Duration: 1 day

Instructor: Fatih KURAN

Objective

This program aims to establish a solid foundation for evaluating project and investment proposals, along with risk analysis and management techniques. By the end of the course, participants will gain a comprehensive understanding of project finance concepts and structures, enabling them to manage financial performance metrics and decision-making processes effectively.

Learning Outcomes

Participants will gain detailed knowledge in the following areas:

• Concept and Terminology of Project Finance

• Parties and Structuring in Project Finance

• Project Finance and Public-Private Partnerships (PPP)

• Comparing Income Statements and Cash Flows

• Factors Influencing Project Finance Decisions

• Comprehensive Risk Analysis and Management in Project Finance

• Project Types and Associated Risk Profiles

• Creditworthiness and Bankability

• Special Conditions in Loan Usage (‘Term Sheet’)

• Negotiation Processes and Management Between Investors and Banks

• Cost of Capital and Equity

Content

1. Introduction and Overview

• Terminology

• Concepts of Project Finance and Structured Finance

• Special Purpose Vehicle (SPV) Concept

• Comparison of Project Finance vs. Corporate Finance

• Applications and History of Project Finance

• Phases of Investment Projects and Their Financial Implications

• Differences Between Income Statements and Cash Flows

• Cash Flow Waterfalls and Key Performance Metrics (DSCR)

• Advantages and Disadvantages of Project Finance

• Importance of Leverage and Its Implications

2. Project Risks

• Risks Based on Phases:

o Project Phase

o Engineering and Construction Phase

o Startup Phase (Physical Completion)

o Operation Phase

• Types of Risks:

o Construction and Completion Risk

o Operational Risk

o Sales Risk

o Financial Risks

o Economic Risks

o Political Risk

o Legal Risk

3. Risk Management and Project Agreements

• Structuring Transactions and Parties Involved

• Sales Agreements and Types

• Contracts Related to Engineering, Procurement and Construction (EPC Contracts)

• Contracts Related to Project Operations (O&M Contracts)

• Importance of Insurance in Project Finance

• Key Considerations in Contracts

• Why do Projects Fail?

4. Financing Sources and Usage Conditions

• Equity and Debt in Project Finance

• Various Equity Payment Structures

• Financing Aligned with Cash Flows (‘Debt Sculpting’ and ‘Debt Sizing’)

• Credit Evaluation Criteria:

o Pre-construction Phase

o Post-construction/Operation Phase

• Project Finance Sources:

o Syndicated Loans and Club Loans

o Commercial Banks

o Investment Banks

o ECA Loans

o Leasing

o Vendor Credits

o Bond Markets

• Concepts of Creditworthiness and Bankabili

• Different Loan Repayment Plans (Risks and Advantages):

o Equal Installment (Annuity) Payments

o Equal Principal Payments

o Step-Up Installments

o Step-Down Installments

o Seasonal Payments

o Grace Periods

o Interim Payments

o Skipped Payments

o Balloon Payments

• Special Conditions in Loan Usage (‘Term Sheet’):

o Additional Borrowing

o Loan Usage Period

o Dividend Distribution limitations

o Reserve Accounts:

 Debt Service Reserve Account

 Maintenance Reserve Account

• Insurance in Project Finance

• Components of Financing Costs

• Comparative Project Finance Perspectives of Bankers and Investors (Sponsors)

5. Performance Metrics in Project Finance

• Internal Rate of Return (IRR)

• Net Present Value (NPV)

• Debt Service Coverage Ratio (DSCR)

• Break-even Analysis

• Payback Period (Discounted and Non-discounted)

* The course involves Excel applications, and participants are required to bring laptops with Excel 2013 or a higher version installed.