PROJECT FINANCING

Understanding Financial Structures through Cash Flow Analysis: Knowing how to build and interpret financial models (financial modelling -CFADS) Clear distinction between corporate and structured financing: Understanding the rationale behind using project financing rather than corporate financing, and what constitutes ‘non-recourse’ or ‘limited-recourse’ financing, where debt repayment depends solely on the project’s revenues and not on the sponsors’ assets. Identification and Allocation of Risk in a Project Financing Transaction: Knowing how to identify legal, technical, environmental, market and political risks at every stage of the project (construction and operation) and learning to transfer risks to the parties best suited to manage them through commercial contracts (e.g. EPC agreements for construction, supply/off-take contracts). 3. Negotiation and Contract Drafting: Understanding the key clauses of fundamental contracts, such as the Concession, the Off-take (sales) contract and the Common Terms Agreement (financing agreement with banks), and how to manage interactions between promoters (sponsors), public bodies, credit institutions, and legal and technical advisors. 4. Optimisation of the Capital Structure: Determining the optimal financial leverage (debt-to-equity ratio) and using financial derivatives (e.g. Interest Rate Swaps) to mitigate the risk of interest rate fluctuations. 5. Bankability Assessment: Assessing whether a project is ‘bankable’, i.e. whether it generates sufficient returns to meet investors’ yield requirements and the guarantees demanded by credit institutions, and understanding and being able to calculate the key indicators, as well as analysing fundamental indicators

Good Knowledge or in-depth understanding of: • methods for evaluating business investments • analysis and reclassification of financial statements • the current tax system in Italy; good knowledge of Excel

Understanding of the methods and application of investment analysis tools and the structuring of a project financing transaction Good understanding of the different perspectives on analysing and mitigating risks and returns in a project financing transaction Understanding of the different approaches to investment valuation: corporate-based versus project financing-based Knowledge of the different perspectives on investment valuation by financial institutions versus debt funds and the role of private equity funds

The course aims to introduce the financial technique of project financing as a method of funding the implementation of projects (works and facilities) by both public and private entities. The course will provide a general overview of methods for evaluating corporate investments and of how project financing can be used to fund and implement an investment. The areas of application of Project Financing and Public-Private Partnership models will be outlined – in accordance with current Italian legislation – illustrating their similarities and differences in terms of selection and application. The course will explore in depth techniques and methods for structuring project financing – for network projects and individual projects – including the relevant indicators and tools for analysing and assessing the so called “Bankability” and or “Affordability”, describing and verifying the different roles of the public and/or private entities involved, the mitigation and allocation of project risks through the contractual structure of the entire transaction. Main assessments and criteria applied by a lender – financial institution or debt fund – to evaluate the project as ‘financeable’ will be illustrated and analysed as well as criteria and mechanisms for initial and final structuring (Term Sheet), and the main structure of relevant loan agreements The course will also be supplemented by testimonials from leading national and international professionals from lenders and industry practitioners in the traditional/renewable energy and network infrastructure sectors. In the second part of the course, individual and group exercises will be carried out, during which financial models will be created in a Windows Excel environment for the structuring of project financing transactions for both renewable energy projects and network infrastructure.

Recommended textbook: 1. Project Finance in Theory and Practice: Designing, Structuring, and Financing Private and Public Projects Paperback – 4th edition English by Stefano Gatti (Author), published by Academic PR 2. Project Financing – Project Finance for the Construction of Public Works – 2nd Edition by Sergio Massimiliano Sambri, published by CEDAM. 3. Public-Private Partnerships and Project Finance. Following the Amending Decree to the Public Contracts Code. Edited by Marco Nicolai, Ilaria Paradisi, Walter Tortorella , published by Maggioli editore 4. Valuation. Theoretical Foundations and Best Practice in the Industrial and Financial Sectors - Mario Massari - Laura Zanetti- 2nd Edition, published by McGraw-Hill Education 5. Bank lending, investment, insurance and derivatives contracts - Gianni & Origoni published Wolters Kluwer Teaching materials (lecture notes and slides)

• Classroom Lectures and Testimonials • Practical Sessions in the Computer Lab • Case Study Analysis

• Oral exam • classroom quick test

• Class participation; • Curricula studiorum • Exam mark