Project finance analysis

Assessment 2: Assignment 

You need to choose a real-world project finance case study. A good place to start is a book by Henry Davis “Project Finance: practical case studies”, volumes I and II.

You need to prepare a 2000-word document describing your case:

• The purpose of the project
• The financing structure
• Key risks
• Principal problems and lessons

Learning outcomes tested:

• Understand the exposure of lending institutions to credit risk;
• Have knowledge of credit rating systems and their application
• Ability to measure credit risk using quantitative methodologies
• Apply credit risk management techniques
• Have a critical awareness of current issues in credit risk

Format and referencing: (15 marks)

You will need to include a title page, Introduction, discussion, evidence, analysis, summary and conclusion. Using academic Harvard style referencing figure prominently in the marks attributed for this bit.

Analysis of project finance: (25 marks)

You need to demonstrate knowledge of what is meant by project finance. You should then address why you chose your case. Of the 25 marks 5 will be awarded to explaining and defining project finance, 10 marks will be awarded to the reason for choosing the case ( e.g. explanation how country benefits from this project), and 10 marks will be awarded to analysing the purpose of the project.

Analysis of the source of finance and financing  structure: (30 marks)

15 marks will be given to extracting information and calculation ratios, and 15 marks will be awarded for an appropriate analysis and evaluation.

Identifying credit risks, principle problem and lessons learned: (30 marks)

15 marks will be given for referring to two key credit risks and 15 marks will be given to lessons learned.

BELOW IS EXAMPLE OF TABLE OF CONTEST PROVIDED BY MY PROFESOR. THIS IS WAY ASSIGMENT CAN BY STRUCTURED

List of Contents

1. Introduction. 3
2. Description of the project 4

II.1. Overview of a project finance project 4

II.2. Reasons for selecting the case. 4

II.3. Purpose of the chosen project 5

III.  Structure of the financing. 6

III. 1. Main parties. 6

1. a) Project company. 6
2. b) Sponsor 6
3. c) Investors. 6

III.2. Sources of financing. 7

1. a) Equity. 7
2. b) Bonds. 7
3. c) Debt-to-Equity ratio. 8
4. d) Other sources of financing. 9
5. Risks involved. 10
6. 1. Pre-completion risk and mitigations. 10
7. a) Timing risk. 10
8. b) Concession risk. 10

IV.2. Sovereign risk and mitigation. 11

1. a) Expropriation risk. 11
2. b) Currency risk. 11
3. Main issue. 11
4. Lessons learnt 12

VII. Conclusion and Discussion. 12

VIII.        References. 13