AMOUD SCHOOL OF

POSTGRADUAT
UNIVERSITY E STUDIES&
RESEARCH
COURSE OUTLINE
Course Code: PPM 8123
Course Title: Project Financing, contracting and procurement
Contact Hours: 45 Credit Units: 3 Duration.15 Weeks

Facilitator: Name: Morvin Odhiambo Achila Phone no.: 0636457117.email address;

achilamorvin@gmail.com

Course 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.

Course Aims
Describe the general and broad intended outcomes of the course. Answers the basic
questions: what should the course lead to in the long term?
Provide 2-3 course aims.

Course Objectives
The purpose of the course is to understand what project finance is, it’s 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. The course 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.

1
Course Description
The course covers core principles of project finance, capital structure, risk
management and the relationship between investment and financing. The course
also covers appraisal procedures, planning and implementation of projects, venture
capital finance and reconstruction of assets in distress. A unique aspect of this course
is that it concentrates on structuring of project financing to suit the needs of the
project and would be based on case studies in different sectors.

Learning Outcomes
Upon successful completion of this course, the student should be able to:
1. Apply specialised knowledge of traditional and contemporary costing methods
and systems to diverse projects.
2 Utilise specialised economic evaluation techniques to determine and evaluate
project feasibility.
3. Analyse, synthesise and communicate the financial context of projects and
compare alternative funding schemes for project performance.
4. Critically analyse economic parameters to determine financial status within
diverse organisations.
5. Research and justify why and how contemporary financial management strategies
are preferable according to the project context.

Course Content Plan

Week Content Specific Content Duration

(1&2) Introduction Development and Features of Project (6) hours

to Project Finance, Project finance and
Finance privatization, Project Finance and
Structured Finance, Advantages and
Disadvantages of project finance.
Theory of Project Finance

(3&4) Historical evolution of project finance (6) hours

Project and market segments: Commercial
Finance Banks, Bond Issues, Mezzanine and
Market
Subordinate Debt, Lease Finance,
vendor finance and public- sector
finance. Global project Finance
Market, Evolution of PPP, the
European Market
(3) hours
(5) Sponsors and Other investor, Project
Project development, role of advisers, joint-

2
Week Content Specific Content Duration
Development venture issues and project company,
and Project Procurement and Public
Management procurement System.
(6&7) (6) hours
Offtake Contract, Concession
Project Agreements, Terms of project
Contracts
agreement, control of project design
and construction, contracts, and
financing, Compensation for
additional cost, Force Majeure step-in
by the offtaker or contracting
authority, termination of project
agreement, Effect of debt refinancing
or Equity Resale on the project
(8) agreement.
(3) hours
EPC contract, Operation and
Ancillary
Contracts Maintenance Contracts, Fuel or Other
input supply contract, Permit and
Other Rights, Government Support
Agreement, Insurance, Direct
Agreements.
(9,10 &11) (9) hours
Categories of Project finance risk, Risk
Project Evaluation and allocation, Analysis of
Finance Risk commercial Viability, Completion
risk, Environmental risk, Operating
Risk, Revenue Risks, Input supply
risks, Force Majeure, Contract
Mismatch and Recourse to Sponsor.
Macro Economic Risks: Inflation,
Interest risk, Exchange Risk. Political
Risk: Project and Politics,
Classification of Political Risk,
Currency convertibility and transfer,
Expropriation, war and civil
disturbance, change of law and Quasi
Political Risk.
(12) (3) hours

Political Risk
Guarantees, Mitigation of Political risk, Export
Insurance and Credit Agencies, Export Credit,

3
Week Content Specific Content Duration
Finance Untied cover and Financing, ECA
Structures and Products, International
(13) Financing Institutions and Private (3) hours
Sector Insurance.
Financial
Modeling and Model Inputs, Model Output, Macro
Evaluation Economic Assumption, Project Cost
and funding, operating revenue and
cost, Law drawing and debt service.
Equity returns, Debt cover ratios, The
(14 & 15) base case and changes in assumptions, (6) hours
sensitivity analysis, Investor Analysis.
Financial
Structuring Debt: Equity Ratio, Debt Service,
and Draw Down of Debt and Equity,
Documentatio Interest rate and fees, Control of Cash
n flow, Debt Prepayments and
refinancing, security, financial close –
conditional precedent,
Representations and warranties,
covenants, Events of default, waiver,
amendments and enforcements on
default, inter creditors issues.

Methodology
Readings will introduce students to issues and subject matters. Class lectures will
define, analyze and resolve issues and raise subsequent ones. Students will study the
book and other readings, attend lectures, participate in class lectures, solve problems
from the book, perform other assignments, do projects individually and in groups,
and make presentations individually and in groups. Students will study book
sections and articles that will not be covered in class lectures. Class discourse will
play an essential role.

Evaluation
The course evaluation will comprise of Course and end semester examination.
Course will constitute 40% of the overall marks, while the end semester exams will
constitute 60% of the total marks.

Attendance
Students are required to have attained 75% attendance of lectures to be able to sit for
end semester examination.

Participation
Students are encouraged to participate in class discourse which will play a
significant role in assessing the course work.

4
Plagiarism
The university, in its examination policy, has specific regulations on plagiarism. This
should be emphasized in each course.

References
1. E.R Yescombe, 2013, Principles of Project Finance, Yescombe , Academic
Press.
2. Andrew Fight, 2006, Introduction to Project Finance, Butterworth-Heinemann
is an imprint of Elsevier.
3. Stefano Gati, 2013, Project Finance in Theory and Practice, Academic Press is
an imprint of Elsevier

Effective Date
01/10/2017

5
Signed
A course outline must be signed the course lecturer and by the dean before it can be
accepted as a teaching tool. Note that a course outline is an official university
document.

……………………………………….
Facilitator

……………………………………….
Dean, SPGS&R

Filing
Once duly signed and stamped by the dean, the course outline will be made into
four (4) copies for (i), the Dean, (ii) the Coordinator; (iii) Library; and (iv) the
Lecturer. It is the duty of the lecturer to share the course outline with the students.