Infrastructure Finance

Navigating key risks and opportunities in Africa's large scale infrastructure projects

This programme will provide participants with a sound understanding of the key issues in large scale
infrastructure projects to:

  • Develop a clear understanding of the factors influencing the choice of financing methods for infrastructure projects
  • Understand the motivations of the parties involved
  • Master risk evaluation and allocation
  • Navigate capital structuring issues
  • Learn from past lessons through practical case studies like:
    - Working in groups, participants are given background on an in the infrastructure sector, and     make their   recommendations
    - In groups, participants bid for an airport concession
    - Review of background on a corporate operating in the infrastructure area to evaluate their approach to capital structuring

The financing of infrastructure represents a major opportunity and challenge, given the scale of potential infrastructure development as a result of:

  • Ageing infrastructure in many developed economies
  • Need for infrastructure in many developing economies to support economic growth
  • Attempts by governments and supranational agencies to mitigate the impact of the credit crisis, by accelerating spending on infrastructure projects

Public private partnerships are providing opportunities for private sector providers of capital to be involved in projects that are underpinned by contracted cash flows (subject to performance) over long time periods at a time, when the current business environment is volatile.

Traditional methods of financing infrastructure projects are no longer sufficient to finance infrastructure projects, leading to increased use of PPPs and development of infrastructure Funds as potential sources of finance. There has also been a change in approach in recent years to “risk sharing”, “accountability” and “Value for Money” resulting in changes in how services to public sector users are procured and performance evaluated.

This training programme will be relevant to personnel involved in the financing and / or financial evaluation of infrastructure projects, that are looking to obtain an intensive overview of key issues relating to the financing of large scale infrastructure projects including personnel working for:

  • Governments and Public Sector Agencies
  • Equity Investors, including Private Equity
  • Firms and Infrastructure Funds
  • Project sponsors
  • Commercial banks
  • Development Finance Institutions
  • Export Credit Agencies
  • Contractors
  • Consultancy firms

Programme Overview

Issues for Government in the financing of Infrastructure

  • Budgetary issues, subsidies and the impact of the credit crisis
  • Are subsidies from government needed?
  • Options for the financing of public sector infrastructure assets – from operating contracts to privatisation and influencing factors
  • Value for money in the procurement of public sector services vs political and social issues

 

Key players in an Infrastructure Finance

  • Roles and objectives of the parties and funds
  • Potential conflicts of interest and potential differences in public and private sector objectives

Risk identification and allocation in Infrastructure projects and lessons of experience

  • Mega projects and risk - lessons from the transportation sector
  • The infrastructure sector and impact of the credit crisis in terms of risk assessment and corporate valuations
  • Debt perspective – overview of a methodology for rating a transport project
  • Summarised review of default study for Project Finance and PPP/PFI transactions
  • Risk and risk allocation – typical risks and approaches to risk allocation
  • Guarantees and credit enhancement

Analysing credit risk of sponsors involved in Infrastructure Finance

  • Different elements of cash flow:
  • EBITDA, cash from operations, cash available for Debt Service, free cash flow
  • Cash available to equity investors in a Project Finance structure
  • Financial analysis of corporates involved in Infrastructure projects
  • Quantitative indicators and typical ratios used in financial analysis
  • Qualitative factors
  • Project vs Corporate related cash flow analysis

Reviewing business plans for Infrastructure projects

  • Are the assumptions realistic?
  • Peer group analysis
  • Identifying and sensitising key financial risks in Cash flow related ratios (DSCR, LLCR, PLCR)

Debt financing issues

  • Corporate Finance vs Project Finance issues – factors influencing the capital structuring decision
  • Debt vs Equity, leverage objectives, loans vs bonds, recourse to sponsors
  • Potential involvement of various financial institutions / instruments and influencing factors
  • Development Finance Institutions, export Credit Agencies, commercial Banks, leasing, capital Markets
  • Government support for Infrastructure Finance
  •  Local vs foreign currency finance & Interest and currency exposure management
  • Subordinated / mezzanine debt

Key Corporate Finance concepts – risk and return in Infrastructure projects

  • Time Value of Money
  • Equity/Debt Leverage and how this relates to the structure of PPP transactions
  • Investment appraisal techniques (Accounting Rate of Return, payback, IRR, NPV)
  • Capital Asset Pricing Model

Case studies

Case studies from both developed and developing economies will be the main focus of the teaching methodology with examples primarily based on the major areas of public infrastructure, such as:

  • Roads
  • Ports and airports
  • Transmission lines
  • Metro systems
  • Water
  • Social Infrastructure (Health and Education)

Case studies will also include review of key issues relating to the evaluation of project investors involved in Infrastructure projects

Exercises

  • Review of an infrastructure project to illustrate the role of the various stakeholders and potential conflicts of interest; review of background of a company actively involved in infrastructure transactions, to evaluate their approach to infrastructure finance
  • Rating an Infrastructure project
  • Participants review background on a corporate investing in Infrastructure Finance
  • Participants look at the transaction from either an investor or user perspective, negotiate key aspects of the risk allocation
  • Participants assess the viability of the assumptions to establish the potential key influences on the project financial viability
  • Working in teams, participants review and develop a summarised debt financing term sheet for transaction
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Dates & Locations



This course is only available as a custom course tailored for your business, contact us to discuss your requirements.

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