Project finance investments - Английский язык - Презентации

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Project finance investments

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Topic : Project finance Topic : Project finance investmentsinvestments • 1. The concept of "Project finance investment projects", its types and content • 2. Development of project financing investments in the Republic of Uzbekistan www.arxiv.uz

What is Project Finance?What is Project Finance? • No universally accepted definition of the term “Project Financing” -- different people use it in different senses. • Project financing refers to a financing in which lenders to a project look primarily to the cash flow and assets of that project as the source of payment of their loans. www.arxiv.uz

Project financeProject finance www.arxiv.uz

Project FinanceProject Finance • A Definition from the Association of Corporate Treasurers “ A financing of a particular economic unit in which a lender looks initially to the cash flows and earnings of that economic unit as the source of funds from which a loan will be repaid and to the assets of the economic unit as collateral for the loan” www.arxiv.uz

Origins and Development Origins and Development of Project Financeof Project Finance • Project financing had its origins in the energy industry in industrialized countries (oil & gas production loans). • Later extended to infrastructure, transportation, mining, utilities and large industrial projects. • Scope further expanded to include all kinds of infrastructure projects. • Today even medium-scale projects (US $5 million) can use project finance. • Project financing is a new kind of bank’s activity was developed at the abroad the last 15-20 years and is now especially popular in the United States and Western Europe. www.arxiv.uz

Project finance is the system of careful evaluation of the project and detailed design plan for its implementation. One of the most important moments is the allocation of risk between the borrower, the lender and other parties involved in the project, which is carried by diversification of risks. In case failure with the project, diversification of risks protects the lender or the borrower from bankruptcy. www.arxiv.uz

Why Project Financing?Why Project Financing? Project Owners’ Perspective • Size and cost of projects • Risk minimization • Preservation of borrowing capacity and credit rating • May be only way that enough funds can be raised www.arxiv.uz

Project Finance • A Project usually defined as a major productive capital investment e.g. in - oil or mineral development - heavy industry - forestry, agriculture - power generation, transportation, (roads, bridges) - telecoms www.arxiv.uz

Main Characteristics of Main Characteristics of Suitable Investment projects Suitable Investment projects for Projects Financingfor Projects Financing • The ideal candidates for project financing are capital investment projects that • are capable of functioning as independent economic units, • can be completed without undue uncertainty, and • when completed, will be worth demonstrably more than they cost to complete. www.arxiv.uz

Characteristics of Project Finance • Project cash flows • Normally higher levels of debt • Variety of contractual obligations and undertakings to manage and reduce risk - Bank Guarantees - Letters of Credit to cover greater risk during construction period www.arxiv.uz

Prerequisites for Project Prerequisites for Project FinancingFinancing • Financial Analysis • Economic Analysis • Risk Analysis www.arxiv.uz

Project FinanceProject Finance ProcessProcess • Strategic/commercial evaluation • Systematic identification and exploration of risks • Valuation (NPV of cash flows) • Design of risk bearing/sharing package • Appropriate funding package • Impact of financing package on net cash flows and sensitivity analysis www.arxiv.uz

The Basic Elements of a The Basic Elements of a Project FinancingProject Financing Loan funds Debt repayment Equity funds Returns to investors Cash deficiency agreement and other forms of credit supportInvestors Lenders OutputAssets comprising the project PurchasersPurchase contract(s) Suppliers Raw materials Supply contract(s) www.arxiv.uz

In Project financing the main sources of loans are commercial banks. However, not only banks provide funds for the project; involved in lending to several financial institutions, but commercial bank is considering various options of the loan, arrange financing, takes over the functions of a financial adviser, developing risk- sharing scheme for the project, provides customer service and its relationship with other creditors. www.arxiv.uz

• The key to project financing is the reallocation of any risk away from the lenders to the project. It’s All About Risk! www.arxiv.uz

““ What may be an unacceptable risk What may be an unacceptable risk for one party may be perfectly for one party may be perfectly acceptable to another”acceptable to another” Risk Analysis • Pre construction • Construction • Operation But many risks may be present at all stages Resource availability- Geological- Infrastructure-Technological-Construction- Operating-Labour supply-Material sourcing-Product market-Management- Political-Regulatory-Environmental www.arxiv.uz

The term "regression" refers to the opposite claim for the amount of money provided by legal entity to another obliged person. www.arxiv.uz

Project financing without recourse to the borrower assumes that the creditor takes all the commercial and political risks associated with the project, evaluating only the cash flows generated by the project and to repay loans and interest on them. This form of financing is the most expensive for the borrower because the lender expects to receive appropriate compensation for the high level of financial risk. This form of financing projects is rarely used because of the great complexity of a system of commercial obligations and the high costs of attracting specialists, experts, consulting services, etc. Without recourse to the borrower finance projects with high profitability and ensure the production of competitive products and related primarily the extraction and processing of minerals. ww

Project financing with full recourse to the borrower is widespread in the world. This form of preference because rather quickly possible to obtain the necessary funds to finance the project. It is characterized by the lowest cost of funds compared to the others. Financing with complete recovery of the creditor to the borrower can be used in the following cases: • providing funding for projects with federal or regional importance, nonprofit infrastructure projects; • the provision of funds in the form of export credit, • lack of reliability of guarantees issued for the project, although they cover all project risks; • provision of funds for small projects that are sensitive to even slight increase in investment costs. www.arxiv.uz

Project finance with limited recourse to the borrower involves an assessment of all the risks associated with the implementation of the project. Risks are distributed among the participants in such a way that the participants can take care of all the risks depend on them. For example, the borrower assumes all operational risks; equipment suppliers assume the risks associated with the completeness and quality of supply; the contractor is responsible for the completion of construction enterprises, etc. The advantage of this method of project financing is its fair value and the maximum allocation of risks among all project participants. Parties interested in the project, take on specific commercial liability instead of providing guarantees. One of the type of project finance with limited reco

Recently, the commercial banks of Uzbekistan as the National Bank, Bank "Asaka" and "Pakhtabank" are trying to carry out project finance, but in most instances is complicated by the following: - Require quite a large investment on a long term basis, which can only afford a few of banks; - Low investment attractiveness of economic subjects or projects; - The bankruptcy of many large enterprises. www.arxiv.uz

ConclusionConclusion • Project financing is characterized by a particular way of financial and economic support for the project, which is based on receipt of confirmation of the reality of the planned cash flows discounted by identifying project-related most important and significant of risks and their main part between sponsors, lenders, contractors, suppliers of material resources and other participants . • In project financing basic software provides banks loans is the project itself, that is, income that will create or reconstructed company in the future. www.arxiv.uz

Thank you for your attention! www.arxiv.uz

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