SPV

PROJECT FINANCING SYLLABUS.

SYLLABUS EDHEC NICE MS FINANCE

 

 

PROJECT FINANCE AND ESSENTIALS IN INFRASTRUCTURE FINANCE

  • NUMBER OF HOURS: 30
  • SEMESTER #  2
  • INTERNATIONAL PROGRAMME  # 4 ECTS
  • COURSE COORDINATOR : Philippe-Henri LATIMIER, Ph.DPHLatimer@aol.com

 

  • COURSE SUMMARY :

Project Finance involves the raising of funds to finance an economically separable capital investment project in which the providers of the funds look primarily to the cash flow from the project as the source of funds to service their loans and provide the return of and a return on their equity invested in the project. This is a practical course that provides students an opportunity to understand the risk-return character of limited recourse projects from multiple perspectives. Case studies on risk structuring span a variety of sectors and geographical regions.

Prerequisites : Knowledge of Corporate Finance and basic credit analysis as well as basic Corporate Law.

  • COURSE OBJECTIVES & LEARNING OUTCOMES

Upon completion of the course, the Student will:

  • Understand the principles of project financing (PF)
  • Be able to evaluate the key components of the risk and the profitability of projects
  • Know how to use simple financial software to model the net present value of a project  
  • Know how to structure the financing for a project deemed worthwhile
  • Know how to calculate Project’s Cost of Capital
  • Understand how to compare Project’s Cost of Capital and Project’s IRR
  • Know if Project creates Shareholder Value?
  • Understand how to evaluate maximum Borrowing Capacity for a Project 
  • Know how to draft a financing recommendation for a board
  • Handle Warm-Up cases to apply Key Concepts
  • Preparing and submitting outcomes of a presentation to an Ad-Hoc Credit Committee supervised by Prof based on 4 to 5 real-world cases (OIL & GAS, AIRPORT, Infrastructure, Energy).

 

  • COURSE CONTENT

 1)       SESSION ONE

TOPIC # 1: Introduction

  • Objectives
  • Discussion

What Is Project Financing (PF)?

  • Typical characteristics
  • Definition
  • Pre-requisites
  • Typical PF examples 

2)       SESSION TWO 

What Is Different about Project Financing?

  • When is PF most suitable?
  • PF & corporate lending
  • PF & asset based lending
  • PF & property lending

TOPIC # 2: Warm-up case studies to make the key concepts clearer

  TOPIC # 3: History of Project Finance

  • Early forms of PF
  • PF & natural resources
  • PF & financing infrastructure
  • PF & government procurement

Current Project Finance Market

  • PF market expansion
  • Market highlights
  • PF market by sector
  • PF market by geography

TOPIC #  4: Understanding Project Finance

  • Financing cash flow
  • Risk Allocation
  • Economic Rent
  • When is PF most suitable?

TOPIC # 5: Warm-Up exercises to make the key concepts clearer

3)       SESSION  THREE

TOPIC # 1: Review of Project Finance Principles

  • Objectives
  • Discussion

Evaluating Project Cash Flow.

  • What is Project Cash Flow?
  • What is Discounted Cash Flow?
  • Calculation of Project Cash Flow
  • Evaluating IIR, NPV, Profitability Index, Pay-Back Period
  • PF and Project Cash Flow Profiles

Creating a SPV

  • What is a SPV?
  • Main functions of a SPV
  • Why is a SPV required?
  • How is a SPV created?

TOPIC # 2: Exercises to apply the concepts

TOPIC # 3: Key Project Finance Risk Categories

  • Construction
  • Operation
  • Funding
  • External

Controlling Direct Risks

  • Construction failure
  • Revenue failure
  • Operations failure
  • Supply failure

Controlling External Risks

  • Political
  • Environmental
  • Technology
  • Force Majeure

TOPIC # 4 : Warm-Up Case Studies  to apply the key concepts 

4)       SESSION FOUR

TOPIC #  1 : Key Roles in Project Finance

  • Overview
  • Discussion

Project Funding

  • Sponsor(s)
  • Other equity providers
  • Senior debt providers
  • Junior debt providers

Contractual Parties

  • Contractor
  • Purchaser
  • Operator
  • Supplier

TOPIC # 2: PF Roles & Risk Management

  • Risk takers/risk avoiders
  • Separation of roles
  • Phasing of roles
  • Managing by contract

PF Roles & Conflict

  • Where is the sponsor?
  • Who controls the contractor?
  • Ensuring long-term commitment
  • Sources of conflict

Managing PF Roles

  • Need for strong sponsor
  • Ownership – the right balance

TOPIC # 3: Warm-Up Case Studies to apply the concepts

5)       SESSION FIVE

TOPIC # 1: Due Diligence in Project Finance

  • Overview
  • Discussion

Due Diligence Process

  • Technical due diligence
  • Legal due diligence
  • Financial due diligence
  • Other due diligence

PF Advisors

  • Technical
  • Legal
  • Financial
  • Other

PF Information Memorandum

  • Purpose
  • Responsibility
  • Process
  • Output

PF Financial Model

  • Purpose
  • Responsibility
  • Process
  • Output
  • Evaluating Project’s Debt Capacity

Managing Due Diligence

  • Nature of assignment
  • Management control
  • Lines of communication
  • Dissemination of findings

6)       SESSION 6: PREPARING A PROPOSAL TO SUBMIT TO AD-HOC CREDIT COMMITTEE SUPERVISED BY PROF 

  • CONCRETE CASE STUDY: USING PF TO FINANCE A PIPELINE PROJECT

Summary: During this day the students apply the concepts learned during the first there days to a concrete case. They analyze the case in detail, create a simple financial model, do the basic financial engineering and prepare a simple report to a board with a recommendation that the project be funded or not.

7)       SESSION 7: CONCRETE CASE STUDY: USING PF TO FINANCE AN OIL & GAS PROJECT

Summary: During this day the students apply the concepts learned during the first there days to a concrete case. They analyze the case in detail, create a financial model, do the basic financial engineering and prepare a detailed report to a board with a recommendation that the project be funded or not.

8 & 9 AND 10) SESSIONS # 8, 9 and 10.  

OTHER REAL-WORLD  CASES ( INFRASTRUCTURE ) FOR CLASS PRESENTATION BY STUDENTS ( GROUP EXERCICES ) BASED ON CLASS PREFERENCES 

NB : EACH GROUP WILL BE COACHED BY PROF BEFORE DELEGATES SUBMIT THEIR CONCLUSIONS USING A POWER POINT FORMAT + PATTERN DISCUSSED IN CLASS. 

  • TEACHING & LEARNING METHODS

Power point slides providing an electronic slide-show of each session, including key concepts, examples, and exhibits;

Real-life case studies to aid practical applications;

Class discussion

  • ASSESSMENT METHODS

Warm-up exercices + session problems in class : 20%

Homework assignment(s) : 20%

Class Presentation during last 2 sessions : 60%

  • RECOMMENDED READING

PROJECT FINANCING & ASSET-BASED FINANCIAL ENGINEERING  JOHN D. FINNERTY WILEY FINANCE ISBN 978-0-470-08624-7