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Project Finance & Transaction Structuring
Week 1
Design Research
4 videos, 1 reading
Video: The Interaction Design Specialization
20 m
Video: Introducing Elizabeth Gerber
40 m
Video: Who, What, Where, When and How People Work
35 m
Video: Michael Chapman of IDEO on Interviewing
20 m
Reading: Slides
30 m
Graded: Final Quiz: Design Research
5 Questions
Week 2
Ideation
2 videos
Video: The Interaction Design Specialization
20 m
Video: Introducing Elizabeth Gerber
40 m
Graded: Cumulative Quiz
4 Questions
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Project Finance & Transaction Structuring

  /  Finance and financial management  /  Project Finance & Transaction Structuring

Project Finance & Transaction Structuring

About this course

Introduction

In project finance, a subtler, but often under-appreciated, risk arises from the multi-dimensional nature of the project finance which flows from the myriad of parties required to design, finance, approve, complete and operate the project.

This project finance and transaction structuring course is aimed at transaction advisers, Lawyers and other professionals who are involved in project finance and infrastructure deals and who need to understand the core principles, key legal issues and techniques encountered in structuring robust project financings.

The project finance documentation course focuses on the major commercial and legal issues that arise in the key legal documents that weld the project together as well as other critical aspects that encompass most if not all these agreements; for example, choosing the most appropriate Legal Structure/Vehicle for the project; assessing the integrity of the legal environment of the transaction.

Course benefits

  • Apply the principles of transaction structuring to project and infrastructure finance deals.
  • Apply the different approaches to value debt instruments and evaluate the pros and cons of each approach

Who should attend?

  • Finance department staff involved in the preparation of documentation for project finance
  • Legal advisers involved in advising on Sales and Purchase Agreements (SPAs)
  • M&A teams involved in assessing acquisition or divestment opportunities
  • Transaction and valuation advisers involved in analyzing documentation required for project finance.
  • Any other professional interested in the knowledge and act of advising project finance deals.
Project Finance Documentation Course Content:
Bankability – overview of the main
  • What makes a project Bankable?
  • Market risk
  • Completion risk – 3 main aspects
  • Operating risks
  • Supply risk
  • Forex / Currency risk
  • Financing risk – interest rate risk & availability (syndication) risk
  • Political risk
  • Force majeure risks – 4 kinds
  • Legal risk
  • Environmental risk
Key Structuring Principles & Issues
  • Creating a Non-recourse structure
  • Tax issues
  • Group tax relief & Consortium* relief
  • Thin Cap rules
  • Transfer pricing issues
  • Withholding taxes
  • Subordination & what it is and why it matters
  • Contractual vs. Structural
Choosing the Ownership & Project structures
  • The rationale for using an SPV
  • SPV vehicle types – pros, cons and risks
  • Company
  • Partnerships
  • General
  • Limited
  • Unincorporated Joint Ventures
  • Review of the Contractual/ Project Framework
  • Review of various types of Project Delivery methods
  • DBFM, BOOT, BOT, BOO, BLT
  • Leasing structures: Leveraged, Captive etc
Generic Issues in Documentation
  • Governing Law “clause” for the main contracts – Finance, Construction, Operation
  • Rationale for inclusion
  • The Rome Convention
  • Jurisdiction “clause”
  • Rationale and importance
  • Liquidated Damages
  • General issues
  • Rules against Penalties
  • Recent developments
  • Force Majeure
  • Key risks in Drafting
  • Poor/no definition – no recognised meaning in English law
  • Dispute Resolution Generally
  • Arbitration
  • Using Experts
The Project Agreement: key issues
  • 2 main types – Off-take Agreement or Concession Agreement
  • Off-take Agreements
  • Take-or-Pay vs. Take-and-Pay
  • Take-or-Pay penalty risk
  • Other types: Long-term sales agreements, Spot sales
  • Concession Agreements
  • Typical sectors and examples
  • Structure
  • Key risks
  • Risky sectors – “Real” Toll Roads, Waste Plants
Senior Facilities Agreement (SFA) & Term sheet
  • Debt Service
  • Margin and margin ratchets
  • Specific issues for Revolving Credit Facilities (“RCFs”) & Working Capital
  • Aspects relating to RCFs – clean-downs
  • Problems with Headroom
  • Key financial covenants – application, pros & cons
  • ADSCR
  • Loan / Bond Life
  • Project Life
  • Difficult issues (historic vs forward looking, treatment of cash & cash reserves)
  • MAC clauses
  • When they might matter
  • Borrower’s vs lender’s approach
Collateral/Security & Guarantees & Credit support
  • Collateral
  • Typical assets subject to Security
  • Defensive security and the benefit of the Negative Pledge
  • Offensive Security
  • Guarantees vs Guarantees Indemnities
  • Why they matter
  • Key issues – enforceability
  • Letters of Credit
  • Distinguished from Bonds and Guarantees
  • Typical problem areas (formalities)
  • Bonds generally
  • Tender / bid bond
  • Advance payment bond
  • Performance bond
  • Retention and maintenance retention bonds
Hot issues for Sponsors (Techniques for boosting IRR & limiting exposure)
  • The Sponsor’s main aim – Improving the Flow to Equity
  • Timing of Equity Injection
  • Using equity bridges
  • Optimizing the “Equity” structure
  • Subordination
  • Distributions to the Sponsor – Distribution lockouts
  • Cash and Cash sweeps – impact on Leverage/ covenants
  • Issues re the various Control/Reserve / Escrow Accounts – Debt Service, Maintenance
  • Techniques for getting flexibility in the Loan Agreement
  • Cure rights
  • The Security Principles
Joint Venture / Shareholders issues
  • Main approaches to protection of minority interests
  • Shareholder Agreements vs Articles of Association – pros & cons
  • Board issues
  • Pre-emption issues & why they matter
  • Information rights
  • Exit, Termination & Deadlock
  • Drag & Tag rights
  • Deadlock- Russian Roulette etc
  • Valuation on Exit – problems with “Fair Value”
Construction contracts
  • Key risk in Construction phase
  • Risk Allocating through the contract type
  • Fixed-price vs Cost-plus
  • EPC-Turnkey (fixed price)
  • P&C only
  • Risk mitigation techniques
  • Liquidated damages
  • Performance Bonds
  • Warranties
  • Contingency reserves (split between debt & equity?)
  • Insurance
  • Step-in rights – collateral warranties or schedule of third party rights
  • Issues with sub-contractors
Operating & maintenance
  • Key risks
  • Operating efficiency
  • O&M increase – routine & major O&M
  • Market demand / Pricing
  • Input availability
  • Force majeure
  • Risk mitigation techniques
  • Take-or-pay agreement
  • Put-or-Pay agreements
  • Pass-through / Tolling agreements
  • Debt Service Reserves
  • Cash traps
  • Insurance