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TABLE OF
CONTENTS Advanced Project Financing: Structuring
Risk, 1st Ed. Introduction
Project Finance's Origins
Project Finance Defined Project Finance Structuring Off Balance Sheet Non-recourse Completion Test/Option Conditions Limited Recourse Advantages Capital Shortage Risk Transfer Deal Sequestration Ratings management Securitised Project Financings Better returns Consortium Control
Tailoring
Disadvantages
Extra Cost and Time References Chapter One :
Stages Structuring Stages Construction Commissioning/Completion Technical Feasibility Study Financial Feasibility Market Feasibility Board Paper Approach to Banks Progressive Authority Credit Committee Matrix Sequential Approach to Bond Underwriters Take-Out (Re)Financing Pricing the Sovereign Ceiling Use in M&A Equity/Mezzanine Summary References Chapter Two
Funding Sources Local Currency Funding Banks Bilateral Agencies US Exim EDC EGCD Coface JBIC Hermes SACE SESCE ABB EFIC MEBIC Exim China OPIC CDC Multilaterals The World Bank EBRD ADB EIB MIGA Capital Markets Developers Mezzanine Merchant Financing Islamic Lending Governments/PPP Leasing Commodity Equity Summary References Chapter 3 :
Cashflows Benchmark Cashflow cases Modelling aspects Principal repayment methods Repayment Profiles
Tribasa cash Sweep Interest Bases
Spreads
Cash-trap Styles Reserve Styles Debt Service Reserve Maintenance Reserve Capex reserve Cashflow Controls Flow of funds through lockbox Flow of fund without lockbox Operations summary Operating Cashflows Gross revenues Opex Financing Costs Financing Reports Capex Modelling language Cashflow Modelling Approaches Typical Sensitivities Liquidated damages Model Periods Input Sheet Modelling Shortcomings Common Shortcomings Summary References Chapter 4 :
Financial Advisers Advantages & Disadvantages Need for an Adviser Advisory Costs Who are the Financial Advisers? Investment/merchant banks Commercial banks Investment Banks Boutique advisers Country specialists Financial analysts Accounting and Insurance firms Legal networks Stockbrokers or Equity firms One-country specialists Equipment Suppliers or service providers Summary References Chapter 5 :
Credit Ratios Sector cashflow profiles Debt Service Cover ratio "DSCR" Key ratio targets Residual Base case cashflow Downside case #1 Downside case #2 Interest Cover ratio Principal Cover Ratios PV Ratios Loan Life Ratio "LLR" Project life Ratio "PLR" Residual Life ration "RLR" Debt:Equity Ratio Payback Payback Calculation bases Discount Rate Leveraged IRR Choice of discount Rate Multi-tranche Ratios Accounting ratios Telecoms ratios Summary References Chapter 6 :
Risk Systems Insurance Key Risks facing the company Risk mapping - insurance industry Lenders rights in insurances Statistical Modellers Checklist Contractual/Jig Saw Project Finance : 16 risk systems References Chapter 7 :
Sector Profiles Sector features Power Cashflows Tollways Tollway Cashflows Railways Railway Cashflows Resources Resources Cashflows Telecoms Telecoms Cashflows Satellites Satellite Cashflows Prisons/Hospitals Prisons/Hospitals Cashflows Airports/Ports Airports/Ports Cashflows Water/Waste water Water Cashflows Stadiums/Theme Parks Stadiums/Theme Parks Cashflows Summary Chapter 8 :
Structures Risk 1. Contract 2. Trigger 3. Study 4. Avoided 5. Financed Risk Division Document matrix Interest
Risk trade-off documentation Principal Drawdown Styles 1.
Certification 2.
Benchmarks 3.
Anticipated-Cost-to-Complete 4.
Up-front-Banks 5.
Up-front-Bonds SPV 1.
Unincorporated
Joint Venture 2.
Partnership 3.
Trusts Mezzanine Subordinated Debt Working Capital Bridge Loans Multi-Tranche Commodity Funding 1.
Warrants 2.
Production
payments Contract Structures
Supplier Credits
Buyer Credits
Leasing 1.
Leveraged
Leasing 2.
Wrap
Lease 3.
Captives 4.
Double-Dip 5.
Hire
Purchase 6.
Lease
Tranches Trigger Structures Deferral 1.
Inverse
order of maturity 2.
Current
Order of maturity 3.
Banked
Deferral Pre-Export Financing Prepayment Advanced payment Clawback Mandatory Prepayments Equity Kickers Financed Structures Equity 1.
Dividend
Reserve 2.
Subordinated
Debt 3.
Convertible/IPO Securitisation 1.
CLO 2.
Revenues Joint Financing Study Structure Ratings 1.
Methodology 2.
Default 3.
Deal
Pricing 4.
Covenants 5.
Term 6.
Pricing Avoided Off Balance Sheet 1.
Deconsolidation 2.
Diamond 3.
Defeasance 4.
Derivatives 5.
Puts/Calls/Indemnities 6.
Comfort
Letters Summary References Chapter 9 : Due
Diligence
Systematic review
Feasibility Process Selection of Experts/Engineers Customary reviews 1.
Legal
review 2.
Taxation
review 3.
Accounting
review 4.
Insurance
review 5.
Environmental
review Traffic Studies Construction Cost Audit Power Sector Resources Common Sense References Chapter 10 :
Supply Risk Contract Structures Supply Agreements Supply Undertakings Tolling Contracts Supply Assurance Finance Structure Financed Trigger Structure
Insurance Study Structure
Supply Studies Traffic studies Subscriber studies Water Supply Water treatment Oil & Gas reservoir Mining Reserves Power Project Fuel Supply Processing Projects Weighting Structured 1.
Borrowing
Base Physical tail Depletion Protection Summary References Chapter 11 :
Market Risk Market Quantity Sales Contracts Take-or-pay contracts Capacity Contracts Buy-back contracts Throughput agreements Minimum Quantity Market preference contract Requirement Contract Tolling Agreements Advanced Sales Production payments Unliquidated Basic Sum Contract Monetisation Market price Contract Structures
Sales contract Base price Additional contract options Merchant Financing Consumer Financing Trigger Situations Hedging Forward-contracts Options-based Swap-driven Cross-swaps Natural Hedge Contract for Differences Make-up deficiency Agreements Insurances Study Techniques Macroeconomics Microeconomics Charting Cycle analysis Summary References Chapter 12 :
Foreign Exchange Funding Foreign Exchange Risk What percentage to structure? Contract Structures
Forward contracts Parallel Loans Barter Trigger structures Currency Swap FX Swaps CPI Swaps Avoided Natural Hedge Commodity Lending CPI Lending FX Tariff Barter Study Summary References Chapter 13 :
Operating Risk Technical Component Technology Risk Contract Structures Technology Management Technology Warranty Quality Assurance Technology Guarantee Fleet Assurances/Backup Trigger Structures Business interruption insurance Technology Insurance Financed Structures
Performance Bond Study Structures
Independent Certification Alternate Technology Technology Curve Summary Chapter 14 :
Chapter 15 :
Chapter 16
Environmental Risk Environmental risk 1.
Emissions 2.
Catastrophe 3.
Contextual Contract Structures Environmental management Rehabilitation Management/Revenues Environmental Warranty Trigger Structures Rehabilitation Release Emergency Response Environmental Insurances Financed Structures Rehabilitation Guarantee Pollution Control Bonds Rehabilitation Reserve Study EIS Environmental plan Avoided 1.
Regulatory
Waiver 2.
Regulatory
Purchase/Trade 3.
Physical
Waiver Summary References Chapter 17 :
Infrastructure Risk Contract Structures Contract Government Commitments Pooled Infrastructure Studies Transport Studies Fob offtake
Summary
References Chapter 18 :
Force Majeure Risk Acts of nature Acts of Man(kind) Acts of Government Impersonal Acts Herstatt Risk Trigger Structures Deferral Insurance Negotiation Studies
Risk management Safety Measures References Chapter 19 :
Completion Risk Completion Test Contract Structures
Turnkey Construction Contract Multi-party Turnkey Contracts Partnering Charters Trigger Structures
Delay-in-startup Insurance 1.
Force
majeure 2.
Change
of Law 3.
Efficacy Financed Structures Liquidated Damages Delay Underperformance Default Agreement Bonding/Guarantees Maintenance Bond Completion Guarantee Completion Undertaking Retention Performance Bond Overrun - Standby Facilities Equity and Debt subscription Study Approach Independent Completion Engineer Sector Completion Protocols
Tollways/bridges Rail/light rail Ports/Airports Prisons/Hospitals Water/Waste water Power Telecom Mining Summary References Chapter 20 :
Engineering Risk Design/Calculations Insurance Study Independent Certification
References Chapter 21 :
Political Risk Definitions 1.
War and
Insurrection /Civil Disturbance 2.
Currency
inconvertibility Transfer ("CIT") 3.
Nationalization
and creeping Expropriation ("NCE") 4.
Landowners/indigenous
people's disturbance 5.
Terrorism
and Sabotage 6.
Willful
breach of contract 7.
Change
of government 8.
Corruption 9.
Unions 10.
Environmental Activists 11.
Approvals/Bureaucratic Risk 12.
Conflict of Authority 13.
U.S.A. 14.
Religious Fundamentalism/Ethnic Tension 15.
Taxation Changes 16.
Change in law Government Supports Treaty Protection Contract Structures Concession Agreement Co-financing Multi-party Structures Partial Risk Partial Credit Market Tie Counter trade Trigger Structures PRI Currency Inconvertibility Agreements Debt:Equity Swaps Tax Indemnification Financed Structures War and Insurrection Residual Cash Escrow Prepay PRI Premiums Study Sources
Avoided Offshore Proceeds Account References Chapter 22 :
Participant Risk SPV Trigger Structures Cross-Collateralization Deficiency Agreements Study Avoided Bankruptcy Remoteness Pre-Assignments Summary References Chapter 23 :
Interest Rate Risk Contact Structures Supplier credits Leasing Hedging/Swaps
Trigger Structures Alternative Funding Interest Protection Agreement Interest Makeup Agreement Bank-ended Interest Summary References Chapter 24 :
Syndication Risk Choice of banks/Placements Parties Pricing Contract Structure Fully Underwritten Club Underwriting Broad Syndication UN syndication Information Memorandum Syndicate Model Project development Plan Loan Administration Disclosure
References Appendix 1 :
Differing Definitions Appendix 2 :
Typical Owner Controlled Insurance Program Section 1 Owners Project Company Insurance Coverages Construction Phase 1.
Contractors
All Risks 2.
Marine
Cargo and delay in start-up 3.
Umbrella/excess
Liability - construction 4.
Workers
Compensation and Employer's Liability 5.
Business
Auto Liability 6.
Any
other Statutorily required coverages 7.
Force
Majeure 8.
Any
Other Elective Coverages Section 2. Contractor's Insurance Requirements
Construction phase 1.
Contractor's
equipment 2.
Marine
Liability 3.
Aircraft
Liability (owned/non-owned) 4.
Worker's
Compensation 5.
Business
Auto Liability 6.
Professional
Errors & Omissions - Design Liability 7.
Umbrella
Excess liability - Construction 8.
Liquidated
damages/Efficacy (to be provided by the equipment supplier) 9.
Any
other statutorily required coverages 10.
Any other elective coverages Section 3. Owner's Project Company Insurance Coverages Operational Phase 1.
Industrial
All Risk Property Damage 2.
Operational
Boiler & Machinery Coverage 3.
Industrial
All Risks - Loss of Profits 4.
Business
Auto Liability 5.
Third
Party Liability Primary Cover 6.
Umbrella/Excess
Liability 7.
Any
other statutorily required insurance coverages 8.
Any
other elective coverages
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