2 module)
    0.3 * Case analysis + 0.3 * Class activity + 0.4 * Examination test (70 minutes + 10 minutes for reading and preparation), closed-book.
Bibliography

Bibliography

Recommended Core Bibliography

  • Frederik Pretorius, Berry-Fong Chung-Hsu, Arthur McInnes, Paul Lejot, & Douglas Arner. (2008). Project Finance for Construction and Infrastructure : Principles and Case Studies. Wiley-Blackwell.
  • Friedl, G., Copeland, T., & Antikarov, V. (2018). Real Options. A Practitioner´s Guide, Book Review. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.5BD264EB
  • Paul D. Clifford. (2021). Project Finance : Applications and Insights to Emerging Markets Infrastructure. Wiley.
  • Project financing and the international financial markets, Buljevich, E. C., Park, Y. S., 2002

Recommended Additional Bibliography

  • Childs, P. D., Ott, S. H., & Triantis, A. J. (1998). Capital Budgeting for Interrelated Projects: A Real Options Approach. Journal of Financial and Quantitative Analysis, (03), 305. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.cup.jfinqa.v33y1998i03p305.334.00
  • Guo, J., Huang, P., & Zhang, Y. (2019). Do debt covenant violations serve as a risk factor of ineffective internal control? Review of Quantitative Finance & Accounting, 52(1), 231–251. https://doi.org/10.1007/s11156-018-0708-7
  • Laux, J. (2011). Topics in Finance Part VI——Capital Budgeting. American Journal of Business Education, 4(7), 29–38. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=eric&AN=EJ1056593
  • Lev Virine, & Michael Trumper. (2017). Project Risk Analysis Made Ridiculously Simple. World Scientific Publishing Co. Pte. Ltd. https://doi.org/10.1142/9963
  • Link About It: Information Asymmetry, Knowledge Pooling and Syndication in Project Finance Lending. (2018). https://doi.org/10.26481/umagsb.2018008
  • Ruling Zhang, Killian J. McCarthy, Xiao Wang, & Zengrui Tian. (2021). How Does Network Structure Impact Follow-On Financing through Syndication? Evidence from the Renewable Energy Industry. Sustainability, 7, 1.