Professional Documents
Culture Documents
Project Finance
Project Finance
Introduction
Project finance refers to financing arrangements where the terms and conditions of the debt
are directly related to the specific purpose for which the proceeds will be used. In such deals,
lenders often have to rely only on the cash flows from those projects with limited or no
recourse to the broader balance sheet of the sponsoring corporation. Resultantly, such an
arrangement is often referred to as “structured finance” since the repayment schedule and
covenant packages for this debt are likely to reflect specific project cash flows or other
characteristics of the assets being financed. Project financing is used by asset intensive
industries as a way of mitigating risk. It is a popular method of financing cross-border
projects, particularly in developing countries. For some assets, project financing is driven by
the ability to capture tax advantages that are tied to specific assets or to particular issuers of
debt (such as municipalities). Capital for project financing is provided through bank lending,
public debt offerings, lease financing, and a wide range of governmental and
quasigovernmental agencies.
The course should broadly cover issues related to (i) choice between corporate and project
finance, sources of project finance, valuing projects, managing project risk and structuring of
the financing deal- Revenue requirements, Capital structure, debt syndication, securitization,
(ii) Political, legal and market related issues pertaining to disclosures, supports and
guarantees in infrastructure related projects (iii) alternative sources of finance: Conventional
and non conventional (Infrastructure Debt Funds, Take out financing and issues related to
debt restructuring).
Text Book(s)
Projects- Planning, analysis, selection, financing, implementation and Review By Prassanna
Chandra latest edition McGrawHill (PPC)
Addl. Readings:
1. Book: Project Finance: Asset Based Financial Engineering 3ed by Finnerty, J.D.,
Wiley (JDF)
2. Reading: Characteristics of alternative price control frameworks: an overview by
Chris Decker (CD2)
3. Reading: Auction Theory for the new economy- Note by L.M. Ausubel (LM3)
Cases: HBR:
1. The Chad Cameroon Petroleum Development and Pipeline Project (A) --202010-
PDF-ENG
2. Chase’s Strategy for Syndicating the Hong Kong Disneyland Project Loan (A) --
201072-PDF-ENG
3. Financing the Mozal Project -- 200005-PDF-ENG
4. Poland’s A2 Motorway -- 202030-PDF-ENG
5. Petrolera Zuata, Petrozuata C.A -- 299012-PDF-ENG
6. Bidding for Antamina -- 297054-PDF-ENG
7. Hamilton Real Estate: Confidential Role of Information for the CEO of Estate One --
905052-PDF-ENG
8. Hamilton Real Estate: Confidential Role of Information for the Executive VP of Pearl
Investments -- 905053-PDF-ENG
9. Note: An overview of project finance and infrastructure finance- 2014 update --
214083-PDF-ENG
10. Project finance for Autopistas del Centro -- NA0266-PDF-ENG
11. Politics, institutions and project finance: The Dabhol power project --HKU707-PDF-
ENG
12. Cheniere’s LNG Liquefaction strategy: pushing the boundaries of the project finance
debt market --IN1375-PDF-ENG
Session Plan
Session Module Topic Chapter No. / Reading
material / Cases
1-2 1 Introduction to project Ch 1, 2, 3, 4 (JDF) and
finance; difference from Reading (CD2)
corporate finance; (soft copies to be provided)
regulatory pricing Note-Case 9
3-4 2 Structuring projects, Ch 7, 8 (JDF)
leveraging projects finance (soft copies to be provided)
for developments, Case 1, 3
financing projects
5-6 3 Analysing projects Ch 5, 9, 10 (JDF)
viability, Project appraisal, (soft copies to be provided)
Impact of refinancing on Case 2, 4, 10
project appraisal
7-8 4 Managing risky projects, Ch 13, 14 (JDF) and
Auction design and Reading (LM3)
strategy- principle, (soft copies to be provided)
practice, impact on asset Case 5, 11, 6
valuation
9 5 Negotiation Case 7, 8
Project Guidelines