Introduction

The success of Public-Private Partnerships (PPPs) is determined by various factors, the most important being finance for the project. In most cases, funds are provided by the private sector partner, but some projects are co-funded by both partners.

Project Finance is the long-term financing of a public infrastructural project and/or service based on a non-recourse or limited recourse financing structure in which equity and debt used to finance the project are paid back from the cash flow generated from the project.

With project finance, there is the authority of the lender to oversee project governance and performance, fostering cash flow reliability. Further, the concept allows sponsors to raise third-party funds without being directly liable to lenders.

An important matter of focus is the willingness of prospective lenders to finance the project. Project finance is generally undertaken with no association with a previously functioning company, i.e., a special purpose vehicle company is created to take forward the project until closure.

The sole purpose of this company is to see the project through to successful completion, managing and regulating all related aspects along the way. In most cases, this company is not related or drawn as a reference to a parent company and has limited liability. Project finance agreements are mostly long-term since related projects are large-scale and extend across years.

A typical feature of this arrangement or agreement is that there are multiple participants involved, such as lenders, stakeholders, contractors, grantors, etc. The financing structure is non-recourse in nature, in that the borrower or shareholder of the borrower has no personal liability in case of monetary default.

However, in cases in which the lender is not fully convinced of the potential of the project to repay the entire loan, the lender may extend the liability in a limited capacity to the borrower. Documentation is very complex in such cases, and risk identification and allocation is critical and given extreme importance.

This Xcelerate Training Institute course will empower you with adequate knowledge and information about project finance and PPPs. This will also garner the necessary confidence as well as experience and exposure to play a role in project finance at any stage, be it negotiations, contract preparations, etc.

Learning Objectives

• in-depth understanding of the theories and principles around project finance and PPPs
• the required confidence to undertake higher roles and responsibilities and play an important part in project finance setup and maintenance across a project
• the adequate experience and exposure to mitigate most, if not all, risks related to project finance
• the confidence to play a role in convincing investors to invest funds and finance public sector projects
• the required skill and knowledge to monitor the performance of projects under the project finance agreement, implement next steps to enhance performance, pre-empt risk and take action early enough
• experience, knowledge and information to formulate policies and contracts around this arrangement, with limited or no liability to borrowers.

Training Methodology

Xcelerate Training Institute Solutions believes in a training methodology best suited to the audience. As such, the course content, module sequence as well as duration is highly customizable and is rechecked before initiation of each training programme.

This is to ensure that the course is made closely relatable to the real work scenario of the audience for ease of reference of training scenarios to real situations at work. Delivery is through PowerPoint presentations by the trainer, but trainee participation is also encouraged through group activities involving speeches, debates, contests, assignments, presentations, etc.

Benefits For Your Organization

• A more confident and experienced workforce to conduct and manage project finance for long-term infrastructural and public service projects
• Lesser risk due to early identification of risks or prediction of future risks and mitigation of the same earlier into the agreement/project
• Limited liability and reduced stress on one partner alone because of effective and calculative risk allocation across partners
• Better performance tracking of the project and greater accountability to ensure performance objectives and service delivery are as per the standards defined
• Higher chances of private investment in public sector projects, thus increasing the quality and efficiency of public services to citizens
• The clarity in responsibilities and liabilities between partners set out in the agreement/contract
• Greater client satisfaction because of timely completion of projects with superior quality and good efficiency

 Benefits For You

• Increased knowledge and understanding of all principles, theories and concepts around project finance for large-scale, long-term infrastructural and public service projects
• Greater capabilities, information and confidence to proactively take part in the project finance process
• Increased ability to positively influence the success of a project finance arrangement and the project thereafter
• Greater confidence and abilities to successfully undertake higher roles and responsibilities, fostering faster career growth and progression
• Increased clarity and authority for decision making, thus enhancing one’s critical reasoning and decision-making skills
• Enhanced capabilities to work in any sector and perform roles with regard to private finance and investment in the public sector
• A sense of satisfaction by achieving customer satisfaction and delight through timely completion of critical projects with good quality

Target Audience

• Senior officials of private and/or public sectors responsible for decision making for finance of public sector projects
• Investors and shareholders responsible for investments and influenced by decisions with regard to project finance in PPPs
• Policymakers and contract managers from either sector responsible for formulating policies and preparing contracts covering all required clauses
• Legal authorities and compliance agents to ensure the required standards and legislation are adhered to
• Finance officials who play an important role in decision making or at least serve as consultants to investors in case of such projects
• Human resource officials who play a role in defining individual or group performance parameters and metrics required to track and gauge the progress and performance of a project
• Any other private or public sector professional who would like to be part of project finance arrangements in future
• Any other non-private or non-public sector stakeholder involved in project finance

Course Outline

Features of Project Finance

• Non-recourse financing
• Off-balance sheet
• Capital intensive
• Numerous project participants
• Project finance documents
• Risk allocation
• Special purpose entities
• Cash flow waterfall
• Cost of financing

Sources of Project Finance

• Equity
• Debt
• Government grants

Areas Impacted by Financing Sources

• Overall project cost
• Cash flow
• Ultimate liability/claims to project income/assets

Sources of Equity

• Project sponsors
• Government
• Third-party private investors

Forms of Debt

• Commercial loan
• Bridge finance
• Bonds and other debt instruments
• Subordinate loans

Parties in a Typical Financing Structure

• Shareholders
• Grantors
• Lenders
• Operators
• Construction contractors
• Input suppliers
• Off-take purchasers

Types of Agreements in Project Finance

• Shareholder agreement
• Loan agreement
• Operating agreement
• Construction agreement
• Concession agreement
• Off-take purchase agreement
• Input supply agreement

Advantages of Project Finance

• Reduction/Isolation of financial risks of investors
• Careful project scrutiny
• Detailed risk analysis
• Reduced risk due to appropriate allocation

Disadvantages of Project Finance

• More complex transactions
• Higher transaction costs
• Protracted negotiation between parties
• Need for close monitoring and regulatory oversight

Concerns of Lenders

• Certainty and sufficiency of project cash flow
• Creditworthiness of public sector and contractors
• Soundness and stability of legal and regulatory framework
• Effectiveness/Enforceability of PPP contract
• Authority in case of failure
• Availability of alternate contractors and vendors
• Vague, uncontrollable, infinite risks
• Reputation impact of the project
• Availability/Effectiveness of insurance coverage