Project Finance Modelling

Course One

. ity d bil ne ne exi e O ed sig fl urs bin De lete Co com p er s om ith se r c e ur fo end co t h At bot or

Covering SPV Debt and Valuations

Course Two

Public Private Project Finance Partnerships (PPP) Modelling 14 – 16 December 2013

17 – 19 December 2013

Fairmont Hotel, Dubai, UAE

Fairmont Hotel, Dubai, UAE

Top 4 Learning Objectives

Top 4 Learning Objectives

1. Learn how Gulf countries intend to mobilise

1. Overcome the most complex aspects of building a reliable project finance model and explore the role

private finance for infrastructure

of equity and its rewards 2. Compare Western and Gulf PPP projects and be able to appreciate the different structures for PPP and other styles of private finance investment 3. Review PPP financing structures and financial models by examining PPP contracts in detail 4. Identify and seize lucrative infrastructure and

2. Appreciate the structure of a project finance model, its relationship with project contracts and risks it models and be able to produce a detailed model that meets all users’ requirements 3. Understand and model debt, debt covenants, cash waterfalls, intercreditor relations, restructuring and the rescheduling of debt

social development project investments in the Gulf 4. Be able to model the equity return of a project finance project in Excel from the sponsor’s perspective

www.iirme.com/ppp Organised by:

www.iirme.com/projectmodelling Strategic Career Partner:

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The George Washington University School of Business, IIR Middle East’s Academic Partner, is dedicated to excellence: in its teaching and research about management, in the public and private sectors, within the United States and internationally.

The school has a 75 year history of preparing men and women for leadership in both the public and private sectors. Known internationally for its dedication to academic excellence, the school draws students from all parts of the United States and around the world.

Beyond first class teaching and scholarship, the school’s faculty offers practical experience in the issues and challenges confronting business and government. Its research centres link faculty and students with US and international business and government organisations. Recent distance learning initiatives have expanded the school’s global reach.

Course Requirements And Certificates Delegates must meet two criteria to be eligible for an IIRME/GW Certificate of Completion for a course: 1. Satisfactory attendance – delegates must attend all sessions of the course. Delegates who miss more than 2 hours of the course sessions will not be eligible to sit the course exam 2. Successful completion of the course assessment Delegates who do not meet these criteria will receive an IIRME Certificate of Attendance. If delegates have not attended all sessions, the Certificate will clearly state the number of hours attended..

Assessment Assessment will be ongoing and based on in class participation.

Who Should Attend?

These courses are designed for professionals who are seeking to improve their PPP and technical modelling skills including • Bankers and financiers involved in project finance • Directors and business development executives from corporates, equity sponsors and consultancies • Trade finance managers • Accountants and lawyers.

T: +971 4 335 2437 F: +971 4 335 2438

Meet Your Expert Course Director Julian Spencer Roche Finance Training Consultant, Australia and UK Julian was educated at Oxford and Exeter Universities. In the 1980s he served at the UK Ministry of Defence as a fast-stream administrator, where amongst other duties he was one of the team conducting the UK’s first defence PPP, of the Royal Dockyards.

From 1990 through to the present he has served in various corporate and academic positions including: •

Director, Forecasting Service, DRI McGraw-Hill – responsible for macro-economic analysis and forecasting of Soviet and East European economies

•

Lecturer at Southampton University in Corporate Finance (Accounting and Finance BSc). Teaching corporate finance including business valuations, investment banking, corporate governance, EVA, CFROI, investment analysis, fund management, private finance initiatives, mergers and acquisitions, management buy-outs, venture capital and other aspects of corporate finance

•

Partner, RER – established the firm that produces the “Green Book” internationally known database, world leader in international business confidence and real estate data

•

Head of Research, Hudson Venture Partners – responsible for the selection and evaluation of investment projects and account management

•

Vice President, MHC International – responsible for corporate finance and economic input to firms specialising in corporate social responsibility issues

•

Consultant to professional bodies including ACCA in Europe and Asia

•

Consultant to major corporations specialising in commodities production and trade

Julian’s United Nations work includes: •

UN Expert on commodities and part time Staff Economist, UNCTAD Risk Management Division

•

UNCTAD Representative on UN Expert Committee on Sustainable Development Indicators

•

UNCTAD Panel Member, Swiss Futures and Options Association Burgenstock Meetings

Would you like to run this course in-house?

The in-house training division of IIR Middle East Tel: +971 4 407 2624 • Email: CTS@iirme.com www.iirme.com/cts

E: register@iirme.com

Course One

Public Private Partnerships (PPP) 14 – 16 December 2013 • Fairmont Hotel, Dubai, UAE Course Timings Registration will be at 07:30 on Day One. The course will commence at 08:00 every day and finish at 14:30.There will be breaks for refreshments at approximately 10:30 and 12:30 and lunch will be served at the end of each day’s session.

Course Overview The countries of the Gulf have growing populations and the governments’ are looking to create advanced technological societies in a single generation. As a result there is an enormous appetite for infrastructure and social development projects, ranging from airports and ports, roads and railways, to schools and hospitals. These are the most challenging and important investment opportunities anywhere in the world.

Although there are substantial funds available for co-investment, most Gulf countries are seeking private finance for these infrastructure investments. This course is about how private finance is and will be used. The logic, financial structure, risk analysis, legal background, contracts and scope of the Gulf infrastructure programme is examined in great depth with a range of relevant local case studies and plenty of group work and participation.

Day One Origin And Background To Private Finance In Infrastructure • History and development • What should the state provide?

• Alternatives – from privatisation to contracting • Current position, future trends and developments • Private finance for infrastructure in the Gulf – arguments for and against Case Study: Does the Gulf need private finance?

• Rationale and objectives of PPP Case Study: Saudi water PPP projects • Benefits and drawbacks of using PPP Case Study: Why has the UK abandoned PPP? • Alternatives to PPP Case Study: Infrastructure bonds – the global experience – differences in Western and developing markets Structures In PPP/PFI Projects • Concession and franchises • Sale/flotation of a minority/majority stake • Joint ventures • Build-own-operate( BOO) • Build-develop-operate (BDO) • Buy-build-operate (BBO) • Build-operate-transfer(BOT) • Build-own-operate-transfer (BOOT) • Build-rent-own-transfer (BROT) • Build-lease-operate-transfer (BLOT) • Build-transfer-operate (BTO) • Design-construct-manage-finance (DCMF) • Design-build-finance-operate (DBFO) Case Study: The Asian Development Bank and the Bangkok Metro • Lease-Develop-Operate (LDO) • Wrap-Around Addition (WAA)

Case Studies: Lessons from PPP experience in European countries Key Issues In PPP/PFI • Achieving design quality • Appointing and managing advisers • Appointing and working with preferred bidders • Public sector comparators (use, selection, construction and application) • Managing long-term delivery of PPP

Case Study: Types of Islamic finance structures appropriate for infrastructure finance • Guarantees and other forms of credit enhancement Case Study: Review of financing guidance and codes in PFI/PPP Projects with specific reference to Islamic financing Worked exercises: resolving finance and structural issues in infrastructure provision

Day Two PPP/Private Finance Project Evaluation • Existing criteria • Examples of assessment programmes Case Study: International comparison of best practice guides in PFI/PPP experience and their application to the Middle East

Day Three Overview Of Risk And Risk Allocation • Risk evaluation and types of risk • Allocation and mitigation of risk • Possibility of renegotiation • Payment mechanisms • Alteration in government policy and the law

• Feedback systems • Capital assessment programmes • Planned improvements Comparative PPP Procedures • Initial approval process (outline business case) • Publication in national press/journals • Formation of bidding consortia • The role of economic criteria • Role of national and international agencies • PPP monitoring procedures • Stakeholders in the PPP process • Appeals and arbitration • Court case law Case Study: PPP procedures in the Gulf Sources And Types Of Funding • Potential financiers • Types of funding; terms and tenors (senior debt, bonds, junior debt, equity) Case Study: Review of a PPP funding structure Reviewing PPP Financial Models • PPP vs. project finance models • Inputs and model structure • Using the model • Risk analysis Contract Issues • Off-balance sheet funding • Contract length and size • Whole life cycle costing • Syndicated debt - secondary market • Asset financing and leasing • Debt and inter creditor issues.

• Special Purpose Vehicles - SPVs – and project financing Case Studies: Project finance structures and examples from the Gulf • Ratings and ratings companies - Fitch, S&P and Moody’s Case Study: Ratings agency approaches to PPP transactions • Credit enhancement • Islamic finance and legal issues

Case Study: Comparative risk evaluation in water and sanitation treatment plants Additional Factors • Staff and management resource constraints • Land and property availability • Planning permission • Legal reviews • Due Diligence • Tax (where relevant) • Audit/accounting • Environmental • Finance generated from the disposal of property • Mixed use of property by the beneficiary and the general public • Commercial revenues and their appropriation • Small projects - bundling, schools, prisons etc.

• Communications strategy Case Study: The standard PPP contract Future Prospects In the Gulf • Water and sanitation • Transport Case Study: Gulf high-speed rail projects • • • • • •

Education Health Energy Social services Defense PPP as a real estate development model Case Study: Review of future size and scope planning for renewable energy PPP projects in the Gulf

• Future deal structures Case Study: International comparison of best practice guides in PPP experience and their application to the Middle East • International dimension – major players • Specific issues for PPP/other private finance infrastructure projects in the Gulf • Regulatory dimension

T: +971 4 335 2437 F: +971 4 335 2438 E: register@iirme.com W: www.iirme.com/ppp

Course Two

Project Finance Modelling 17 – 19 December 2013 • Fairmont Hotel, Dubai, UAE Course Timings Registration will be at 07:30 on Day One. The course will commence at 08:00 and conclude at 14:30. There will be refreshment breaks at approximately 10:30 and 12:30 and lunch will be served each day.

Course Summary Modern project finance transactions require a high level of expertise in building financial models which are reliable and flexible to accommodate the changing requirements occurring during the life of a project. This course covers such issues as how to model the role of debt, debt covenants, cash waterfalls, intercreditor relations, restructuring and rescheduling of debt, how to model risk, and the role of equity and its rewards.

In the course of the three days you will build and evaluate a range of project finance models, covering projects as diverse as Public-Private Partnerships (PPP), major energy investments and private hospitals. You will overcome the most complex aspects of building a reliable model, including uncertainty, currency and timescale mismatches, debt amortisation, depreciation, control account waterfall, cost structures, and the ability to easily shift time scales, as well as the ability to identify and control key sensitivities through spreadsheet simulation.

Course Methodology This course will teach you all the available techniques and how to practically apply them through the use of Excel. An extensive use of case studies will be adopted to illustrate the principles covered. You will get practical tips on layout and style in building and analysing userfriendly models which are available as additional benefits of the course. You are advised to bring your own laptops.

Using Excel For Modelling • Worksheet organisation • Data input, management and verification • Use of colour/add-ins • Naming of cells • Location of input variables • Review of Excel functions and their use • Macros and their use • Goal seeking • Optimisation • Circularity and how to resolve it • Working with range names • Graphs and charts • What is needed from Excel and what is superfluous • Principles of spreadsheets and workbooks Case Study: Evaluating good and bad Excel financial models Project Cash Flow • Limited recourse

• Quantification and allocation of risk • Structuring and financing solutions • The role of Islamic finance in project finance structures (with case studies) • Project finance experience worldwide Case Study: Project finance worldwide (including examples of Islamic financing)

• • • •

Off-take contracts Operations and maintenance contracts Shareholder’s agreement Financing documents

Project Finance In Practice • Design tolerance • Dealing with escalation/inflation • Dealing with non-correlated variables • Pre-completion elements • Estimating damages

Project Finance Models • The fundamentals of project finance model design • Objectives of project finance models • Design, testing and feedback • Model sensitivity and auditing • Definitions and analysis • Revenue and cost modelling • Cash adequacy, recourse, standby and liquidity • Financial coverage ratios and the bank perspective

Project Finance Model Issues • Depreciation of fixed assets • Control accounts – waterfall/cascade • Status checking • Modelling securitisation in project finance • Working capital

Case Study: Examples of project finance models

Case Study: Modelling cash flow waterfalls

Equity Valuation • Equity NPV/IRR and project IRR • XNPV, XIRR, MIRR • Modelling cash flow and ratios • Allowing for accountancy – depreciation, tax and capital allowances

Case Study: Examples of Excel project modelling

Approaches To Rating In Project Finance Models • Debt issues sheet • Financial statements • Introducing flexible time dimensions • Debt amortisation schedules • Senior debt, mezzanine and equity tranches

Case Study: Valuation and cash flow models Project Dynamics • Demand and capacity driven forecasts • Consistency of capital expenditures and volume • Operating revenue and expense drivers • Cash flow design Project Risks • Supply risk • Market risk • Currency or foreign exchange risk • Operation risk • Environmental risk • Infrastructure risk • Force Majeure risk • Completion risk • Technology risk • Political risk • Financial risk • Interest rate risk • Creditworthiness • Syndication risk Structures • Contracts and documents • Construction contracts • Feedstock or fuel supply contracts

Case Study: Rating agency models of project finance transactions Using Project Finance Models • Input of models to the decision-making process • Modelling a PPP transaction • Deciding between corporate and project finance • Benefit allocation between stakeholders Case Study: Review of several project finance models and their decision-making input Building A Project Finance Model Based on a real example, provided by an equity investor in a project finance transaction, you will construct and use a model for the transaction.

This exercise will include: • Project review • Analysing the inputs • Dealing with input priorities • Data plausibility • Cash flow projections • Loan assessment • IRR/NPV and other valuation analysis

T: +971 4 335 2437 F: +971 4 335 2438 E: register@iirme.com W: www.iirme.com/projectmodelling

Course One

Course Two

Public Private Partnerships (PPP)

Project Finance Modelling

14 – 16 December 2013 • Fairmont Hotel, Dubai UAE

17 – 19 December 2013 • Fairmont Hotel, Dubai, UAE

FIVE WAYS TO REGISTER IIR Holdings Ltd. P.O Box 9428 Dubai, UAE

+971 4 335 2437 +971 4 335 2438 register@iirme.com

www.iirme.com/ppp www.iirme.com/projectmodelling

DISCOUNTS AVAILABLE FOR 2 OR MORE PEOPLE CALL – +971 4 335 2483 E-MAIL – a.watts@iirme.com WEB BC4880 Event

Course Fee Before 28 September 2013

Course Fee Before 19 October 2013

Final Fee

Course One Public Private Partnerships (PPP) 14 – 16 December 2013

US$ 3,095

US$ 3,395

US$ 3,495

Course Two Project Finance Modelling 17 – 19 December 2013

US$ 3,095

US$ 3,395

US$ 3,495

Both Courses 14 – 19 December 2013

US$ 4,690

US$ 5,190

US$ 5,490

Course fees include documentation, luncheon and refreshments. Delegates who attend all sessions and successfully complete the course assessment will receive an IIRME/GW Certificate of Completion.

WOULD YOU LIKE TO RUN THIS COURSE INͳHOUSE?

All registrations are subject to our terms and conditions which are available at www.iirme.com/terms. Please read them as they include important information. By submitting your registration you agree to be bound by the terms and conditions in full.

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