Role of Financial Advisors in

Project Finance

Roll No Group No 6 -Members

13A AYUSH VERMA
32A MANAS RANJAN MISHRA
49A PARUL CHANDRA
70A NIRAJ KUMAR
Role of Financial Advisors
 Helping governments achieve investment
targets for infrastructure by identifying
opportunities to attract private sector
investment
 Structuring transactions to achieve efficient
risk transfer and helping governments procure
and monitor effective private sector partners

 Help investors -
 identify opportunities,
 develop winning tenders,
 arrange finance and
 mitigate commercial and financial risks on
infrastructure transactions

 Maximization of client value

 Commercial Guidance
 Financial advice
Why sponsor engage financial advisors

 Market Knowledge

 Specialist Knowledge and Expertise

 Resourcing

 Independent Insight

 Investor Confidence

 Knowledge Share
Role of Financial Advisors
1.Feasibility Analysis:
1. Conduct financial feasibility studies to assess the viability of the project.
2. Evaluate the project's expected cash flows, costs, and potential risks.
3. Analyze market conditions, economic factors, and regulatory considerations.
2.Structuring the Financing:
1. Advise on the appropriate capital structure, including debt and equity ratios.
2. Assist in designing financing packages that align with the project's cash flow generation.
3. Recommend suitable debt instruments and financing sources.
3.Financial Modeling:
1. Develop comprehensive financial models that project cash flows over the project's lifecycle.
2. Sensitivity analysis and scenario planning to assess potential risks and outcomes.
3. Help determine key financial metrics such as return on investment (ROI), internal rate of
return (IRR), and payback periods.
4.Identifying Funding Sources:
1. Identify potential lenders, investors, and financing institutions.
2. Assist in preparing funding proposals and documentation for lenders and investors.
3. Negotiate financing terms and conditions on behalf of the project sponsor.
Feasibility Stage

Public Sector/ Procurer side Private Sector/ Contractor Side

• Assist in clarifying objectives • Identify and evaluate potential
• Assist in scoping options to meet objectives, incl. opportunities
commercial structures • Conduct market soundings to test
• Financial analysis/modelling of options appraisal funder appetite
• Identification, costing and allocation of risk
• Review financial data available for completeness
• Indicative value for money analysis
• Market sounding to test appetite INCREASED BY
• Affordability assessment
• Inform timetable 65%
• Initial view on accounting treatment
• Draft relevant sections of outline business cases

2013-2014 2017-2018
Financing Stage or Finance closure

Public Sector/ Procurer side Private Sector/ Contractor Side

• Oversee funding competition (if used) and/or
management of chosen funders on behalf of client
• Conduct remaining financial negotiations
• Input on financial detail of contracts
• Review and approve financial model
• Oversee financial close
• Final value for money analysis
• Draft relevant parts of final business case
• Write information memorandum for
potential funders
• Analyse different financing structures
• Inform strategy for funder management
• Conduct funding competition
• Detailed negotiation with funders
Assist with financial negotiations with
• INCREASED BY
procuring authority
65%
• Inform hedging arrangements
• Write financial close protocol
• Manage financial close process

2013-2014 2017-2018
Role of Financial Advisors
1.Risk Assessment and Mitigation:
1. Analyze and quantify project risks, including market, construction, operational, and financial risks.
2. Develop risk mitigation strategies and financial hedges.
3. Structure financial covenants and guarantees to protect the interests of lenders and investors.
2.Due Diligence:
1. Coordinate due diligence activities, including legal, technical, and financial due diligence.
2. Ensure that all relevant information is disclosed to potential lenders and investors.
3.Regulatory Compliance:
1. Keep abreast of relevant laws, regulations, and tax implications related to the project.
2. Ensure that the project's financing structure complies with all legal requirements.
4.Negotiation and Documentation:
1. Assist in negotiations between project sponsors, lenders, and investors.
2. Prepare and review financing agreements, loan documents, and contracts.
3. Ensure that all financial arrangements are clearly documented and legally binding.
5.Monitoring and Reporting:
1. Monitor the project's financial performance and adherence to financial covenants.
2. Recommend adjustments or corrective actions as necessary.
6.Exit Strategies:
1. Develop exit strategies for investors, such as refinancing or selling the project.
2. Optimize the financial returns for all stakeholders upon project completion
Tender Stage
Public Sector/ Procurer side
• Inform tendering strategy/structure
• Assist in building market appetite
• Design payment mechanism
• Determine evaluation criteria
• Draft relevant parts of tender documents
• Conduct financial discussions/negotiations with bidders,
• Assist in drafting financial elements within contract
• Build shadow financial model for use in analysis
• Establish accounting treatment
• Analysis of potential funding options
• Further analysis and determination of risk allocation
•
•
Detailed risk-adjusted value for money analysis
Conduct financial evaluation of bids, including review of
financial models and calculating any required risk
adjustments
Private Sector/ Contractor Side
• Inform bid strategy
• Assist in building funder appetite
• Analyse and evaluate different funding
structures
• Assist on financial discussions/ negotiations
with procuring authority incl. on payment
mechanism
• Build financial model
• Provide financial analysis/results on cost
profiles
INCREASED BY
• Run sensitivities to analyse risk profiles (i.e.
65%
how project performance is affected by cost
overruns/changes in economic assumptions)
• Interact with accounting/tax advisors to
determine correct treatment
• Draft financial sections of bid documents

2013-2014 2017-2018
Contract Mgmt./ Performance
Public Sector/ Procurer side
• Assist with contract monitoring
• Evaluation of contract performance, and potential
changes to the project
• Analyse areas of potential cost savings
• Conduct financial negotiation for any contract
variations
• Oversee any refinancing on behalf of client
• Benchmarking and market testing as part of contract
provisions
• Analysing and negotiating on any
disagreements/disputes with contractor and assisting
on contract terminations
Private Sector/ Contractor Side
• Analyse financial performance of
projects
• Build operating financial model to
monitor project
• Test potential refinancing opportunities
• Conduct refinancing, including
analysing potential structures,
conducting funding competition,
INCREASED BY
updating financial model
65%on financial negotiations for any
• Assist
contract variations
• Analysing and assisting negotiations on
any disagreements/disputes and
assisting on contract terminations
2013-2014 2017-2018
Types of Advisors
Type STRENGTH WEAKNESS

Investment provide lending facilities and derivatives Lack of independence both in terms of judging
alongside financial advice different funding sources and on securing most
Bank competitive financing price due to position as
potential lender as well as advisor.

Professional offer financial advice which is Not able to directly provide lending and/or
independent of the source of finance, derivatives alongside advice.
Services free of any inherent or perceived
conflicts of interest. They also provide
access to integrated specialist tax and
accountancy advice, etc

Boutique provide specialist advice and market Can be reliant on small number of employees. Do
knowledge, often advising on unusual not have as strong a brand as other players
projects in niche areas of the market
Thank You
QUIZ TIME !!
Q1
What is the primary role of a financial advisor in project finance?
• a) Project execution
• b) Risk management
• c) Construction supervision
• d) Environmental impact assessment
Q2
In project finance, a financial advisor helps in:
a) Raising funds and structuring the financing
b) Designing the project's architecture
c) Managing day-to-day operations
d) Conducting market research
Q3
What key aspect of project finance does a financial advisor focus on?
a) Technical specifications
b) Legal compliance
c) Financial feasibility
d) Human resources management
Q4
A financial advisor assists in assessing and mitigating financial risks in
project finance. Which of the following is NOT a financial risk?
a) Market risk
b) Political risk
c) Engineering risk
d) Credit risk
Q5
In project finance, a financial advisor helps in evaluating the financial
viability of a project by:
a) Providing architectural designs
b) Conducting market surveys
c) Preparing a business plan and financial models
d) Negotiating with suppliers
Q6
What is the main objective of a financial advisor when securing project
financing?
a) Minimizing project risks
b) Maximizing shareholder profits
c) Enhancing project aesthetics
d) Recruiting project staff
Q7
When assessing the creditworthiness of a project, a financial advisor
considers:
a) The project's color scheme
b) The project manager's personal interests
c) The project's expected cash flows and collateral
d) The project's construction timeline
Q8
When structuring project financing, the financial advisor helps in
determining:
a) The color scheme of the project
b) The project's mission statement
c) The optimal mix of debt and equity
d) The project's location