Energy & Infrastructure Finance Master Class

This Master Class will provide participants with a sound understanding of the key financing issues in large scale Energy and Infrastructure projects so that they can develop a clear understanding of the factors influencing the choice of:

  • Financing methods
  • The motivations of the parties involved
  • Risk evaluation and allocation
  • Capital structuring issues
  • And lessons from the past

Opportunities and challenges in large scale Infrastructure and Energy projects

Infrastructure: The financing of Infrastructure represents a major opportunity and challenge, given the scale of potential infrastructure development as a result of

  • Ageing infrastructure in many developed economies
  • Need for infrastructure in many developing economies to support economic growth
  • Attempts by governments and supranational agencies to mitigate the impact of the credit crisis by accelerating spending on infrastructure projects

Traditional methods of financing infrastructure projects are no longer sufficient to finance Infrastructure projects, leading to increased use of Public Private Partnerships, and development of Infrastructure Funds as potential sources of funds. There has also been a change in approach in recent years about “risk sharing”, “accountability” and “Value for Money” resulting in changes in how services for how services to public sector users are procured and performance evaluated.

PPP is providing opportunities for private sector providers of capital to be involved in projects that are underpinned by contracted cash flows (subject to performance) over long time periods at a time when the current business environment is volatile.

Power:  Although there is no one commonly accepted definition of what is covered by the term “Infrastructure projects” this master class will also include coverage of energy projects focusing on power generation, as these are vital to the development of infrastructure to facilitate economic development. In the area of energy projects government policies and the rapid change in renewable energy technologies present both opportunities and challenges.

Case studies

Case studies and illustrations from both Developed and Developing Economies will be the main focus of the teaching methodology with examples primarily based on some of the major areas of public infrastructure, such as:

  • Roads
  • Ports and airports
  • Power generation and transmission lines
  • Water
  • Metro systems
  • Social Infrastructure ( Health and Education)

Introduction

Background on transaction volumes in Project Finance for the Infrastructure and Power sectors.

Overview of an Infrastructure or Power Generation project to illustrate key aspects of the financing

Module 1:

Issues for Government in the financing of Infrastructure

  • Budgetary issues and the impact of the credit crisis
  • Are subsidies from government needed?
  • Options for the financing of public sector infrastructure assets – from operating contracts to privatization and influencing factors
  • Value for Money in the procurement of public sector services vs political and social issues

Case study: background on an Infrastructure sector or the Power sector to illustrate issues relating to the financing of the sector.

Module 2:

Key players in the Infrastructure and Power generation sectors

  • Roles  and objectives of the parties to Infrastructure and Power projects
  • Growth of Investment Funds operating in the Infrastructure and Power sectors
  • Potential conflicts of interest and potential differences in Public Sector and Private Sector objectives

Exercise: review of an Infrastructure or Power generation project to illustrate the role of the various stakeholders and potential conflicts of interest; review of background of a company actively involved in Infrastructure or Power generation transactions to evaluate their approach.

Module 3:

Risk identification and allocation in Infrastructure and Power projects and lessons of experience

  • Mega projects and risk –  lessons from the transportation sector
  • The infrastructure sector and impact of the credit crisis in terms of risk assessment  and corporate valuations
  • Debt perspective – overview of a methodology for rating a transport or power generation project
  • How risky are major infrastructure and power generation projects…summarized review of default study for Project Finance and PPP/PFI transactions
  • Trends in tariffs for power generation…what has been the experience in South Africa and elsewhere?

Exercise: rating an Infrastructure or power project – participants are given background on an Infrastructure project and develop a rating.

Analysing the corporate credit risk of sponsors involved in Infrastructure Finance

  • Different elements of cash flow
    • EBITDA
    • Cash from operations
    • Cash available for Debt Service
    • Free cash flow
    • Cash available to equity investors in a Project Finance structure
  • Financial analysis of corporates involved in Infrastructure projects
    • Quantitative indicators and typical ratios used in financial analysis
    • Qualitative factors
  • Project vs Corporate related cash flow analysis

Exercise: participants review background on a corporate investing in Infrastructure or Power Generation projects as a basis for assessing their financial strength.

Risk mitigation and allocation in Infrastructure and Power generation projects

  • Risk and risk allocation – typical  risks and approaches to risk allocation
  • Guarantees and credit enhancement

Exercise: participants are given background on an Infrastructure or Power generation project and looking at the transaction from either an investor or user perspective negotiate key aspects of the risk allocation.

Module 4:

Reviewing business plans for projects

  • Are the assumptions realistic?
  • Peer group analysis
  • Identifying and sensitising key financial risks in a PPP transaction
  • Cash flow related ratios
    • DSCR
    • LLCR
    • PLCR

Exercise: participants assess the viability of the assumptions to establish the potential key influences on the project financial viability.

Module 5:

Debt financing issues

  • Impact of the “credit crisis” on the debt markets
  • Corporate Finance vs Project Finance issues – factors influencing the capital structuring decision
    • Debt vs Equity
    • Leverage objectives
    • Loans vs bonds
    • Recourse to sponsors
  • Potential involvement of various financial institutions / instruments and influencing factors
    • Development Finance Institutions
    • Export Credit Agencies
    • Commercial Banks
    • Leasing
    • Capital Markets
  • Government support for Infrastructure and Power generation projects
  • Local vs foreign currency finance
  • Subordinated / mezzanine debt
  • Interest and currency exposure management
  • Review of selected transactions, both Corporate and Project Finance funded, to illustrate the debt financing structure.

Exercise: working in groups, participants make recommendations on the debt finance in support of an Infrastructure or Power Generation project.

Module 6:

Key Corporate Finance concepts – risk and return

  • Refresher on use of investment appraisal techniques
    • Concepts, definitions and examples
    • Future values
    • Present values
  • Capital Asset Pricing Model and capital structuring decisions

Examples to illustrate the use of Investment Appraisal techniques and risk and return for selected project investments

Case study: in groups, participants bid for an airport concession.

Sources of equity finance

  • Equity investors’ perspective – risk and return in an Infrastructure project; valuation issues
  • The role of Infrastructure Funds, Sovereign Wealth Funds and Private Equity
  • Understanding the equity investor’s approach to achieving returns from the project company, including operating relationships with the project company, and cash extraction through re – financing

Case study: review of background on a corporate operating in the Infrastructure area to evaluate their approach to capital structuring.

Module 7:

Key commercial terms and protections for debt providers in loan documentation

  • O&M Contract
  • Concession terms and conditions
  • Typical forms of construction related contracts
  • Operating and maintenance
    • Covenants
    • Third party credit support
    • Security
    • Debt Service Reserve , Escrow and Maintenance accounts
  • Termination provisions

Exercise: working in teams, participants review and develop of a summarized debt financing term sheet for an Infrastructure Finance transaction.

All professionals involved in energy and infrastructure finance from across Government and Government Agencies, Project Sponsors, Contractors, Commercial Banks, Development Banks, Export Credit Agencies as well as Consulting and Advisory Firms.

  • Staff involved in Project Finance & Structured Finance
  • Staff from Corporate Finance & Treasury Departments
  • Investment Managers
  • Power Companies
  • Utilities and Oil & Gas Companies
  • Project Managers / Accountants / Analysts
  • Group  &  Senior Legal Counsels

Participant Profile

Participants should already be familiar with the fundamental principles of business risk analysis and investment appraisal techniques, key aspects of company valuation, the core functions of Microsoft Excel, and the key features of the principal financial instruments.

An understanding of the core features of the debt financing instruments, but limited practical experience of their use, in the context of Corporate and Project Finance for Infrastructure and Power projects will be assumed.

Malcolm

Malcolm  Sullivan 

Malcolm Sullivan started his career with National Westminster Bank (now part of RBS) before moving to Mellon Bank NA, a major regional US bank (now part of Bank of New York Mellon).

At Mellon Bank, Malcolm held several credit analysis and account management positions in London, focusing on large UK corporates and UK subsidiaries of US corporations.  He also had two extended work assignments in the USA, on the second occasion as an account officer responsible for a group of US subsidiaries of non-US multinationals.

Since 1992 Malcolm has been primarily focused on training in the areas of Corporate Credit Analysis, Financial Restructuring, Project and Structured Debt Finance, such as Real Estate Finance and Asset Securitisation.

He has designed and delivered tailored courses in more than 55 countries. In these areas he has worked with a wide range of corporate and investment banking firms; Development Finance Institutions; public sector organisations; Export Credit Agencies; and a number of major corporations.

Note:  His full professional Biography is available on request.

Venue:

Holiday Inn Hotel, Sandton – Johannesburg

Dates:

3rd – 5th July 2017

Course Prices and Discounts can be viewed after registration.

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