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<ul><li>Financing of Infrastructure Projects:  </li></ul><ul><li>PRESENTED BY: </li></ul><ul><li>SHANKAR MAHATO (049) </li...
Overview <ul><li>What is Project Finance? </li></ul><ul><li>Role of a Project Finance Counsel </li></ul><ul><li>Public Pri...
What is Project Finance ? <ul><li>Project Finance is financing the development or exploitation of a right, natural resourc...
Role of a Project Finance Counsel <ul><li>Risk allocation and mitigation through Negotiation and Documentation among the p...
Public Private Partnership  <ul><li>Structures </li></ul><ul><ul><li>Build Operate Transfer (BOT) </li></ul></ul><ul><ul><...
Financing <ul><li>Project Financing vs. Balance Sheet Financing vs. Asset Financing </li></ul><ul><li>Project  Financing  ...
L&L/NLS Lenders Shareholder’s Agreements Project company –  Credit Agreement –  Security Documents –  Concession  Agreemen...
L&L/NLS Risk Matrix <ul><li>Completion Risk </li></ul><ul><li>Technological Risk </li></ul><ul><li>Supply Risk  </li></ul>...
Project Finance Requirements  <ul><li>Hate surprises; will not accept risks which are either incapable of proper assessmen...
Project Finance Requirements -  Consents <ul><li>Consents must last for duration of project </li></ul><ul><li>Regulators s...
Project Finance Requirements - Promoters <ul><li>All equity contributions to be provided up-front </li></ul><ul><li>Promot...
Project Finance Requirements - Concession Agreement <ul><li>Terms of concession fixed for life of project </li></ul><ul><l...
Project Finance Requirements - Construction Contract <ul><li>Turnkey fixed price contract </li></ul><ul><li>Fixed completi...
Project Finance Requirements - Operation & Maintenance Contract <ul><li>Proper incentives to run project properly and prof...
Project Finance Requirements -  Supply Contract <ul><li>Security of supply and remedy for interruptions  </li></ul><ul><li...
Project Finance Requirements -  Off-take Agreement <ul><li>Full pass-through of capital and variable costs </li></ul><ul><...
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Presentationon infrastructure project_finance

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Presentationon infrastructure project_finance

  1. 1. <ul><li>Financing of Infrastructure Projects: </li></ul><ul><li>PRESENTED BY: </li></ul><ul><li>SHANKAR MAHATO (049) </li></ul><ul><li>M.B.A. 4 TH SEMESTER </li></ul>
  2. 2. Overview <ul><li>What is Project Finance? </li></ul><ul><li>Role of a Project Finance Counsel </li></ul><ul><li>Public Private Partnership </li></ul><ul><li>Financing </li></ul><ul><li>Risk Matrix </li></ul><ul><li>Project Finance Requirements </li></ul>L&L/NLS
  3. 3. What is Project Finance ? <ul><li>Project Finance is financing the development or exploitation of a right, natural resource or other asset where the bulk of the financing is not be provided by any form of share capital and is to be repaid principally out of revenues produced by the project in question </li></ul>L&L/NLS
  4. 4. Role of a Project Finance Counsel <ul><li>Risk allocation and mitigation through Negotiation and Documentation among the project participants </li></ul><ul><li>Minimizing residual risk with the Structuring of project vehicle </li></ul><ul><li>Balancing conflicting interests of various project participants </li></ul><ul><li>Achieving successful Financial Closure by ensuring fulfillment of Project Finance requirements </li></ul>L&L/NLS
  5. 5. Public Private Partnership <ul><li>Structures </li></ul><ul><ul><li>Build Operate Transfer (BOT) </li></ul></ul><ul><ul><li>Build Own Operate Transfer (BOOT) </li></ul></ul><ul><ul><li>Build Transfer Operate (BTO) </li></ul></ul><ul><ul><li>Build Own Operate (BOO) </li></ul></ul><ul><ul><li>Design, Construct, Maintain & Finance (DCMF) </li></ul></ul><ul><ul><li>Design, Build, Finance & Operate (DBFO) </li></ul></ul><ul><ul><li>Disinvestment </li></ul></ul>L&L/NLS
  6. 6. Financing <ul><li>Project Financing vs. Balance Sheet Financing vs. Asset Financing </li></ul><ul><li>Project Financing </li></ul><ul><li>Source of Finance </li></ul><ul><ul><li>Commercial Banks </li></ul></ul><ul><ul><li>Financial Institutions </li></ul></ul><ul><ul><li>Export Credit Agencies & Multilateral Agencies </li></ul></ul><ul><ul><li>Capital Market </li></ul></ul>L&L/NLS
  7. 7. L&L/NLS Lenders Shareholder’s Agreements Project company – Credit Agreement – Security Documents – Concession Agreement – Consents Government Construction Contract Market Risks Offtake Agreement Operating and Maintenance Agreement Promoters Supplier Offtaker Finance Risks Supply Agreement Operator Contractor Construction & Operation Risks Insurances Insurers
  8. 8. L&L/NLS Risk Matrix <ul><li>Completion Risk </li></ul><ul><li>Technological Risk </li></ul><ul><li>Supply Risk </li></ul><ul><li>Market Risk </li></ul><ul><li>Financial Risk </li></ul><ul><li>Political Risk </li></ul><ul><li>Environmental Risk </li></ul><ul><li>Force Majeure Risk </li></ul>
  9. 9. Project Finance Requirements <ul><li>Hate surprises; will not accept risks which are either incapable of proper assessment or which are potentially open-ended in their effect </li></ul><ul><li>No change in law risk </li></ul><ul><li>No discriminatory taxation </li></ul><ul><li>Minimise “risk-dumping” on project company </li></ul><ul><li>No liability for consequential loss </li></ul><ul><li>Contracts must survive enforcement of Banks’ security </li></ul>L&L/NLS
  10. 10. Project Finance Requirements - Consents <ul><li>Consents must last for duration of project </li></ul><ul><li>Regulators should not be able to vary the terms of consents unduly </li></ul><ul><li>Consents should inure to project and not just to project company </li></ul><ul><li>Government Support Agreements </li></ul>L&L/NLS
  11. 11. Project Finance Requirements - Promoters <ul><li>All equity contributions to be provided up-front </li></ul><ul><li>Promoters to provide cover for cost overruns </li></ul><ul><li>Promoters to provide cover for gaps in undertakings including insurance. </li></ul>L&L/NLS
  12. 12. Project Finance Requirements - Concession Agreement <ul><li>Terms of concession fixed for life of project </li></ul><ul><li>Extension of term for force majeure </li></ul><ul><li>Compensation for termination must repay debt </li></ul><ul><li>Concession should survive enforcement of security </li></ul><ul><li>Transferability of concession on security enforcement </li></ul>L&L/NLS
  13. 13. Project Finance Requirements - Construction Contract <ul><li>Turnkey fixed price contract </li></ul><ul><li>Fixed completion date </li></ul><ul><li>Force majeure , price increases and completion must back to back with concession agreement </li></ul><ul><li>Adequate liquidated damages for late completion </li></ul><ul><li>Performance Guarantees </li></ul>L&L/NLS
  14. 14. Project Finance Requirements - Operation & Maintenance Contract <ul><li>Proper incentives to run project properly and profitably including penalties for failure to meet targets </li></ul><ul><li>Ability to remove operator for poor performance </li></ul>L&L/NLS
  15. 15. Project Finance Requirements - Supply Contract <ul><li>Security of supply and remedy for interruptions </li></ul><ul><li>Take or Pay obligation </li></ul>L&L/NLS
  16. 16. Project Finance Requirements - Off-take Agreement <ul><li>Full pass-through of capital and variable costs </li></ul><ul><li>Foreign exchange protection </li></ul><ul><li>Take or Pay obligation </li></ul><ul><li>Credit enhancement including Government Guarantees </li></ul>L&L/NLS

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