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Structured and Project Finance

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    1. Structured and Project Finance

    2. Overview: Structured & Project Finance Introduction: Overview of Ex-Im Bank Structured Finance Products History and Activity Project v. Structured Finance: Distinctions Deal Appropriateness

    3. Products What We Do Comprehensive guarantee Direct Loan Political risk only guarantee Role is as Senior Lender Participation limited by U.S. content

    4. History: Where Weve Been

    5. Activity: What Weve Done

    6. Authorizations By Sector, Project and Structured Finance, 1995-2004 ($MM)

    7. Authorizations By Sector, Project and Structured Finance, 1995-2004 ($MM)

    8. Structured & Project Finance: What is the Difference? Structured (Typical) Full recourse to sponsor Expansion of operation in existence for 3+years Analysis of historic & projected cash flows Limited perfection of security Project Finance Limited recourse Greenfield or project expansion Analyze projects future cash flows Complex documentation to perfect security

    9. Terms: Project v. Structured Finance Structured Finance Pay interest during construction (IDC) Maximum Repayment Term 10 years/12 years power Equal semi-annual principal 1st principal 6 months post-completion Finance for: local costs connected to export contract, ancillary fees Project Finance Capitalize IDC Repayment up to 14 years Flexible amortization Grace periods available Local costs 15% of contract value, special ancillary services

    10. Deal Appropriateness-Structured v. Project Finance The Trade-off What Not to Do Issues Structure and Core Principles Co-finance Example

    11. Project Finance: Trade-off Whether to use project finance is often a trade-off between:

    12. Other Considerations For Project Finance: Expertise For Structured Finance: Existing credit source For either: Existence of more than an idea and a site

    13. What Not to Do Dont: Use project finance due to lack of supporting balance sheet strength. Assume micro project finance takes as long as big deals it takes more! Use structured finance to get lower credit standards.

    15. Core Concepts of Project Finance Reasonable Assurance of Repayment Equity at Risk Long-term investors Real cash equity investments Proper incentives Sound Regulatory & Legal Framework Non-interference & lenders rights Government support Clear regulation and transparent, enforceable contracts

    16. Structured Finance: Structure Degree of structuring can vary Elements tend to include: Reserve & other accounts Payment priorities & cash control Funding tied to milestones Dividend release conditions

    17. Example Structure Finance: Off-shore Trust

    18. Structure Finance Core Principles Same as for project finance: Reasonable Assurance of Repayment Equity at risk Sound Regulatory & Legal Framework Structured finance can save money & time, but not at the expense of credit principles.

    19. Co-Finance Reinsurance of lead ECA by follower Used mostly for straight-forward credits Not suited for project finance Too complex for passive following Little cost savings Use in structured finance being considered.

    20. Examples: Project Finance in Africa

    21. Examples: Project Finance in Africa

    22. Conclusions Structured finance increasingly an option, especially for small deals African activity has been less than hoped Project finance requires equity support & expertise Structured finance can save time & money but not at expense of credit Ex-Im Bank committed to being flexible in finding deal-specific approaches