Project Evaluation and Financing - MIT OpenCourseWare

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$10,000,000 $5,000,000 $0 ($5,000,000) ($10,000,000) ($15,000,000) ($20,000,000) ($25,000,000) ($30,000,000) ($35,000,000) Financing – Gross Cashflows Design/Preliminary Construction years 1 2 3 4 5 6 7 8 9 10 OWNER investment ($10,000,000) ($20,000,000) operation incomes $2,000,000 $4,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 owner cashflow $0 ($10,000,000) ($20,000,000) $2,000,000 $4,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 owner cum cashflow $0 ($10,000,000) ($30,000,000) ($28,000,000) ($24,000,000) ($18,000,000) ($12,000,000) ($6,000,000) $0 $6,000,000 CONTRACTOR costs ($4,000,000) ($7,000,000) ($14,000,000) $0 $0 $0 $0 $0 $0 $0 revenues $0 $10,000,000 $20,000,000 $0 $0 $0 $0 $0 $0 $0 contractor cashflow ($4,000,000) $3,000,000 $6,000,000 $0 $0 $0 $0 $0 $0 $0 contractor cum cashf ($4,000,000) ($1,000,000) $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 Owner investment = contractor revenue 1 2 3 4 5 6 7 8 9 10 11 owner cum cashflow contractor cum cashflow • Early expenditure • Takes time to get revenue
Multi-lateral, bi-lateral and Export Credit Agencies Typical Project Structure for IPP Gas Input Under a supply contract Non-Recourse DEBT Inter-creditor Agreement Technol. License Labor Bank Syndicate Equipment Contract (turbines) 70% Adapted from: Esty & Sesia; HBS Oct. 2007 30% Project Company (Power Plant) Construction Contract (EPC Contract) Sponsor A Operating & Maint. Contract Sponsor B EQUITY Shareholder Agreement Board of Directors Power Output Under a purchase contract Sponsor C Host Government: legal system, permits, Regulation, property rights, etc.
Page 1 and 2: MIT OpenCourseWare http://ocw.mit.e
Page 3 and 4: Main Features Project Financing Ec
Page 5 and 6: Equity Company Project Equity Loan
Page 7 and 8: Strategic Objectives (Long Run) •
Page 9 and 10: Summary of Financial Ratios Profita
Page 11 and 12: Liquidity Ratios: Short term oblig
Page 13 and 14: Traditional Financing Structure Sto
Page 15: Contractor Construction Contract In
Page 19 and 20: Typical Terms Project Company has
Page 21 and 22: Project finance may come into the p
Page 23 and 24: Benefit of Leverage on Investor’s
Page 25 and 26: Man-hours S-curve curve Work months
Page 27 and 28: Expense & Payment Cumulative net ca
Page 29 and 30: Contractor Financing Owner keeps a
Page 31 and 32: Latent Credit Many people forced t
Page 33 and 34: Develop or Not Develop Is any indi

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