Are you involved in the development and execution of technical projects and eager to know what it takes to fund a project successfully? Would you like to be more in touch with the latest developments in project finance and able to use these to your advantage? If so, you're in the right place! This course will provide you with the fundamental knowledge and necessary tools to create the optimum financing structure for your project and enhance its potential to attract funding.
The approach taken is both theoretically sound and practically relevant. This is achieved by using case studies to illustrate the topics, as well as assignments that give learners first-hand experience in what it takes to put together a financeable project. At the end of the course, you'll understand what is required to achieve successful project financing. Those who work on infrastructure and industrial projects, especially, will need to have a good understanding of how project financing works and how project investors and lenders think and assess the risks of a project.
Projects are increasingly set up through cooperation between different groups of stakeholders such as Public Private Partnerships (PPPs). Project contracts are evolving to facilitate and structure such co-operations, which has in turn led to a range of novel contracts and methods of financing.
Use our project finance model to optimize and manage your project's business case
During the course you will have access to and learn how to use our (Excel) project financial model to make the financing succeed. This tool will help you generate the data required and used by financiers and investors to assess their expected return and risks. In this part of the course, you will learn to use project assumptions to predict the cash flows and then use these cash flows to calculate necessary financial ratios. This model will allow you to conduct sensitivity analysis to quantify the impact of risks.
What you'll learn
- How to create a financing structure that will provide the best chance of successful project financing.
- The optimal allocation of the roles, risks and rewards between the various project stakeholders.
- Creating a financial risk management plan.
- Constructing the optimal legal conditions for project financing to succeed.
"From week one, you will learn how project investors and lenders think, how they assess the risks of a project and what they look at when deciding whether to invest in a project, or not. The basic idea behind this course is that if we understand how investors and lenders think, we can use that to our advantage. You can then present them with a project proposition they will want to invest in." - Emile Peters, Senior lecturer of Economics and Project Finance.
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Week 1: What is Project Finance?
First, we'll look at financing generally to see what aspects are most important for financing to succeed. Then we'll look at project financing, a specialized form of financing, that is designed to fund (technical and infrastructure) projects.
Topics that we will cover in this week are:
- Introduction to the course
- Finance basics (financial analysis, NPV, IRR, etc.)
- Optimizing the financing package (debt vs equity, leverage, CADS, DSCR)
- Specific features of project finance and how it differs from generic (corporate) financing (SPV, limited recourse financing, ring fencing)
- The parties involved in project financing
- Drivers for the Development of Project Finance
- Public Private Partnerships (PPPs); a special form of project finance
Week 2: Risk Management in Project Finance
Because of the way in which project finance is structured, where the money flows are restricted to the project (= ring fencing and limited recourse financing), careful management of the project risks becomes crucial for the success of the financing. In this week, we'll focus on the system that has been developed to stabilize project cash flows and reduce the financial impact of risks.
Topics that we will cover are:
- Risk management basics
- Risk management steps in project finance
- The project finance solution to risks – contractual risk distribution
- Dealing with:
- output risks
- construction risks
- operational risks
- Other risks
In this week, we'll also get acquainted with a sample project – a case study of the creation of a power plant in the Philippines – that we will use throughout the course to get familiar with the topics we are covering. In the next weeks, we'll come back to this case study to address the various aspects that arise.
Week 3: Optimizing the legal structure in project finance
By this week, we'll have built up a good understanding of the most important financial and risk management aspects in a project financing. This week we'll look at the standardized legal structure that has been developed to achieve all the project finance objectives. Topics we'll cover in this week include:
- The project company (SPV)
- The finance agreements
- Security arrangements
- Incorporation of the project agreements into the financing package
- Standardized Governance structure of the project company
- The cash flow waterfall that is applied in project finance.
Week 4: Using the project finance model to optimize and manage the project's business case
In the first week, we saw that financiers and investors will want a clear understanding of the expected project cash flows in order to assess their expected return and risks. In this week, we'll look at the tool that we use to generate the data they need; an (Excel) project financial model. We'll learn what the model can do and how we can apply it to make the financing succeed.
Topics that we will cover in this week:
- The standardized architecture of the project financial model
- Using project assumptions to predict the cash flows
- Using these cash flows to calculate necessary financial ratios (NPV, IRR, DSCR)
- Conducting sensitivity analysis with the model to quantify the impact of risks
- Using the model to anticipate and trigger legal defaults
At the end of this week, we'll bring all topics together to give you a final overview.
Week 5: Project finance overview
When we come to week 5, we'll have looked at project finance from a number of different angles, and we'll have experimented with the various optimizations we can implement, by working through our sample transaction. In doing this, we'll have improved our chances of getting the financing we need for our project. In week 5, we'll bring all aspects together to have a good overview of the topic. By now we'll have experienced how we can create a financing structure that will provide the best chance of success, we'll know how to optimize the allocation of the roles, risks and rewards between the various project stakeholders, we'll be able to create a financial risk management plan and construct the optimal legal conditions for project financing to succeed.
Assignment(s) and Assessment
Throughout the course you will have practice exercises but no exams.
If you successfully complete this course you will earn a professional education certificate and you are eligible to receive 3.0 Continuing Education Units (CEUs).
This course is primarily geared towards working professionals. Basic Financing knowledge will be helpful.
For those with no, or limited finance knowledge, the following may be a good introductory course to take first: Finance for Everyone: Smart Tools for Decision-Making.
This course is a good enhancement course for learners who successfully completed the MOOC Project Management from DelftX. This course builds on the basic knowledge gained in that MOOC, but deals with the financing aspects in considerably more detail.
If you have any questions about this course or the TU Delft online learning environment, please do not hesitate to contact us by sending an email.