Duration: 2 days

Instructor: Fatih KURAN

Objective: The Project Finance Course aims to enable professionals responsible for evaluating investment projects to analyze the efficiency and profitability levels of planned medium- and long-term investments, conduct risk analysis, and understand the differences between project finance and traditional lending practices.

Upon completion of the course, participants will gain detailed knowledge of the following topics:

 Concept and Terminology of Project Finance

 Project Finance Worldwide

 Stakeholders and Structuring of Project Finance

 Project Finance and PPP

 Comparison of Income Statement and Cash Flow

 Factors Influencing Project Finance Decisions

 Comprehensive Risk Analysis and Management in Project Finance

 Project Types and Different Risk Profiles

 Alternative Financing Methods

 Creditworthiness and Bankability

 Special Conditions in Loan Agreements ('Term Sheet')

 Negotiation Process and Management with Investors and Banks

 Preparation of Financial Feasibility Reports for Projects

 Cost of Capital and Equity

 Financial Performance Criteria for Projects

 Project Stress Testing

Target Audience: Professionals in the private and public sectors working in project evaluation, financial sector professionals responsible for credit marketing and allocation, bankers, leasing sector employees, investors, project developers and managers, machinery vendors related to investment projects, contractor company executives, project consultants of all kinds, insurance companies, and other individuals involved in project and investment finance.

Content:

1. Introduction and Overview

• Terminology

• Concepts of Project Finance and Structured Finance

• The Concept of SPV (Special Purpose Vehicle)

• Comparison of Project Finance vs. Corporate Finance

• Applications of Project Finance

• History and Development

• What is PPP (Public-Private Partnership)?

• Global Applications, Statistics, and Trends in Project Finance

• Phases of Investment Projects and Project Finance

• Differences Between Income Statement and Cash Flow

• Cash Flow Waterfall, NPV, and IRR Concepts

• Importance of DSCR as a Performance Criteria

• Why Project Finance? Advantages and Disadvantages

• Leverage Effect and Its Importance

• GROUP WORK 1 - Project Processes and Risks

2. Project Risks

• Risks by Stages

o Project Phase

o Engineering and Construction Period

o 'Start-Up Phase' Physical Completion Acceptance Stage

o Defect Liability Period

o Operation Phase

• Concepts of Physical and Financial (Economic) Completion of Projects

• Conditions for Financial (Economic) Completion

• Risks by Types

o Construction and Completion Risk

o Operational Risk

o Sales Risk

o Operational Risks

o Financial Risks

o Economic Risks

o Political Risk

o Legal Risk

o Environmental Risks (Equator Principles)

• Project Types and Characteristics (Hydropower, Wind, Solar, Malls, Hotels, Ports, Highways, Airports, etc.)

• GROUP WORK 2 – Project Types and Major Risks Matrix

3. Risk Management and Project Agreements

• Stakeholders and Structuring of Transactions

• Different Structures and Applications

• Types of Sales Agreements

• Types of Contracts Related to Engineering, Construction and Procurement (EPC Contracts)

• Contracts Related to Project Operation Process (O&M Contracts)

• Importance of Insurance in Project Finance

• Key Considerations in Contracts

• Common Financial Mistakes

• Why Do Projects Fail? With Examples

• CASE STUDY Part 1 – Project Risk Analysis and Evaluations

4. Funding Sources and Terms of Use

• Equity and Debt in Project Finance

• Different Equity Payment Structures

• Excel-Applied Debt Sculpting Methodology

• Credit Assessment Criteria

o Pre-Construction Phase

o Post-construction (Operational Phase)

• Project Finance Funding Sources

o Syndicated Loans and the Concept of 'Club Loan'

o Commercial Banks

o Investment Banks

o ECA (Export Credit Agency) Loans

o Leasing

o Vendor Credits

o Bond Markets

• Concept of Primary and Secondary Debt

• 'Mezzanine Debt' and Its Applications

• Concepts of Credibility and Bankability

• Different Loan Repayment Plans (Risks and Advantages)

o Equal Installments

o Equal Principal Payments

o Increasing Installments

o Decreasing Installments

o Seasonal Payments

o Grace Periods

o Interim Payments

o Skipped Payments

o Balloon Payments

• Special Conditions in Loan Agreements – 'Term Sheet'

o Additional Borrowing

o Loan Utilization Period

o Profit Distribution Criteria

o Reserve Accounts

 Debt Service Reserve Account

 Maintenance Reserve Account

o 'Cash Sweep' Mechanism

o Interest During the Construction Period (IDC)

o Cost Overruns

o Average Loan Term (Excel-Based Application)

o Evaluation of Additional Investment Opportunities

o Early Closure Options

• Ideal Security Package and Its Management

• Insurance in Project Finance

• Cost Components of Financing

• Comparative Project Finance from the Perspectives of Bankers and Investors

5. Financial Modeling (Feasibility) and Evaluation

• Project Financial Feasibility Report

o Sales/Revenue Projections

o Expense Projections

o Debt Repayment Schedule

o Depreciation Schedule

o Working Capital Schedule

o Income Statement

o Cash Flow

o Balance Sheet

• Financial Modeling of the Projects

• Key Considerations in Financial Modeling

• Project Variables and Forecasting Methods

• Project Performance Criteria

o Internal Rate of Return (IRR)

o Net Present Value (NPV)

o Debt Service Coverage Ratio (DSCR)

o Break-Even Point

o Project Payback Period Analysis (Discounted and Undiscounted)

o Loan Life Coverage Ratio (LLCR)

o Project Life Coverage Ratio (PLCR)

o Modified Internal Rate of Return (MIRR)

• Establishing the Equity-Debt Balance in the Project

• 'Cash Trap' Mechanism

• Comparison and Application of Different Analytical Methods

• Weighted Average Cost of Capital (WACC) Calculation

• Cost of Equity Using the Capital Asset Pricing Model (CAPM)

• Sensitivity Analysis (Project Stress Testing)

• CASE STUDY Part 2 – Excel-Based Project Financial Analysis

* The course involves Excel applications, and participants are required to bring laptops with Excel 2013 or a higher version installed.