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Course Outline Project Management

The Project Finance course, taught by Adjunct Prof. Donald B. Reid in Spring 2009, focuses on understanding project finance, its critical elements, and its application in various industries. Students will engage in team-based case studies, financial modeling, and discussions on project risks, sources of financing, and credit agreements. The course aims to equip students with the skills to identify viable projects for financing and structure basic project financing arrangements.

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21 views4 pages

Course Outline Project Management

The Project Finance course, taught by Adjunct Prof. Donald B. Reid in Spring 2009, focuses on understanding project finance, its critical elements, and its application in various industries. Students will engage in team-based case studies, financial modeling, and discussions on project risks, sources of financing, and credit agreements. The course aims to equip students with the skills to identify viable projects for financing and structure basic project financing arrangements.

Uploaded by

Chebangang Hyacinth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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PROJECT FINANCE

COURSE OUTLINE
Term: Spring 2009 (1st half-semester)
Instructor: Adjunct Prof. Donald B. Reid
Time: Office: KMEC 9-95, 212-759-5655
Classroom: Email: [email protected]
Admin aide: Contact: [email protected]

Background

Project finance is used on a global basis to finance over $300 billion of capital-
intensive projects annually in industries such as power, transportation, energy,
chemicals, and mining. This increasingly critical, financial technique relies on non-
recourse, risk-mitigated cash flows of a specific project, not the balance sheet or
corporate guarantee of a sponsor, to support the funding, using a broad-based set
of inter-disciplinary skills

Not all projects can support project financing. Project finance is a specialized
financial tool necessitating an in-depth understanding of markets, technology,
sponsors, offtakers, contracts, operators, and financial structuring. It is important
to understand the key elements that support a project financing and how an
investor or lender can get comfortable with making a loan or investment. Several
industries will be used to demonstrate project-financing principles, with emphasis
on one of the most important, power.

Objective of the Course

The purpose of the course is to understand what project finance is, its necessary
elements, why it is used, how it is used, its advantages and its disadvantages. At
the end of the course, students should be able to identify projects that meet the
essential criteria for a project financing and know how to create the structure for a
basic project financing.

The course will study the necessary elements critical to project financing to include
product markets, technology, sponsors, operators, offtakers, environment,
consultants, taxes and financial sources. We will discuss and apply the
fundamental risk allocation principle of assigning risks and tasks to the party most
capable of handling them. Various sources of financing will be discussed including
commercial banks, equity sources, the bond markets and leasing.

Financial modeling will be used as an important tool in understanding the


economics, risks and sensitivities of a project. Several guest speakers from the
real world will be invited to discuss topics such as current market conditions,
contracts, hedging, the role of consultants and other pertinent issues.

Preparation and Conduct of the Classes


The student’s primary obligation in this course is to prepare for class discussion
based on a thorough reading and analysis of assigned materials and preparation of
cases in a team setting.

Students will be assigned to 3-person teams to work together on 3-4 cases in this
six-session course. The teams will be diverse, reflecting the nature of our global
business environment. Each team will have at least one “modeling ace.” The
fundamental belief in doing cases is that one learns best by doing versus reading
and memorization.

Class participation and discussions are important learning tools. Class


participation will be graded.

Individual students may make presentations with the approval of the instructor on
real world topics of interest such as an actual project financing. Such
presentations will receive extra credit and need to be discussed with the instructor.

Class topics to be covered will include:

Project Structure and Participants: Debt, equity, developers, consultants,


offtakers, sponsors, operators, law firms, consultants, construction and
engineering firms, political and regulatory bodies

Project Risks and Mitigants: Markets, currency, construction, technology,


offtakers, input supplies, operations, sponsors, political, environmental and
regulatory

Sources of Financing: Banks, insurance companies/pension funds, public


markets, equity funds, leasing, sponsors, financial equity, strategic equity

Credit Agreements: pricing, terms, conditions, covenants, representations


and warranties, events of default.

Financial Modeling: The role and importance of project modeling to identify,


test and measure risks (this will be done through class discussion, study
examples and use in the cases).

Quizzes: There will be 2-3 quizzes taken as Blackboard Assignments.

Grading: The weights for the student’s overall grade are:

Class participation 10%


3 Homework Quizzes 10% each
Cases 60%
Textbook: One or two books are required, and will be available in the bookstore.
All other readings and all cases will be distributed in a course-pack at the start of
the course or during the classes.

COURSE OUTLINE
SESSION #1

Introduction – Project Finance Overview and Fundamentals


Read: TBD
Topics Covered

1. What is “project finance?”


2. How widely is it used
3. Parties to a Project Financing
4. What are the advantages and disadvantages of Project Finance
5. What are the necessary perquisites to a Project Financing
6. Project Financing Risks and Structuring Part I
7. What is role of the financial modeling and projections
8. Readings and Case Assignment

SESSION #2: Project Finance Structure and Participants


Read: TBD
Topics Covered

1. Case Discussion and Presentations


2. Project Financing Risks and Structuring Part II
3. Guest Speaker / Special Topic
4. Readings and Case Assignment

SESSION #3: Project Finance Risks and Mitigants


Read: TBD
Topics Covered

1. Case Discussion and Presentations


2. Project Financing Risks and Structuring Part III
3. Guest Speaker / Special Topic
4. Readings and Case Assignment

SESSION #4: Sources of Capital


Read: TBD
Topics Covered

1. Case Discussion and Presentations


2. Project Financing Risks and Structuring Part IV
3. Various sources of debt and equity
4. Guest Speaker / Special Topic
5. Readings and Case Assignment
SESSION #5: The Loan Agreement (possible guest speaker)
Read: TBD
Study questions:
Topics Covered

1. Case Discussion and Presentations


2. Project Financing Risks and Structuring Part V
3. Guest Speaker / Special Topic
4. Readings and Case Assignment

SESSION #6: Final Case and Wrap-up


Read: TBD

1. Final Case Discussion and Presentations


2. Guest Speaker / Special Topic
3. Wrap-up

Case Format

A. State your recommendation: To lend, Yes or No


B. Conduct Analysis

1. Summarize the transaction and parties involved. If appropriate,


draw a box diagram showing the relationships and direction of
cash flows
2. Identify and evaluate the key participants
3. Evaluate any environmental, regulatory and political issues
4. Identify and evaluate the key strengths of the project
5. Identify and evaluate the key weaknesses, risks and mitigants of
the project
6. Develop a financial model. Run scenarios. Test the key
economic drivers
7. Describe any other relevant issues or matters pertinent to the
credit/investment decision

C. Summarize and explain the reasons for your recommendation

D. Exhibits

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