Professional Documents
Culture Documents
Objectives
To understand what project financing is and what steps are involved in securing and managing it.
Part 1 Introduction
For whom is it important to understand project financing? Why is it important to understand project financing? What is a project? Types of projects. What is project financing? Key characteristics of project financing. Advantages of project financing. Disadvantages of project financing.
large size. Intensive capital requirement Capital Intensive. finite and long Life. few diversification opportunities i.e. assets specific. Stand alone entity. high operating margins. Significant free cash flows.
Such projects are usually government regulated and monitored which are allowed to an entity on B.O.O or B.O.T basis.
and
Financing Stage
Completion Risk
Price Risk Resource Risk
Operating Risk
Environmental Risk Technology Risk Interest Rate Risk
Insolvency Risk
Hedging
Externalizing the project company by forming it abroad or using external law or jurisdiction External accounts for proceeds Political risk insurance (Expensive) Export Credit Guarantees Contractual sharing of political risk between lenders and external project sponsors Government or regulatory undertaking to cover policies on taxes, royalties, prices, monopolies, etc External guarantees or quasi guarantees
with assumptions
Contracts Management/shareholder agency relationship Inter corporate agency relationship Government/corporate agency relationship Bondholder stockholder relationship
Part 3 Conclusion.
A typical project financing structure. Highlights of project financing structure.
Thank You.