Preface | p. XV |
What Is Project Financing? | p. 1 |
What is Project Financing? | p. 1 |
A Historical Perspective | p. 4 |
Requirements for Project Financing | p. 6 |
Appropriateness of Project Financing | p. 8 |
An Example | p. 9 |
Conclusion | p. 12 |
The Rationale for Project Financing | p. 13 |
Prior Studies' Explanations | p. 13 |
The Need for Contracts | p. 14 |
The Advantages of Separate Incorporation | p. 14 |
Countering the Underinvestment Problem | p. 16 |
Reallocating Free Cash Flow | p. 18 |
Reducing Asymmetric Information and Signaling Costs | p. 19 |
More Efficient Structuring of Debt Contracts | p. 21 |
More Effective Corporate Organization and Management Compensation | p. 21 |
Project Financing Versus Direct Financing | p. 22 |
Advantages of Project Financing | p. 22 |
Disadvantages of Project Financing | p. 29 |
Conclusion | p. 30 |
What Is Special about Large Projects? | p. 31 |
How Large Are "Large" Projects? | p. 32 |
Length of Project Contracts | p. 36 |
Initial Project Capital Structure | p. 42 |
Why Studying Project Finance Is Useful | p. 46 |
Why Study How Large Projects Are Financed? | p. 50 |
Conclusion | p. 52 |
Who Finances Large Projects? | p. 53 |
Sources of Funds for Large Projects | p. 53 |
Project Bonds' Default Risk | p. 57 |
Lead Arrangers, Managing Underwriters, and Advisors | p. 65 |
Conclusion | p. 68 |
Analyzing Project Viability | p. 70 |
Technical Feasibility | p. 70 |
Economic Viability | p. 72 |
Creditworthiness | p. 74 |
Conclusion as to Viability | p. 75 |
Assessing Project Risks | p. 76 |
Completion Risk | p. 76 |
Technological Risk | p. 77 |
Raw Material Supply Risk | p. 78 |
Economic Risk | p. 78 |
Financial Risk | p. 79 |
Currency Risk | p. 81 |
Political Risk | p. 82 |
Environmental Risk | p. 84 |
Force Majeure Risk | p. 84 |
Implications for Project Financing | p. 85 |
The Cogeneration Project | p. 85 |
Conclusion | p. 87 |
Designing Security Arrangements | p. 88 |
Purpose of Security Arrangements | p. 89 |
Direct Security Interest in Project Facilities | p. 90 |
Security Arrangements Covering Completion | p. 91 |
Security Arrangements Covering Debt Service | p. 92 |
Types of Purchase and Sale Contracts | p. 93 |
Raw Material Supply Agreements | p. 97 |
Supplemental Credit Support | p. 98 |
Insurance | p. 99 |
The Cogeneration Project | p. 100 |
Conclusion | p. 102 |
Structuring the Project | p. 103 |
Undivided Joint Interest | p. 103 |
Corporation | p. 111 |
Partnership | p. 114 |
Limited Liability Company | p. 118 |
The Cogeneration Project | p. 119 |
Conclusion | p. 121 |
Preparing the Project Financing Plan | p. 122 |
General Considerations | p. 122 |
Construction Financing | p. 126 |
Long-Term Financing | p. 127 |
Withholding Tax Considerations | p. 129 |
Estimating the Borrowing Capacity of a Project | p. 129 |
Loan Repayment Parameters | p. 130 |
Borrowing Capacity, Assuming Full Drawdown Immediately Prior to Project Completion | p. 130 |
Borrowing Capacity, Assuming Periodic Loan Drawdowns | p. 134 |
Application to a Hypothetical High-Speed Rail Project | p. 135 |
Annual Coverage Tests | p. 138 |
Conclusion | p. 139 |
Discounted Cash Flow Analysis | p. 141 |
Incremental After-Tax Cash Flows | p. 142 |
The Hurdle Rate | p. 148 |
Estimating the Cost of Capital for a Project | p. 153 |
Net Present Value Analysis | p. 156 |
Internal Rate of Return Analysis | p. 157 |
Comparing IRR and NPV Analyses | p. 159 |
Conclusion | p. 163 |
Financial Modeling and Project Evaluation | p. 164 |
Preparing Cash Flow Projections | p. 164 |
Preparing Projected Financial Statements | p. 171 |
Evaluating a Project's Debt Capacity | p. 173 |
Measuring Expected Rates of Return | p. 175 |
Sensitivity Analysis | p. 182 |
Conclusion | p. 184 |
Using Real-Options Analysis to Evaluate a Project | p. 186 |
Description of the Oil Field Project | p. 186 |
Project's Real Options | p. 187 |
Evaluating the Project | p. 190 |
Traditional DCF Analysis | p. 205 |
Sensitivity of Option Value to Oil Price Volatility and to Reserve Dispersion | p. 206 |
Conclusion | p. 208 |
Sources of Project Funds | p. 209 |
Equity | p. 210 |
Long-Term Debt Market | p. 213 |
Commercial Bank Loans | p. 214 |
Fixed-Rate Debt Market | p. 219 |
International Capital Market | p. 227 |
Supplier Credits | p. 231 |
Governmental Assistance | p. 231 |
World Bank Loans | p. 236 |
Inter-American Development Bank | p. 237 |
Local Sources of Capital | p. 237 |
Conclusion | p. 238 |
Managing Project Risks | p. 240 |
Interest-Rate Swaps | p. 240 |
Credit Default Swaps | p. 245 |
Options | p. 251 |
Forwards and Futures | p. 257 |
Hedging | p. 260 |
Hedging with Options | p. 262 |
Hedging Foreign Exchange Risk | p. 265 |
Conclusion | p. 272 |
Issues for the Host Government | p. 273 |
Contribution to the Host Jurisdiction's Economic Development | p. 273 |
Host Jurisdiction's Expected Economic Return | p. 274 |
Impact on the Availability of Hard Currency | p. 275 |
Exposure of the Host Government to the Project's Obligation to Repay Project Debt | p. 276 |
Desirability of Precedents | p. 277 |
Hibernia Oil Field Project | p. 277 |
Public-Private Infrastructure Partnerships | p. 278 |
Public-Private Financing Structures | p. 280 |
Legislative Provisions that Can Affect Public-Private Partnerships | p. 283 |
Conclusion | p. 287 |
Case Study: The Indiantown Cogeneration Project | p. 288 |
Project Description | p. 288 |
The Partnership and the Sponsors of the Project | p. 293 |
Principal Project Contracts | p. 296 |
Projected Operating Results | p. 302 |
Project Financing | p. 306 |
Conclusion | p. 318 |
Case Study: The Tribasa Toll Road Project | p. 319 |
The Mexican Government's Toll Road Program | p. 319 |
Infrastructure Financing Alternatives | p. 321 |
Risk Considerations in Foreign Infrastructure Projects | p. 321 |
Tribasa Toll Road Trust 1 Financing | p. 324 |
Credit Analysis | p. 329 |
Risk Minimization Features | p. 333 |
Conclusion | p. 337 |
Case Study: The Euro Disneyland Project | p. 338 |
Introduction | p. 338 |
Project Description | p. 339 |
Disney | p. 340 |
Project Ownership Structure | p. 340 |
Master Agreement with the French Government | p. 344 |
Project Financing | p. 346 |
Interests of the Participants in the Project | p. 349 |
Financial Projections | p. 355 |
Valuation | p. 355 |
Corporate Governance Issues | p. 364 |
Operating Results | p. 364 |
Subsequent Developments | p. 366 |
Conclusion | p. 367 |
Case Study: The Eurotunnel Project | p. 368 |
Historical Background | p. 369 |
The Eurotunnel System | p. 370 |
Project Ownership Structure | p. 371 |
Construction | p. 372 |
Project Financing | p. 373 |
Economic Risk | p. 375 |
Projected Financial Results | p. 380 |
Project Debt Financing | p. 382 |
Project Equity Financing | p. 387 |
Sensitivity Analysis | p. 390 |
Subsequent Developments | p. 391 |
Conclusion | p. 392 |
Conclusion | p. 394 |
Reaping the Benefits of Project Financing | p. 394 |
Recognizing When Project Financing can be Beneficial | p. 396 |
Potential Future Applications of Project Financing | p. 397 |
Organizational (Re)form | p. 398 |
Financial Engineering | p. 398 |
Comparative Terms of Selected Projects | p. 401 |
Other Examples of Project Financings | p. 413 |
Legal Investment Requirements Governing New York Life Insurance Companies | p. 427 |
Bibliography | p. 433 |
Useful Web Sites | p. 441 |
Notes | p. 443 |
Index | p. 459 |
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