Project Finance: Applications and Insights to Emerging Markets Infrastructure

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Project Finance: Applications and Insights to Emerging Markets Infrastructure

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Tackle infrastructure development projects in emerging markets with confidence

In Project Finance: Applications and Insights to Emerging Markets Infrastructure, distinguished professor and author Paul Clifford insightfully applies the fundamental principles of project finance structuring to infrastructure investments in emerging markets.

Using leading emerging market case studies to illuminate the underlying themes of the book, the author provides a practitioner’s perspective and incisive analysis of concepts crucial to a complete understanding of project finance in emerging markets, including:

· Risk management

· ESG and impact investing

· The emergence of new global multilateral development banks

· China’s Belt and Road Initiative

Project Finance bridges the gap between theoretical infrastructure development, investment, and finance and the implementation of that theory with instructive and applicable case studies. Throughout, the author relies on a grounded and quantitative approach, combining the principles of corporate finance with straightforward explanations of underlying technologies, frameworks, and national policies.

This book is an invaluable resource for undergraduate and graduate students in finance, as well as professionals who are expected to deal with project and infrastructure finance in emerging markets.
Chapter 1 Principles and Application of Project Finance

• Origins and History of Project Finance

• Why Sponsors use Project Finance

• Project Finance – Asset Class Performance

• Global Infrastructure Outlook

• The Infrastructure Gap in Emerging Markets

• Focus - Asia Infrastructure Needs

Chapter 2 Project Finance – Risk Analysis & Mitigation

• Commercial versus Contract Viability

• Sponsor R`isk

• Political Risk

• Construction & Completion Risk

• Operation & Maintenance Risk

• Supply Risks

• Reserve Risk

• Sales / Offtake Risk

• Approvals and Permits

• Social & Environmental Considerations

• Financial Risks

• Force Majeure Risk

• Regulatory & Change in Law Risk

Case Study – Mozal Aluminum Project, Mozambique

Case study learning objectives:

• Apply Project Risk Analysis, Mitigation and Allocation Learnings

• Structure Matters – Application of Effective Structural Risk Mitigation

• The Paradox of Infrastructure Investment and Finance – Higher Risk requires higher returns which expose lenders and Project to adverse sovereign actions

Chapter 3 Project Finance Agreements and Loan Documentation

• Construction Contracts in Project Finance

• Operations & Maintenance Contracts in Project Finance

• Offtake Contracts/Concession Agreements

• Supply Contracts

• Project Finance Loan Documentation

• Common Terms Agreement

• Account Agreement & the Cash flow “Waterfall”

• Direct Agreements

• Covenants and Security package

• Key Lender Protection Mechanisms & Strategies for Negotiating Finance Agreements

Case Study – Samba Drillship Oil & Gas Project, Brazil

Case Study Learning Objectives:

• How Project Finance Lender Security Rights and Protections Work

• Challenges and Issues Enforcing Lender Security Rights

• How Lenders Successfully Exercise Step-in Rights

• Ring-fencing Projects from Bankruptcy Actions

Chapter 4 Risks and Challenges of Project Financing in Emerging Markets

• Track Record of Project Financing in Emerging Markets – The Asian IPP Experience

• Currency Mismatch - Lessons Learned from the Asian Currency Crisis

• How the Asian Currency Crisis Transformed the Approach to Project Finance

• Role of Multilateral, Bilateral Development Banks and Export Credit Agencies

• Stakeholder Alignment Issues

• Mitigating Political and Sovereign Risks

• Local Community Benefits and Social Infrastructure

Case Study – Dabhol Power Project, India

Case Study Learning Objectives:

• Why Projects in Emerging Markets Fail

• Importance of Stakeholder Alignment and Balanced Risk Adjusted Returns

• Market Entry Strategies for Emerging Markets

Chapter 5 Sources of Financing for Emerging Markets

• Multilateral Development Banks

• Bilateral Development Banks

• Export Credit Agencies

• Commercial Banks

• Political Risk Insurance Market – Breach of Contract and Non-Honoring of Financial Guarantees

• Project Bonds

• Equipment Suppliers and Financing

• Institutional Lenders (insurance companies, infrastructure funds, pension funds, private equity etc.)

• Strategies for Multi-Sourced Financing in Emerging Markets

Case Study – Nam Theun 2 Hydro Project, Laos

Case study learning objectives:

• Project Finance Structuring to Achieve Multi-Source Financing

• Effective Documentation and Contract Structure

• How to Address Cross Border/Cross Currency Risks

• How to Achieve Efficient Financial Execution

Chapter 6 Financial Structuring and Debt Sizing

• The Borrower/Sponsor Objectives

• Lenders Objectives

• Debt Sizing & Sculpting

• Financial Structuring – Debt Sizing and Loan Amortization

• Lender Ratios for Debt Calibration & Stress Testing

• Cash Traps and Sweeps

Case Study – Sabine Pass LNG Project & USA-Asia Energy Flows

Case Study Learning Objectives:

• Application of Mini-Perm Financing

• Project Finance Structuring to Optimize Bank and Bond Financing

• Cross Border Energy Trade Flows between US and Asia

Chapter 7 Environmental Social and Governance (ESG)

• Sustainable Infrastructure Finance and Investing

• Equator Principles

• Multilateral Development Banks ESG frameworks

• IFC Impact Investing Principles

• Green Bonds

• Sustainability Project Financing and UN Social Development Goals

• How to Unlock ESG Institutional Capital

Case Study – Manzanillo Container Port Terminal Project, Mexico

Case study learning objectives:

• Understanding and Analyzing Market Risk in Project Deals

• Role of Multilateral Development Banks Managing Environmental and Social Issues

• Assessing and Mitigating Social and Environmental Risks

Chapter 8 Emerging Markets Project Finance Bonds & Local Capital Markets

• Project Bonds Versus Project Loans

• Project Bonds Investor Base & Market Liquidity

• Local Currency Project Bonds & Partial Credit Guarantees/Insurance Wraps

• Recent Project Bond Case Study in Emerging Markets

Case Study – Mong Duong 2 Power Project, Vietnam

Case study learning objectives:

• Example of Asia frontier market power project capital markets bond refinancing

• Project finance structuring requirements for bond investor refinancing

• Terms and conditions for emerging markets bond deal

Chapter 9 China’s Belt and Road Initiative

• Background and Scope of the Belt and Road Initiative

• Belt and Road Initiative Infrastructure Needs – Spotlight on the China-Pakistan Economic Corridor

• China’s Financing Strategy for BRI Infrastructure Development

• Emergence of New Multilateral Developments Banks – Focus on Asia Infrastructure Investment Bank

Chapter 10 Project Finance Market Developments and Finance Structures

• Mini-Perm Financing Structures

• Back-Levered Financings for Renewable Energy Projects

• Infrastructure Guarantee Products – Bond and Private Capital Credit Enhancement
PAUL D. CLIFFORD is Adjunct Professor at Columbia Business School. He also teaches at The City University of New York. He is a consultant for in-house programs at international banks and private sector energy companies. Formerly, he was Director of Project Finance for Standard Chartered PLC and ANZ Bank.