Project finance has spread worldwide and includes numerous
industrial projects from power stations and waste-disposal plants
to telecommunication facilities, bridges, tunnels, railway
networks, and now also the building of hospitals, education
facilities, government accommodation and tourist facilities.
Despite financial assessment of PF projects being fundamental to
the lender's decision, there is little understanding of how
the use of finance is perceived by individual stakeholders; why and
how a financial assessment is performed; who should be involved;
where and when it should be performed; what data should be used;
and how financial assessments should be presented.
Current uncertainty in financial markets makes many sponsors of
construction project financings carefully consider bank liquidity,
the higher cost of finance, and general uncertainty for demand.
This has resulted in the postponement of a number of projects in
certain industry sectors. Governments have seen tax receipts
drastically reduced which has affected their ability to finance
infrastructure projects, often irrespective of the perceived
demand. Equity providers still seek to invest, however there are
less opportunities due to market dislocation. Due to the demand for
global infrastructure it is believed that project financings will
return to their pre-crunch levels, or more so, however
lenders' liquidity costs will be passed on to the borrowers.
Lenders will also be under stricter regulation both internally and
externally.
The steps outlined in the guide are designed to provide a basic
understanding for all those involved or interested in both
structuring and assessing project financings. Secondary contracts
involving constructors, operators, finance providers, suppliers and
offtakers can be developed and assessed to determine their
commercial viability over a projects life cycle.
Special Features
* a structured guide to assessing the commercial viability
of construction projects
* explains economic metrics to use in the decision making
process
* detailed case study shows how stakeholders apply the concept of
project finance
Autorentext
Anthony Merna is senior partner of Oriel Group Practice, a
multidisciplinary research and consultancy practice based in
Manchester and a visiting lecturer to Manchester Business School at
the University of Manchester. He has been teaching Project Finance
for the last 14 years to a number of UK and overseas universities,
businesses and government agencies.
Yang Chu is a graduate of the School of Mechanical,
Aerospace and Civil Engineering at the University of Manchester and
a research consultant with Oriel Group Practice specialising in the
areas of project finance and risk modelling. He is currently
carrying out risk management research at Manchester Business
School.
Faisal Al-Thani is Senior Development Manager, Middle
East for Maersk Oil based in Doha and a board member of the Marsh
International Risk Council.
Zusammenfassung
Project finance has spread worldwide and includes numerous industrial projects from power stations and waste-disposal plants to telecommunication facilities, bridges, tunnels, railway networks, and now also the building of hospitals, education facilities, government accommodation and tourist facilities.
Despite financial assessment of PF projects being fundamental to the lender's decision, there is little understanding of how the use of finance is perceived by individual stakeholders; why and how a financial assessment is performed; who should be involved; where and when it should be performed; what data should be used; and how financial assessments should be presented.
Current uncertainty in financial markets makes many sponsors of construction project financings carefully consider bank liquidity, the higher cost of finance, and general uncertainty for demand. This has resulted in the postponement of a number of projects in certain industry sectors. Governments have seen tax receipts drastically reduced which has affected their ability to finance infrastructure projects, often irrespective of the perceived demand. Equity providers still seek to invest, however there are less opportunities due to market dislocation. Due to the demand for global infrastructure it is believed that project financings will return to their pre-crunch levels, or more so, however lenders' liquidity costs will be passed on to the borrowers. Lenders will also be under stricter regulation both internally and externally.
The steps outlined in the guide are designed to provide a basic understanding for all those involved or interested in both structuring and assessing project financings. Secondary contracts involving constructors, operators, finance providers, suppliers and offtakers can be developed and assessed to determine their commercial viability over a projects life cycle.
Special Features
- a structured guide to assessing the commercial viability of construction projects
- explains economic metrics to use in the decision making process
- detailed case study shows how stakeholders apply the concept of project finance
Inhalt
List of Illustrations xi
List of Tables xiii
About the Authors xv
Preface xvii
1 Introduction 1
1.1 The development of project finance 1
1.2 Financial assessment 6
What is financial assessment? 6
Why perform a financial assessment? 6
Who is involved in the risk assessment process? 7
Where should a financial assessment be performed? 7
When should a financial assessment be performed? 8
What data are to be used? 8
How should assessment outputs be presented? 8
1.3 Purpose of this guide 9
1.4 Scope of the guide 9
2 Project finance 11
2.1 Introduction 11
2.2 Definition of project finance 11
2.3 The key characteristics of project finance 13
Special project/purpose vehicle 14
Contractual arrangement 14
Non-/limited recourse 17
Off-balance sheet transaction 18
Robust income stream of the project as the basis for financing 19
2.4 Legal and financial considerations in project finance 20
Legal 20
Financial 22
3 Financial instruments and cash flow modelling 25
3.1 Introduction 25
3.2 Debt finance 25
Senior debt 27
3.3 Mezzanine finance 28
Subordinate debt 28
Bond finance 29
3.4 Equity finance 31
3.5 Sources of debt and equity 34
3.6 Cash flow modelling and project financing 34
4 Risk management 39
4.1 Introduction 39
4.2 Risk 39
4.3 Risk management process 41
Risk identification 42
Risk analysis 44
Risk response 47
4.4 Typical risks in project financing 49
5 The financial assessment process 51
5.1 Introduction 51
5.2 The financial assessment structure 51
SPV assessment 51
Lenders' assessment 54
SPV and lender final assessment 55
6 Case study 57
6.1 Introduction 57
6.2 Independent power project 57
6.3 Supply and offtake contracts 58
Supply contracts 60
Offtake contracts 61
Applications of supply and offtake contracts 64
6.4 Assumptions for initial assessment 65
7 Developing the base case model 69
7.1 Introduction 69
7.2 SPV's initial assessment 69
7.3 Identify the estimated activities, time, costs and revenues of the project 70
7.4 Development of the base case model 71
7.5 Identify major project risks 73
7.6 Assess…