{"product_id":"project-finance-in-construction-isbn-9781444334777","title":"Project Finance in Construction","description":"Project finance has spread worldwide and includes numerous industrial projects from power stations and waste-disposal plants to telecommunication facilities, bridges, tunnels, railway networks, and now also the building of hospitals, education facilities, government accommodation and tourist facilities.  \u003cp\u003eDespite financial assessment of PF projects being fundamental to the lender’s decision, there is little understanding of how the use of finance is perceived by individual stakeholders; why and how a financial assessment is performed; who should be involved; where and when it should be performed; what data should be used; and how financial assessments should be presented.\u003c\/p\u003e \u003cp\u003eCurrent uncertainty in financial markets makes many sponsors of construction project financings carefully consider bank liquidity, the higher cost of finance, and general uncertainty for demand. This has resulted in the postponement of a number of projects in certain industry sectors. Governments have seen tax receipts drastically reduced which has affected their ability to finance infrastructure projects, often irrespective of the perceived demand. Equity providers still seek to invest, however there are less opportunities due to market dislocation. Due to the demand for global infrastructure it is believed that project financings will return to their pre-crunch levels, or more so, however lenders’ liquidity costs will be passed on to the borrowers. Lenders will also be under stricter regulation both internally and externally.\u003c\/p\u003e \u003cp\u003eThe steps outlined in the guide are designed to provide a basic understanding for all those involved or interested in both structuring and assessing project financings. Secondary contracts involving constructors, operators, finance providers, suppliers and offtakers can be developed and assessed to determine their commercial viability over a projects life cycle.\u003c\/p\u003e \u003cp\u003eSpecial Features\u003c\/p\u003e \u003cul\u003e \u003cli\u003ea structured guide to assessing the commercial viability of  construction projects\u003c\/li\u003e \u003cli\u003eexplains economic metrics to use in the decision making process\u003c\/li\u003e \u003cli\u003edetailed case study shows how stakeholders apply the concept of project finance\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eList of Illustrations xi\u003c\/p\u003e \u003cp\u003eList of Tables xiii\u003c\/p\u003e \u003cp\u003eAbout the Authors xv\u003c\/p\u003e \u003cp\u003ePreface xvii\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Introduction 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 The development of project finance 1\u003c\/p\u003e \u003cp\u003e1.2 Financial assessment 6\u003c\/p\u003e \u003cp\u003eWhat is financial assessment? 6\u003c\/p\u003e \u003cp\u003eWhy perform a financial assessment? 6\u003c\/p\u003e \u003cp\u003eWho is involved in the risk assessment process? 7\u003c\/p\u003e \u003cp\u003eWhere should a financial assessment be performed? 7\u003c\/p\u003e \u003cp\u003eWhen should a financial assessment be performed? 8\u003c\/p\u003e \u003cp\u003eWhat data are to be used? 8\u003c\/p\u003e \u003cp\u003eHow should assessment outputs be presented? 8\u003c\/p\u003e \u003cp\u003e1.3 Purpose of this guide 9\u003c\/p\u003e \u003cp\u003e1.4 Scope of the guide 9\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 Project finance 11\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Introduction 11\u003c\/p\u003e \u003cp\u003e2.2 Definition of project finance 11\u003c\/p\u003e \u003cp\u003e2.3 The key characteristics of project finance 13\u003c\/p\u003e \u003cp\u003eSpecial project\/purpose vehicle 14\u003c\/p\u003e \u003cp\u003eContractual arrangement 14\u003c\/p\u003e \u003cp\u003eNon-\/limited recourse 17\u003c\/p\u003e \u003cp\u003eOff-balance sheet transaction 18\u003c\/p\u003e \u003cp\u003eRobust income stream of the project as the basis for financing 19\u003c\/p\u003e \u003cp\u003e2.4 Legal and financial considerations in project finance 20\u003c\/p\u003e \u003cp\u003eLegal 20\u003c\/p\u003e \u003cp\u003eFinancial 22\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 Financial instruments and cash flow modelling 25\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 Introduction 25\u003c\/p\u003e \u003cp\u003e3.2 Debt finance 25\u003c\/p\u003e \u003cp\u003eSenior debt 27\u003c\/p\u003e \u003cp\u003e3.3 Mezzanine finance 28\u003c\/p\u003e \u003cp\u003eSubordinate debt 28\u003c\/p\u003e \u003cp\u003eBond finance 29\u003c\/p\u003e \u003cp\u003e3.4 Equity finance 31\u003c\/p\u003e \u003cp\u003e3.5 Sources of debt and equity 34\u003c\/p\u003e \u003cp\u003e3.6 Cash flow modelling and project financing 34\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 Risk management 39\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Introduction 39\u003c\/p\u003e \u003cp\u003e4.2 Risk 39\u003c\/p\u003e \u003cp\u003e4.3 Risk management process 41\u003c\/p\u003e \u003cp\u003eRisk identification 42\u003c\/p\u003e \u003cp\u003eRisk analysis 44\u003c\/p\u003e \u003cp\u003eRisk response 47\u003c\/p\u003e \u003cp\u003e4.4 Typical risks in project financing 49\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 The financial assessment process 51\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Introduction 51\u003c\/p\u003e \u003cp\u003e5.2 The financial assessment structure 51\u003c\/p\u003e \u003cp\u003eSPV assessment 51\u003c\/p\u003e \u003cp\u003eLenders’ assessment 54\u003c\/p\u003e \u003cp\u003eSPV and lender final assessment 55\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Case study 57\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 Introduction 57\u003c\/p\u003e \u003cp\u003e6.2 Independent power project 57\u003c\/p\u003e \u003cp\u003e6.3 Supply and offtake contracts 58\u003c\/p\u003e \u003cp\u003eSupply contracts 60\u003c\/p\u003e \u003cp\u003eOfftake contracts 61\u003c\/p\u003e \u003cp\u003eApplications of supply and offtake contracts 64\u003c\/p\u003e \u003cp\u003e6.4 Assumptions for initial assessment 65\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Developing the base case model 69\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Introduction 69\u003c\/p\u003e \u003cp\u003e7.2 SPV’s initial assessment 69\u003c\/p\u003e \u003cp\u003e7.3 Identify the estimated activities, time, costs and revenues of the project 70\u003c\/p\u003e \u003cp\u003e7.4 Development of the base case model 71\u003c\/p\u003e \u003cp\u003e7.5 Identify major project risks 73\u003c\/p\u003e \u003cp\u003e7.6 Assessment of base case model incorporating risks 74\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Initial economic assessment by lenders 77\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 Introduction 77\u003c\/p\u003e \u003cp\u003e8.2 Financial package assessment 77\u003c\/p\u003e \u003cp\u003eFinance package (1) 78\u003c\/p\u003e \u003cp\u003eFinance package (2) 82\u003c\/p\u003e \u003cp\u003eFinance package (3) 83\u003c\/p\u003e \u003cp\u003e8.3 Conclusions 87\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 Financial engineering 89\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 Introduction 89\u003c\/p\u003e \u003cp\u003e9.2 Financial instruments used in financial engineering 90\u003c\/p\u003e \u003cp\u003eForward rates 90\u003c\/p\u003e \u003cp\u003eFinancial futures 90\u003c\/p\u003e \u003cp\u003eSwaps 91\u003c\/p\u003e \u003cp\u003eOptions 92\u003c\/p\u003e \u003cp\u003eCaps, floors, collars, swaptions and compound options 92\u003c\/p\u003e \u003cp\u003eAsset-backed securities 93\u003c\/p\u003e \u003cp\u003e9.3 Refinancing 94\u003c\/p\u003e \u003cp\u003e9.4 Reappraising public–private partnerships 94\u003c\/p\u003e \u003cp\u003e9.5 Techniques applied in the reappraisal of PPP concession agreement 95\u003c\/p\u003e \u003cp\u003e9.6 Other financial engineering techniques 96\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Final assessment to determine project commercial viability 101\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Introduction 101\u003c\/p\u003e \u003cp\u003e10.2 Detailed risk assessment 101\u003c\/p\u003e \u003cp\u003e10.3 Financial engineering 105\u003c\/p\u003e \u003cp\u003eTax holiday 105\u003c\/p\u003e \u003cp\u003eFinancial collar 107\u003c\/p\u003e \u003cp\u003eExtending the concession 107\u003c\/p\u003e \u003cp\u003eIncreasing debt 107\u003c\/p\u003e \u003cp\u003eGrace period 108\u003c\/p\u003e \u003cp\u003ePhasing construction and operation 108\u003c\/p\u003e \u003cp\u003eUpfront payments 108\u003c\/p\u003e \u003cp\u003eExisting concession revenues 108\u003c\/p\u003e \u003cp\u003e10.4 Summary 109\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Financial close 111\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 Introduction 111\u003c\/p\u003e \u003cp\u003e11.2 Due diligence 111\u003c\/p\u003e \u003cp\u003eTechnical 113\u003c\/p\u003e \u003cp\u003eLegal due diligence 114\u003c\/p\u003e \u003cp\u003eTrigger step in rights 116\u003c\/p\u003e \u003cp\u003eModel audit and sensitivity analysis 116\u003c\/p\u003e \u003cp\u003eRisk valuation 117\u003c\/p\u003e \u003cp\u003eTerm sheet 117\u003c\/p\u003e \u003cp\u003eInter-creditor agreement 117\u003c\/p\u003e \u003cp\u003eHedge strategy 118\u003c\/p\u003e \u003cp\u003eLetters of credit 118\u003c\/p\u003e \u003cp\u003eReserve account 119\u003c\/p\u003e \u003cp\u003eEscrow and ring-fenced facilities 119\u003c\/p\u003e \u003cp\u003eEconomic indicators 120\u003c\/p\u003e \u003cp\u003eTaxation 120\u003c\/p\u003e \u003cp\u003eInsurance 121\u003c\/p\u003e \u003cp\u003e11.3 Financial close 122\u003c\/p\u003e \u003cp\u003eCredit committee approval process 123\u003c\/p\u003e \u003cp\u003eDue diligence report 124\u003c\/p\u003e \u003cp\u003eTechnical closure 124\u003c\/p\u003e \u003cp\u003eFinancial close 124\u003c\/p\u003e \u003cp\u003eTechnical commencement 124\u003c\/p\u003e \u003cp\u003eExecute interest rate swaps 125\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Islamic finance and project finance 127\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e12.1 Introduction 127\u003c\/p\u003e \u003cp\u003e12.2 Islamic finance 127\u003c\/p\u003e \u003cp\u003e12.3 Shariah 129\u003c\/p\u003e \u003cp\u003eQiyas and Litihad 129\u003c\/p\u003e \u003cp\u003e12.4 Core principles of Islamic finance 130\u003c\/p\u003e \u003cp\u003eSharing (profit\/loss and risk) 130\u003c\/p\u003e \u003cp\u003eNo unfair gain 130\u003c\/p\u003e \u003cp\u003eNo speculation 130\u003c\/p\u003e \u003cp\u003eNo uncertainty 130\u003c\/p\u003e \u003cp\u003eNo investments that are not in the public interest 131\u003c\/p\u003e \u003cp\u003eNo hoarding of money 131\u003c\/p\u003e \u003cp\u003eDeception 131\u003c\/p\u003e \u003cp\u003eIslamic financial institutions 131\u003c\/p\u003e \u003cp\u003eShariah supervisory boards 132\u003c\/p\u003e \u003cp\u003e12.5 Project finance 132\u003c\/p\u003e \u003cp\u003eThe Ijara principle 133\u003c\/p\u003e \u003cp\u003eIjara Mawsufah Fi Al Dhimmah (forward lease) 133\u003c\/p\u003e \u003cp\u003eIstisna’a 133\u003c\/p\u003e \u003cp\u003eSukuk 134\u003c\/p\u003e \u003cp\u003eSukuk al Istisna’a 135\u003c\/p\u003e \u003cp\u003eA typical SAI deal 135\u003c\/p\u003e \u003cp\u003eHedging 136\u003c\/p\u003e \u003cp\u003eSwaps 137\u003c\/p\u003e \u003cp\u003e12.6 Other Islamic finance techniques for projects 137\u003c\/p\u003e \u003cp\u003eMusharaka (equity financing) 137\u003c\/p\u003e \u003cp\u003eBai salam (forward financing) 138\u003c\/p\u003e \u003cp\u003e12.7 Risks and liabilities 138\u003c\/p\u003e \u003cp\u003e12.8 Summary 139\u003c\/p\u003e \u003cp\u003e\u003cb\u003e13 Conclusions and recommendations 141\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e13.1 Review 141\u003c\/p\u003e \u003cp\u003e13.2 Conclusions 142\u003c\/p\u003e \u003cp\u003e13.3 Recommendations 144\u003c\/p\u003e \u003cp\u003eAppendix 147\u003c\/p\u003e \u003cp\u003eGlossary 159\u003c\/p\u003e \u003cp\u003eReferences 161\u003c\/p\u003e \u003cp\u003eIndex 167\u003c\/p\u003e  \u003cp\u003e“Overall, the short book is simple to read and understand.”  (\u003ci\u003eConstruction Management and Economics\u003c\/i\u003e, 2012)\u003c\/p\u003e \"This guide is for project managers, students, and academics involved in structuring and assessing project finance.\" (\u003ci\u003eBook News Inc\u003c\/i\u003e, November 2010)  \u003cb\u003eAnthony Merna\u003c\/b\u003e is senior partner of Oriel Group Practice, a multidisciplinary research and consultancy practice based in Manchester and a visiting lecturer to Manchester Business School at the University of Manchester. He has been teaching Project Finance for the last 14 years to a number of UK and overseas universities, businesses and government agencies.  \u003cp\u003e\u003cb\u003eYang Chu\u003c\/b\u003e is a graduate of the School of Mechanical, Aerospace and Civil Engineering at the University of Manchester and a research consultant with Oriel Group Practice specialising in the areas of project finance and risk modelling. He is currently carrying out risk management research at Manchester Business School.\u003c\/p\u003e \u003cp\u003e\u003cb\u003eFaisal Al-Thani\u003c\/b\u003e is Senior Development Manager, Middle East for Maersk Oil based in Doha and a board member of the Marsh International Risk Council.\u003c\/p\u003e  Project finance in construction procurement has spread worldwide from power stations and waste-disposal plants to telecommunication facilities, bridges, tunnels, railway networks, and now also to the building of hospitals and schools.  \u003cp\u003eDespite a financial assessment of PF projects being fundamental to the lender’s decision, there is little understanding of how the use of finance is perceived by individual stakeholders; why and how a financial assessment is performed; who should be involved; where and when it should take place; what data should be used; and how financial assessments should be presented.\u003cbr\u003e The steps outlined in this guide provide a basic understanding for all those involved in structuring or assessing project finance.  Secondary contracts involving constructors, operators, finance providers, suppliers and offtakers can be developed and assessed to determine their commercial viability over a project’s life cycle.\u003c\/p\u003e \u003cp\u003eAny uncertainty in financial markets prompts sponsors of construction project financings to carefully consider bank liquidity, the higher cost of finance, and general uncertainty for demand. This results in the postponement of projects and the drastic reduction of governments' tax receipts, which in turn affects their ability to finance infrastructure projects.\u003c\/p\u003e \u003cp\u003e\u003ci\u003eProject Finance in Construction\u003c\/i\u003e offers a structured process for determining the commercial viability of large construction projects procured with project finance (PF).  It explains how to use economic metrics in the decision-making process and provides a detailed case study showing how stakeholders apply the concept of project finance.\u003c\/p\u003e \u003cp\u003eThis guide will enable students and academics involved in project finance as well as project managers worldwide to develop their own assessment structures and be confident in their use.\u003c\/p\u003e","brand":"Wiley-Blackwell","offers":[{"title":"Default Title","offer_id":47989874196709,"sku":"NP9781444334777","price":92.95,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781444334777.jpg?v=1761785748","url":"https:\/\/k12savings.com\/products\/project-finance-in-construction-isbn-9781444334777","provider":"K12savings","version":"1.0","type":"link"}