Project Finance Advanced Modeling and Legal Analysis in association with Linklaters LLP - Johannesburg

Project Finance Advanced Modeling
and Legal Analysis

Presented in association with

Part 1 - Project Finance vs. Corporate Finance

Corporate finance is a balance sheet exercise
Project finance is a cash flow exercise
"Cash is King"
The Time Value of Money ("TVM")
"A Dollar Day Is Worth More Than A Dollar Tomorrow"

Part 2 - The Role of the Model & Common Rules

Reflection of the Project & Financing Documents
An easily manipulated model to reflect changes in the deal
A tool to support negotiations
"Always negotiate off the model and never model off the negotiations"
Run different cases and scenarios
Essential model layouts and rules

Part 3 - The Risk Matrix

What is Risk?
A statistical perspective
A level view of risk
Risk is not pejorative
What is Reward?
Does the reward adequately compensate the risk?
"Beauty is in the Eye of the Beholder"
How do we approach risk from a modeling standpoint?
Matching risk mitigation with documents and cash flow

Part 4 - Introduction of a Project for Modeling

The project structure and the model
Project Documents are financed, not models
Appropriately representing document structures in the financial model
Nominal versus real models
Real models underestimate real cash taxes

Part 5 - The Project Documents

Overview of the major Project Documents used for the modeling exercise
Which documents can be modeled and which cannot?
How to translate these Documents to the model

Part 6 - The Assumption Page

Off-take Contract
Capacity payments vs. variable-based payments
Concept of time-based versus unit-based contracts
The cornerstone contract to high-leverage project finance structuring
Operational Contract
Construction Contract
Fully wrapped contracts versus cost-plus contracts
Supply/Raw Materials Contract
Reserve contracts versus supply contracts
Financial Term Sheets
Including quantitative elements of security packages
Project Taxes
Development and construction taxes
Operational taxes
Impact of depreciation on operational taxes
General Macroeconomic Indicators & Currencies
Inflation and escalation impact
Purchasing power parity ("PPP")
Capital Costs & Project Timing

Part 7 - Operations

Correctly matching units
Crossing out appropriate units and tariffs to arrive at cash
Fixed and variable costs
Matching cost drivers to revenue drivers
Escalation factors
"How many angels are on a pinhead?"
Operational taxes
Accurately assigning appropriate taxes

Part 8 - Construction

Various draw profile & timing
Equity first
Pro-rata
Philosophy on timing returns and risk vis-à-vis construction draws
Interest During Construction ("IDC") & Commitment Fees
Contract splitting for on- & off-shore costs

Part 9 - Insurance

Construction
Operation
The role in the Security Package

Part 10 - Taxes

Identifying and negotiating tax holidays
Matching appropriate domestic and foreign taxes in the model

Part 11 - Depreciation

Different modeling techniques
The "Trapped Cash" dilemma
Thin-Capitalization issues

Part 12 - Financing(s)

Circularity
Debt profiles
Mortgage, or annuity, style
Level-Principal style
Sculpted debt
Currencies
Matching currencies to revenue drivers
The FX dilemma, forecasting future spot rates
Repayment terms (including grace periods)
Escrow accounts/funding and/or Letter of Credit
Model switches and masks
Coverage ratios

Part 13 - The Income Statement

Flow of information from worksheet tabs to the Income Statement

Part 14 - The Balance Sheet

Balance checks
Addressing Working Capital in the Current Accounts
Flow of information from worksheet tabs to the Balance Sheet

Part 15 - The Statement of Cash Flows

Flow of information from worksheet tabs to the Statement of Cash Flows
Waterfall of payments
Trapped Cash
Cash accounts and distributions
Issues related to retained earnings

Part 16 - Equity Returns

IRR calculations
Addressing NPV and Weighted Average Cost of Capital ("WACC")
Theory versus reality
"Don't give away the farm"

Part 17 - Loan Values

Calculating present value of the loan
Calculating average loan life

Part 18 - "Pricing the Deal" and Scenario Analysis

Review potential risks in the equity model and project documents
The equity's view
Lenders' view
The other participants' views
Refining role of a risk matrix and reflection in the model

Part 19 - Monte Carlo Simulations

Part 20 - Documenting Changes to the Model

Downside, Base and Upside Cases
How to use the model to price and negotiate
(a) Tables
(b) Goal seeking
(c) Logic functions
Analysis of Liquidated Damages ("LD")
- Delay in Start-up
- Shortfalls in Performance
- Calculate and analyze if they are sufficient in terms of the risk
Summary, questions and discussions

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Available Dates

Abu Dhabi Oct 5-6, 2010
Project Finance Advanced Financial Modeling and Legal Analysis
Early-Bird Discount applies
Or combine and save $500:

Abu Dhabi Oct 3-6, 2010
Financial Modeling and Analysis + Project Finance Advanced Financial Modeling and Legal Analysis
Early-Bird Discount applies

TESTIMONIALS

"The Vair course was outstanding on every level."

- World Bank/IFC Advisor