Project Finance


This course covers the key steps in identifying the critical components of a project and assessing the associated risk. It includes a thorough review of the roles of the different parties in the transaction (the sponsor, the company, the commercial lenders, technical experts and lawyers), an examination of the four different phases of the deal and emphasises especially the risk aspects. The methodology behind the construction of the cashflows and the techniques deployed in their evaluation are taught comprehensively with exercises.

Who Should Attend

• Derivative Sales executives
• Risk Managers
• Accountants
• Auditors
• Senior Operations Managers

Course Overview Background and Structure of Company Accounts

• Overview Profit and Loss Account 
• Overview Balance Sheet 
• Cash Flow Statement
• Disclosures
• Notes to the Accounts


Project Finance Overview 

• Contrast with Other Forms of Limited Recourse Financing; The Rationale for using Project Finance; What kinds of projects are financed? Trends in Project Finance
• Project Finance – the Parties
• Feasibility and Planning
• Arranging Structuring and Monitoring the Finance Ownership Structures
• IAS 39 and SPV Issues
• Considerations in Selecting a Structure; Project Finance Structures; Special Purpose Vehicle (“SPV”); General and Limited Partnerships; Joint Ventures (“JVs”)
• Funding Sources
• Financing Issues Types of Equity and Debt; Methods of Obtaining Finance; Structure of Capital Markets; International Issues; Bond Issues; Securitisation Project Finance Risks
• Classification and Identification of Risks; Risk Matrices; the Role of Due Diligence; Risk Allocation and Mitigation; Risk Allocation Techniques
• The Lender’s Perspective
• Key Figures in the Financial Projections; Ratio Analysis; Limitations of Ratio Analysis; Financial Covenant and Country Risk Ratios
• The Sponsor’s Perspective
• Methods of Evaluating Investment Decisions; Factors Influencing the Cashflows; the Cost of Capital – Choice of Discount Rate

Loan Issues

• Off balance sheet v On Balance Sheet
• Risk Transfer Issues
• Concept of Beneficial Interest Development of Accounting Standards • FASB vs. International Accounting Standards
• Understanding the distinction between hedge and trade accounting
• Learning how to apply marking to market principles • Analyzing the role of the Statement of Total Gains and Realized Losses

Fair Value & Cash Flow Hedge Accounting

• Identifying ineffectiveness
• Splitting a hedge between effectiveness and ineffectiveness
• Excluding spot forward differential • Addressing documentation issues

Project Financing Embedded Derivatives and Structured Products

• Breaking down contracts between vanilla bonds and derivatives
• Interest rate exposure
• Regular way vs. derivative transactions • Guidance on when to break down structured instruments

Dealing with Structured Products, Exotic and Credit Derivatives

• Development of Market
• Marking to market products
• Hedge vs. Trade Accounting • Use of the OCI/STRGL accounts

Market and Credit Risk Management Techniques

• Measuring market risk and credit risk on a portfolio basis
• Volatility - as measured by Value at Risk
• Hedging exposures as opposed to hedging assets and liabilities • Portfolio risk hedging vs. Accounting risk hedging - understanding the issues


Case study Depfa Bank Securitsation of Project Finance PPP deals

• Benefits off securitization
• Determining the difficulty from hedging with plain vanilla swaps
• Understanding the use of tailor made amortizing swaps
• Constructing amortization swaps from plain vanilla swaps • Present value basis point calculations

Dealing with Credit Risk

• Measuring Credit Risk
• Basel Committee on methods to measure credit risk
• Credit Derivatives
• Total Return Swaps and Credit Default Swaps • How the Accounting Standards Deal with Credit Derivatives