Cover -- Contents -- Foreword -- Preface -- Acknowledgments -- About the Author -- Chapter 1: Introduction to the Theory and Practice of Project Finance -- Introduction -- 1.1 What Is Project Finance? -- 1.2 Why Do Sponsors Use Project Finance? -- 1.3 Who Are the Sponsors of a Project Finance Deal? -- 1.3.1 Industrial Sponsors in Project Finance Initiatives Linked to a Core Business -- 1.3.2 Public Sponsors with Social Welfare Goals -- 1.3.3 Contractor/Sponsors Who Develop, Build, or Run the Plant -- 1.3.4 The ''Purely'' Financial Investor -- 1.4 Overview of the Features of Project Finance -- 1.4.1 The Contractor and the Turnkey Construction Contract (TKCC) -- 1.4.2 Operations and Maintenance Contractor and the O&M Agreement -- 1.4.3 Purchasers and Sales Agreements -- 1.4.4 Suppliers and Raw Material Supply Agreements (RMSAs) -- 1.4.5 Project Finance as a Risk Management Technique -- 1.5 The Theory of Project Finance -- 1.5.1 Separate Incorporation and Avoidance of Contamination Risk -- 1.5.2 Conflicts of Interest Between Sponsors and Lenders and Wealth Expropriation -- Chapter 2: The Market for Project Finance: Applications and Sectors -- Introduction -- 2.1 Historical Evolution of Project Finance and Market Segments -- 2.2 The Global Project Finance Market -- 2.2.1 A Closer Look at the European Market -- 2.2.2 PPP Development -- Chapter 3: Project Characteristics, Risk Analysis, and Risk Management -- Introduction -- 3.1 Identifying Project Risks -- 3.1.1 Precompletion Phase Risks -- 3.1.2 Postcompletion Phase Risks -- 3.1.3 Risks Found in Both the Pre- and Postcompletion Phases -- 3.2 Risk Allocation with Contracts Stipulated by the SPV -- 3.2.1 Allocation of Construction Risk: The Turnkey (or Engineering, Procurement, and Construction„EPC) Agreement -- 3.2.2 Allocation of Supply Risk: Put-or-Pay Agreements.

3.2.3 Allocation of Operational Risk: Operations and Maintenance (O&M) Agreements -- 3.2.4 Allocation of Market Risk -- 3.3 Summary of the Risk Management Process -- Chapter 4: The Role of Advisors in a Project Finance Deal -- Introduction -- 4.1 The Role of Legal Advisors in Project Finance Deals -- 4.1.1 Legal Advisor, Legal Advisors, and Law Firms: The International Part and Local Legal Counsel -- 4.1.2 Project Financing Development Stages and Impacts on the Role of Legal Advisors -- 4.2 The Role of the Independent Engineer in Project Finance Deals -- 4.2.1 Initial Due Diligence Reporting -- 4.2.2 Monitoring Realization of the Project (Engineering and Construction) -- 4.2.3 Assistance at the Time of Plant Acceptance -- 4.2.4 Monitoring Operations Management -- 4.3 Role of Insurance Advisors and Insurance Companies in Project Finance Deals -- 4.3.1 Rationale for Using Insurance in Project Finance Deals -- 4.3.2 When Should Insurance Products Be Used? -- 4.3.3 Areas Where the Insurance Advisor Is Involved -- 4.3.4 Types of Conventional and Financial Insurance Products Available for Project Finance Deals -- 4.3.5 Integrated Insurance Solutions„Structure and Content -- 4.3.6 Classification of Insurance Underwriters -- Chapter 5: Valuing the Project and Project Cash Flow Analysis -- Introduction -- 5.1 Analysis of Operating Cash Flows and Their Behavior in Different Project Life-Cycle Phases -- 5.1.1 Inputs for Calculating Cash Flows -- 5.2 Defining the Optimal Capital Structure for the Deal -- 5.2.1 Equity -- 5.2.2 Senior Debt -- 5.2.3 VAT Facility -- 5.2.4 Stand-by Facility -- 5.2.5 Identifying Sustainable Debt/Equity Mixes for Sponsors and Lenders -- 5.3 Cover Ratios -- 5.3.1 What Cover Ratios Can Tell Us and What They Can't -- 5.3.2 Cover Ratios as an Application of the Certainty Equivalents Method -- 5.4 Sensitivity Analysis and Scenario Analysis.

5.4.1 Which Variables Should Be Tested in Sensitivity Analysis? -- Chapter 6: Financing the Deal -- Introduction -- 6.1 Advisory and Arranging Activities for Project Finance Funding -- 6.1.1 Advisory Services -- 6.1.2 Arranging Services -- 6.1.3 Integration of Advisory and Arranging Services -- 6.2 Other Roles in Syndicated Loans -- 6.3 Fee Structure -- 6.3.1 Fees for Advisory Services -- 6.3.2 Fees for Arranging Services -- 6.3.3 Fees to Participants and the Agent Bank -- 6.3.4 Example of Fee Calculation -- 6.4 International Financial Institutions and Multilateral Banks -- 6.4.1 Multilateral Organizations -- 6.4.2 Regional Development Banks -- 6.5 Bilateral Agencies: Developmental Agencies and Export Credit Agencies (ECAs) -- 6.5.1 Developmental Agencies -- 6.5.2 Export Credit Agencies (ECAs) -- 6.6 Other Financial Intermediaries Involved in Project Finance -- 6.7 Funding Options: Equity -- 6.7.1 Timing of the Equity Contribution and Stand-by Equity and Equity Acceleration -- 6.7.2 Can Shares in an SPV Be Listed on a Stock Exchange? -- 6.8 Funding Options: Mezzanine Financing and Subordinated Debt -- 6.9 Funding Options: Senior Debt -- 6.9.1 The Base Facility -- 6.9.2 Working Capital Facility -- 6.9.3 Stand-by Facility -- 6.9.4 VAT Facility -- 6.9.5 Loan Remuneration -- 6.9.6 Loan Currency -- 6.9.7 Repayment Options -- 6.9.8 Refinancing Loans Already Granted to the SPV -- 6.10 Project Leasing -- 6.10.1 Valuing the Convenience of a Project Leasing -- 6.10.2 The Tax Effect -- 6.11 Project Bonds -- 6.11.1 Investors in Project Bonds -- 6.11.2 Various Categories of Project Bonds -- 6.11.3 Municipal Bonds -- 6.11.4 When Should Project Bonds Be Used? -- 6.11.5 Procedure for Issuing Project Bonds -- Chapter 7: Legal Aspects of Project Finance -- Introduction -- 7.1 The Project Company -- 7.1.1 Reasons for Incorporating the Project in a Project Company.

7.1.2 The Project Company as a Joint Venture: Another Reason to Develop a Project in an SPV -- 7.1.3 The Project Company and Groups of Companies -- 7.1.4 Corporate Documentation: Articles of Incorporation -- 7.1.5 Outsourcing the Corporate Functions of the Project Company: How the Company/Project Is Actually Run -- 7.2 The Contract Structure -- 7.2.1 Before the Financing: The Due Diligence Report and the Term Sheet -- 7.2.2 Classification of Project Documents -- 7.2.3 The Credit Agreement -- 7.2.4 Security Documents: Security Interests and What They Do -- 7.2.5 Other Finance Documents -- 7.2.6 Project Agreements -- 7.3 Refinancing Project Finance Deals -- Chapter 8: Credit Risk in Project Finance Transactions and the New Basel Capital Accord -- Introduction -- 8.1 The Basel Committee's Position on Structured Finance Transactions (Specialized Lending, SL) -- 8.1.1 Classes of Transactions Included in Specialized Lending -- 8.2 Rating Criteria for Specialized Lending and Their Application to Project Finance -- 8.2.1 Financial Strength -- 8.2.2 Political and Legal Environment -- 8.2.3 Transaction Characteristics -- 8.2.4 Strength of Sponsors -- 8.2.5 Mitigants and Security Package -- 8.2.6 Summary of Grading Criteria -- 8.3 Rating Grade Slotting Criteria of the Basel Committee and Rating Agency Practices -- 8.4 The Basel Accord: Open Issues -- 8.4.1 Effects of the Basel Proposal on the Syndicated Project Finance Loan Market -- 8.5 Introduction to the Concepts of Expected Loss, Unexpected Loss, and Value at Risk -- 8.6 Defining Default for Project Finance Deals -- 8.7 Modeling the Project Cash Flows -- 8.7.1 Defining a Risk Assessment Model -- 8.7.2 Identifying Project Variables and Key Drivers -- 8.7.3 Input Variables: Estimation and Data Collection -- 8.7.4 Estimating Project Cash Flow and Valuing Results.

8.8 Estimating Value at Risk through Simulations -- 8.9 Defining Project Value in the Event of Default -- 8.9.1 Deterministic vs. Stochastic LGD Estimates -- 8.9.2 LGD Drivers: The Value of Underlying Assets vs. Defaulted Project Cash Flows -- 8.9.3 Restructuring vs. Default -- Case Studies -- Case Study 1: Cogeneration -- C1.1 Situation -- C1.2 Production Process -- C1.3 Sponsors of the Deal -- C1.4 Agreements Underpinning the Deal -- C1.5 Financial Structure -- C1.6 Conclusion: In Arrigoni's Office -- Case Study 2: Italy Water System -- Introduction -- C2.1 Business Plan of the Project -- C2.2 Assumptions -- C2.3 Capital Expenditure -- C2.4 Financial Requirement and Sources of Financing -- C2.5 Operational Period -- C2.6 Economic and Financial Ratios -- Appendix to Case Study 2: Structure and Functioning of the Simulation Model -- Introduction -- A.1 Breakdown of the Financial Model -- Case Study 3: Hong Kong Disneyland Project Loan -- C3.1 Background on Syndicated Bank Lending -- C3.2 The Hong Kong Disneyland Project Loan -- C3.3 Designing a Syndication Strategy -- C3.4 Executing the Syndication Strategy -- C3.5 Conclusion -- Glossary and Abbreviations -- References -- Index.