Project Finance in Construction -- Contents -- List of illustrations -- List of tables -- About the Authors -- Preface -- 1 Introduction -- 1.1 The development of project finance -- 1.2 Financial assessment -- What is financial assessment? -- Why perform a financial assessment? -- Who is involved in the risk assessment process? -- Where should a financial assessment be performed? -- When should a financial assessment be performed? -- What data are to be used? -- How should assessment outputs be presented? -- 1.3 Purpose of this guide -- 1.4 Scope of the guide -- 2 Project finance -- 2.1 Introduction -- 2.2 Definition of project finance -- 2.3 The key characteristics of project finance -- Special project/purpose vehicle -- Contractual arrangement -- Non-/limited recourse -- Off-balance sheet transaction -- Robust income stream of the project as the basis for financing -- 2.4 Legal and financial considerations in project finance -- Legal -- Financial -- 3 Financial instruments and cash flow modelling -- 3.1 Introduction -- 3.2 Debt finance -- Senior debt -- 3.3 Mezzanine finance -- Subordinate debt -- Bond finance -- 3.4 Equity finance -- 3.5 Sources of debt and equity -- 3.6 Cash flow modelling and project financing -- 4 Risk management -- 4.1 Introduction -- 4.2 Risk -- 4.3 Risk management process -- Risk identification -- Risk analysis -- Risk response -- 4.4 Typical risks in project financing -- 5 The financial assessment process -- 5.1 Introduction -- 5.2 The financial assessment structure -- SPV assessment -- Lenders' assessment -- SPV and lender final assessment -- 6 Case study -- 6.1 Introduction -- 6.2 Independent power project -- 6.3 Supply and offtake contracts -- Supply contracts -- Offtake contracts -- Applications of supply and offtake contracts -- 6.4 Assumptions for initial assessment -- 7 Developing the base case model.

7.1 Introduction -- 7.2 SPV's initial assessment -- 7.3 Identify the estimated activities, time, costs and revenues of the project -- 7.4 Development of the base case model -- 7.5 Identify major project risks -- 7.6 Assessment of base case model incorporating risks -- 8 Initial economic assessment by lenders -- 8.1 Introduction -- 8.2 Financial package assessment -- Finance package (1) -- Finance package (2) -- Finance package (3) -- 8.3 Conclusions -- 9 Financial engineering -- 9.1 Introduction -- 9.2 Financial instruments used in financial engineering -- Forward rates -- Financial futures -- Swaps -- Options -- Caps, floors, collars, swaptions and compound options -- Asset-backed securities -- 9.3 Refinancing -- 9.4 Reappraising public-private partnerships -- 9.5 Techniques applied in the reappraisal of PPP concession agreement -- 9.6 Other financial engineering techniques -- 10 Final assessment to determine project commercial viability -- 10.1 Introduction -- 10.2 Detailed risk assessment -- 10.3 Financial engineering -- Tax holiday -- Financial collar -- Extending the concession -- Increasing debt -- Grace period -- Phasing construction and operation -- Upfront payments -- Existing concession revenues -- 10.4 Summary -- 11 Financial close -- 11.1 Introduction -- 11.2 Due diligence -- Technical -- Legal due diligence -- Trigger step in rights -- Model audit and sensitivity analysis -- Risk valuation -- Term sheet -- Inter-creditor agreement -- Hedge strategy -- Letters of credit -- Reserve account -- Escrow and ring-fenced facilities -- Economic indicators -- Taxation -- Insurance -- 11.3 Financial close -- Credit committee approval process -- Due diligence report -- Technical closure -- Financial close -- Technical commencement -- Execute interest rate swaps -- 12 Islamic finance and project finance -- 12.1 Introduction -- 12.2 Islamic finance.

12.3 Shariah -- Qiyas and Litihad -- 12.4 Core principles of Islamic finance -- Sharing (profit/loss and risk) -- No unfair gain -- No speculation -- No uncertainty -- No investments that are not in the public interest -- No hoarding of money -- Deception -- Islamic financial institutions -- Shariah supervisory boards -- 12.5 Project finance -- The Ijara principle -- Ijara Mawsufah Fi Al Dhimmah (forward lease) -- Istisna'a -- Sukuk -- Sukuk al Istisna'a -- A typical SAI deal -- Hedging -- Swaps -- 12.6 Other Islamic finance techniques for projects -- Musharaka (equity financing) -- Bai salam (forward financing) -- 12.7 Risks and liabilities -- 12.8 Summary -- 13 Conclusions and recommendations -- 13.1 Review -- 13.2 Conclusions -- 13.3 Recommendations -- Appendix -- Glossary -- References -- Index.