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Project Finance(2)

By Carrie Franklin,2014-08-08 07:22
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Project Finance(2)

    ASIAN INSTIUTTE OF TECHNOLOGY

    SCHOOL OF MANAGEMENT

SM80.9007 Project Finance, 3(3-0) Semester: August 2008

Introduction:

What is the course about?

    This course is about why and how of Project Finance. Project Finance refers to the raising of funds on a limited recourse or non recourse basis; For what? It is for financing economically separable capital investment projects. Thus, the project, and not the entire firm, is responsible for servicing the providers of finance. Investors look to the project’s profitability and the collateral value of the project’s assets in making their investment decision. This is in contrast to Corporate Finance in which the investors look to the firm’s entire asset portfolio.

In this course, we will focus on the Project, its viability and its financing.

Who can benefit from this course?

    This course is for students who intend to take up careers in finance, banking, consulting or in the government.

Course Objectives:

The course has the following participant focused objectives:

    1. Help develop an appreciation of what is project finance and how it differs from corporate finance.

    2. Develop an understanding of the different issues involved in making project finance work.

    3. Develop an understanding of the tools and techniques used in project financing.

    4. Deepen understanding of key learning by application to the analysis of a specific example though a group

    project work.

Course Rationale:

    According to World Bank reports cited in Esty (2004) (see below), Asian countries would require 2 trillion USD of infrastructure investment over the next 10 years. Over the same period Latin American countries would need 50 billion USD of investments in infrastructure.

    This investment will be possible only with private sector involvements. Private sector has historically used project financing to finance large infrastructure projects.

    Knowledge of project finance can help the MBA play an important role in this field of infrastructure development.

Text and Material:

    1. Project Financing: Asset Based Financial Engineering by John D. Finnerty (Second Edition),2007, Wiley

    (Finnerty) Available in the reading room.

    2. Modern Project Finance: A Case book by Benjamin C. Esty, 2004, Wiley (Esty). Available in the reading

    room.

Course outline and Session Plan (Each session will be of 3 hours duration)

Session Objectives and Content

    1 The objectives of this session would be to understand:

    What is Project Financing?

    What is the Rationale for Project Financing?

    What is special about Large Projects?

    Who Finances Large Projects?

    Reading: Chapters 1 to 4 of Finnerty

    Mode: Lecture and Class discussion

    2 The objectives of this session would be to understand:

    How to design security arrangements?

    How to structure the project?

    How to prepare a Project Financing plan?

    Reading: Chapters 6 to 10 of Finnerty

    Mode: Lecture and Class Discussion

3 The objectives of this session would be to understand:

    How to use Real Options to evaluate a project?

    What are the sources of Project Funds?

    How to manage project risks?

    Reading: Chapters 11 to 13 of Finnerty

    Mode: Lecture and Class discussion

    4 The objective of this session is to understand the structuring of projects using a case study.

    Case: The Chad Cameroon Petroleum Development and Pipeline Project (A) from Esty

    Mode: Student Group Presentation and discussion

    5 The objective of this session would be to understand the valuation of projects using a case study.

    Case: Airbus A3XX: Developing the World’s Largest Commercial Jet (A) from Esty

    Mode: Student Group Presentation and discussion

    6 The objective of this session would be to understand the valuation of projects using a case study.

    Case: Nghe An Tate and Lyle Sugar Company (Vietnam) from Esty

    Mode: Student Group Presentation and discussion

    7 The objective of this session would be to understand how to manage risks in a project using a case

    study.

    Case: Petrolera Zuata, Petrozuata C.A from Esty

    Mode: Student Group Presentation and discussion

    8 The objective of this session is to understand financing issues in large projects.

    Case: Financing PPL Corporation’s Growth Strategy from Esty

    Mode: Student Group Presentation and discussion

    9 The objective of this session is to crystallize the difference between project finance and corporate

    finance

    Case: Calpine Corporation: The evolution from Project to Corporate Finance from Esty

    Mode: Student group presentation and discussion

    10 Student Project Presentations

    Course Summary

Grading and Evaluation:

Class Attendance: 10%

    Student Group Presentation: 40%

    Student Group Projects: 50%

Instructor: Dr. Sundar Venkatesh

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