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In a time where ‘getting your bang for your buck’ could not be more pertinent, it is imperative for developers to evaluate debt financing options. Securing finance for even the best researched and robust power projects can be challenging and understanding how to analyse the risks, structure the finance and where to look for it, is vital for success.

The highly practical ‘Power Project Finance’ 3-day programme is a must attend course for anyone who understands the value of developing a robust finance plan to ensure long term viability. The course features core case studies that are supplemented with examples of ‘real life’ project finance and corporate transactions with a focus on the power sector.

Why should you attend this course?

  • Evaluate various debt financing options for a project, both on a finance basis as well as other corporate debt financing options.
  • Understand the motivations of key stakeholders in projects and the implications for the financing approach.
  • Assess the risk and return issues for both debt providers and equity investors in the project in order to develop an appropriate capital structure.
  • Review and sensitise a financial model in the context of a power project.
  • Build your knowledge of practical application through case studies and exercises from real life power projects.

Who should attend?

  • This programme will be relevant to a wide range of participants working for organisations involved in the power sector including:
  • Commercial managers , project managers and engineers, corporate treasury, contractors, lawyers and other professional advisors, investment managers investing in project backed bonds, development finance institutions, export credit agencies, equipment manufacturer
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Expert Course Facilitator- Malcolm Sullivan

After 11 years at Mellon Bank, Malcolm Sullivan joined Swiss Bank Corporation (now UBS) in London where he was actively involved in the development and ongoing management of the bank’s UK Commercial Real Estate lending activities. Sullivan’s Real Estate skills further developed at Debenham Tewson Financial, a subsidiary of one of the world’s leading Real Estate advisory firms.

Since 1992, Sullivan has primarily focussed on Corporate Credit Analysis, Financial Restructuring, Project and Structured Debt Finance, such as Real Estate Finance and Asset Securitisation. He has designed and delivered tailored courses in more than 60 countries. In these areas he has worked with a wide range of corporate and investment banking firms, global and regional Development Finance Institutions, public sector organisations, Export Credit Agencies and a number of major corporations.

In the area of Project Finance Malcolm has developed and delivered training programmes around the world in developed and developing economies. The participants include both the public and private sector, with participants ranging from recent graduates to senior management in a wide range of functions including debt and equity origination and advisory, risk analysts, Project Engineers, lawyers and portfolio/transaction monitoring.

Course Agenda

Module 1: A brief review of key influences on corporates’ debt financing decisions and introduction to power project finance

Topic: Capital structuring decisions

  • Debt vs equity considerations – risk and return
  • Credit rating and debt structuring issues
  • Debt pricing – how banks look at risk and return – principles of Risk Adjusted Return on Capital (RAROC)
  • Review of background on the capital structure of selected companies, and their use of debt finance
  • Exercise: participants assess the impact on a company of different leverage and financing

Topic: Introduction to Power Project Finance

  • Discussion based on the pre-course assignment
    • Review of fundamental aspects of Project Finance, including the use of Project Finance vs other debt financing options and the roles and motivations of key project stakeholders

Module 2: Risk analysis and allocation in project finance

Module objective:

To reinforce participants’ understanding of key risks inherent to a project, typical mitigants and risk allocation.

  • Key risks, mitigants and risk allocation
    – Construction related
    – Operational phase
    – Financial risk exposures/Capital structure
    – Renewable vs non-renewable energy based power projects – relative economics
  • Lessons of experience in terms of key risks
    – Background data on principal reasons for projects, including power projects, facing difficulty

Case study: Rating a Project Finance transaction and developing a rationale for involvement in a project

  • Participants prepare a summarised rating for a project (debt perspective)
  • Participants prepare a summary of the key risks and mitigants for an assigned project

Module 3: Development and financial analysis of the projected operating performance and key drivers

Module objective:

Participants will be given a spreadsheet template (that will be used throughout the training) and selected information on a project as a basis for developing forecast assumptions, building the operating cash flows for an assigned project and sensitising key financial drivers of the project to assess the impact on the Project Internal Rate of Return (IRR).

Topic: Reviewing the project financial statements

  • Developing the underlying assumptions
  • What is the benchmark for the sector?

Topic: Developing the operating cash flows

  • Key elements of building a financial model
  • Key outputs of a model from an equity, debt and user perspective and key Project Finance financial ratios
  • Sensitivity techniques

EXERCISE: Reviewing and developing the underlying assumptions

Participants are required to review and develop background on a project in order to assess, develop and sensitise the underlying assumptions and the impact on the Project IRR.

Module 4: Sources of debt financing in projects—financiers and their objectives

Module objective:

To enhance participants’ understanding of developing a debt structure, key features of various debt products and the impact of the credit crisis. Looking at the impact of the ‘credit crisis’ on Project Finance.

Topic: Use of Project Finance: Project Finance vs. other debt financing options for projects – corporate debt, borrowing base facilities.

Topic: Structuring Project Finance:

  • Tailoring the debt to reflect the operating cash flow profile for the project
  • Involvement of political risk insurers – Export credit agencies and development banks
  • Interest and foreign exchange management issues in Project Finance for power

EXERCISE: Participants will:

  1. Review and develop the debt structure for the assigned case study and sensitise the Debt Service Coverage Ratio to reflect key operating and financial risks.
  2. Decide on the financing approach in terms of the involvement of potential debt providers to a power project.

iii. Make recommendations on pricing for the debt financing.

Module 5: How equity investors assess power projects – financial yardsticks used by investors

Module objective:

To reinforce participants’ understanding of risk and return issues from an equity perspective including evaluation of equity investors’ relationship with the project company and how this can provide incremental income and developing objectives for maximising cash based returns from a project.

  • Understanding the equity investor’s approach to achieving returns from the project company, including operating relationships with the project company, and cash extraction through re – financing
  • Exercise: development of the capital structure for an assigned project as a basis for developing a capital structure that meets the objectives of both equity investors and debt providers

Module 6: Documentation for project finance

Module objective:

To reinforce participants’ understanding of the key commercial elements of debt financing documentation and risk mitigants from a debt provider’s perspective vs. the desire of equity investors to minimise recourse beyond the project being financed.

  • Review of the key commercial issues to be covered in Project Finance term sheets
  • Rationale and structure of loan documentation
  • Inter creditor issues
  • Third party credit support and security issues for debt financiers, including critical commercial issues in offtake agreements, fuel supply agreements, O&M agreements, construction contracts, and shareholder agreements
  • Exercise: participants develop a summarised Project Finance term sheet

Module 7: Presenting a proposal for investment in project finance

Participants consolidate the information developed during the course to produce a summarised recommendation with respect to a renewable power project.

The course will take place from 14-15 May 2015 in Cape Town. If you would like to register, please contact me on the details below:

Tarryn Philander

Spintelligent Training Academy

(t) +27 21 700 3555

(e) training@spintelligent.com

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