Project Finance: by S.Clement
Project Finance: by S.Clement
By
S.CLEMENT
Project Finance -features
EPC
O&M Contract
Contract
Equity
TRA Concession
Agreement Agreement
Lenders Engineer
TRA Bank Government
Risks Analysis –Why?
• Many projects have:
– Large investment outlays
– Long periods of project payout
– Incomplete sharing of information and technology
especially with foreign investors
– Differences in the ability of the parties to bear
risks
– Unstable contracts
– Projects may be attractive in aggregate, but are
unattractive to one or more parties due to
uncertainties about sharing risks and returns.
Risk analysis
• Strategic Risks
– Market demand [more often than not the demand
projections have little credibility].
– Operating costs [often underestimated].
– Unexpected/ unanticipated capital costs.
• Financial Risks
– Interest rate changes.
– Currency/ foreign exchange fluctuations.
– Liquidity – cashs flow mismatch
Risk analysis
• Operational Risks
– Supply chain management
– Information systems
– Key managers
• Hazard Risks
– Property damage
– Legal risks
– Workers' compensation
– Natural disasters
Risk control
• Within Company’s Control
PROJECT COMPANY
OPERATOR
LOCAL LAWS
O&M AGREEMENT