book

Principles of Project Finance, 2nd Edition

by E. R. Yescombe

November 2013

Beginner

560 pages

17h 26m

English

Academic Press

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§2.1 Introduction§2.2 Definition and Basic Characteristics§2.3 Development of Project Finance§2.4 Elements of a Project-Finance Structure§2.5 Examples of Project-Finance Structures§2.6 Why Use Project Finance?
§3.1 Introduction§3.2 Sponsors and Other Investors§3.3 Project Development§3.4 The Rôle of Advisors§3.5 Joint-Venture Issues§3.6 The Project Company§3.7 Public Procurement
§4.1 Introduction§4.2 Commercial Banks§4.3 Bonds§4.4 Other Non-Bank Lenders§4.5 Other Sources of Private-Sector Debt

§5.1 Introduction§5.2 Commercial Banks§5.3 Bonds§5.4 Bank Loans Versus Bonds§5.5 Lenders’ Due-Diligence and External Advisors§5.6 Lenders and the Public-Procurement Process
§6.1 Introduction§6.2 BOT, BTO et al.§6.3 Offtake Contract§6.4 Availability-based Contract§6.5 Concession Agreement§6.6 Other ‘PPP-like’ Contracts
§7.1 Introduction§7.2 Term§7.3 Payment Mechanism§7.4 Contract Monitoring by the Offtaker/Contracting Authority§7.5 Performance Bonding and other Guarantees§7.6 Compensation Events§7.7 Excusing Causes§7.8 Relief Events§7.9 Step-in by the Offtaker/Contracting Authority§7.10 Termination of the Project Agreement§7.11 Change of Ownership§7.12 Dispute Resolution
§8.1 Introduction§8.2 Construction Contract§8.3 O&M/Maintenance Contract(s)§8.4 Building-Services Contract§8.5 Fuel or Other Input-Supply Contract§8.6 Insurance§8.7 Site Lease and other Usage Rights§8.8 Permits and Other Rights§8.9 Amendments to and Replacement of Sub-Contracts§8.10 Parent-Company Guarantees§8.11 Direct Agreements
§9.1 Introduction§9.2 Risk Evaluation and Allocation§9.3 Analysis of Commercial Risks§9.4 Commercial Viability§9.5 Construction Risks§9.6 Revenue Risks§9.7 Operating Risks§9.8 Input-Supply Risks§9.9 Uninsured Risks and Related issues§9.10 Environmental Risks§9.11 Residual-Value Risk§9.12 Contract Mismatch§9.13 Recourse to the Sponsors§9.14 Risks for an Offtaker/Contracting Authority§9.15 Why Do Projects Fail?§9.16 Loss on Default
§10.1 Introduction§10.2 The Time Value of Money§10.3 Interest-Rate Risks§10.4 Inflation§10.5 Foreign-Exchange Risks§10.6 Refinancing Risk
§11.1 Introduction§11.2 Projects and Politics§11.3 Change in Law§11.4 Investment Risks§11.5 Wider Political Risks§11.6 ‘Sub-Sovereign’ Risk§11.7 Government Support Agreement§11.8 Political-Risk Insurance and Guarantees
§12.1 Introduction§12.2 Investors’ Analysis and Equity Structure§12.3 Debt Cover Ratios§12.4 Debt:Equity Ratio§12.5 Debt Service Profile§12.6 Interest Rate and Fees§12.7 Additional Costs§12.8 Optimizing the Financial Structure
§13.1 Introduction§13.2 FUNCTIONS OF THE FINANCIAL MODEl§13.3 Model Inputs§13.4 Macro-Economic Assumptions§13.5 Project Costs and Financing§13.6 Operating Revenues and Costs§13.7 Accounting and Taxation Issues§13.8 Model Outputs§13.9 Sensitivity Analysis§13.10 The Banking Case, Base Case and Financial Close§13.11 Using the Model after Financial Close
§14.1 Introduction§14.2 Lenders’ Term Sheet§14.3 Construction Phase—Drawdown of Debt§14.4 Operating Phase—Control of Cash Flow§14.5 Reporting Requirements§14.6 Debt Cancellation and Prepayment§14.7 Lenders’ Security§14.8 Conditions Precedent§14.9 Representations and Warranties§14.10 Covenants§14.11 Permissions, Waivers and Amendments§14.12 Events of Default§14.13 Lenders’ Decision-Making Process§14.14 Intercreditor Issues§14.15 Governing Law and Jurisdiction§14.16 Debt Refinancing§14.17 Secondary Equity Sale
§15.1 Introduction§15.2 Indirect Public-Sector Financial Support§15.3 Direct Public-Sector Financial Support§15.4 Mezzanine Debt§15.5 Standby Financing§15.6 Refinancing after Project Completion§15.7 Gap Financing§15.8 Policy Banks§15.9 Credit Guarantee Finance§15.10 Capital Grant§15.11 Viability-Gap Funding§15.12 Part-Construction of the Project§15.13 Complementary Investment§15.14 Full Debt Guarantee§15.15 First-Loss Debt Guarantee§15.16 Pari-Passu Debt Guarantee§15.17 Debt Underpinning§15.18 Minimum Revenue Guarantee (‘MRG’)§15.19 Tariff Subsidy§15.20 Public-Sector Project Company§15.21 Guarantee Funds
§16.1 Introduction§16.2 Export Credit Agencies§16.3 Political-Risk Insurance for Investors§16.4 ECAs and Bilateral DFIs§16.5 Multilateral Development-Finance InstitutionsAnnex: U.S. Exim ‘Project Criteria and Application Information Requirements’
§17.1 Introduction§17.2 The Effect of the 2008 Financial Crisis§17.3 The ‘Basel Process’§17.4 Non-Bank Lenders§17.5 Improving Project-Finance Credit Risk§17.6 New Models§17.7 The Future of Project Finance

Content preview from Principles of Project Finance, 2nd Edition

Chapter 1

Introduction

Project finance is a method of raising long-term debt financing for major projects through ‘financial engineering,’ based on lending against the cash flow generated by the project alone; it depends on a detailed evaluation of a project’s construction, operating and revenue risks, and their allocation between investors, lenders, and other parties through contractual and other arrangements. In 2012, at least $375 billion of investments in projects around the world were financed or refinanced using project-finance techniques. This book is intended to provide a guide to the principles of project finance and to the practical issues that can cause the most difficulty in commercial and financial negotiations, based on the author’s ...