international finance management - financing international project

7/30/2019 International Finance management - financing international project

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PRESENTATION ON

FINANCING INTERNATIONAL

PROJECTS


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PROJECT FINANCE:Project finance is a long-term

method of financing large infrastructure and industrial

projects.


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Parties to project financing


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Participation by multilateral organizations and a bilateral investment

organization

Japan Bank for International Cooperation (JBIC), to finance and

guarantee the loan

JBIC lended to the company who wanted to purchase equity from the

original sponsor company, in this case to J-Power and Sumitomo

Corporation.

JBIC provided guarantees to private financial institutions in case the

sponsoring companies default on their loan to purchase ownership of

the SPV


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Financing mechanism


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Alternative method of financing

Leasing

Syndicated loans

Parties to a syndicated loan

Borrower

Lead manager

Managers

Participants

Agents


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Contd.

Export Credit Mechanism

Allows a foreign buyer of exported goods

and/or services to defer payment over a

period of time.

Export credits can prove very useful where

the project concerns a developing country

and the projects realization requires the

contribution of foreign technology.

The Nord Stream Gas Pipeline was

completed at the end of 2012 with the help

of Export Credit


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Development banks


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Joint Venture Financing

Created through an affiliation in

which both parties agree to share

capital, risks and rewards of the

venture.

U.S. Steel partnered with Posco,

South Koreas leading steel producer,

and SeAH, a tubular steel maker, in the

venture to be called United Spiral PipeLLC, to build a new U.S. facility that will

produce spiral- welded pipe for the

natural gas industry


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Build-Operate-Transfer (BOT)

The governmental institutions of the project hostcountry provides a private company with a

concession to build and operate a project.

Especially suitable for the construction projectsof public facilities projects and large-scale

infrastructure facilities project.


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By the end of December 2003, theAs-Samra Wastewater Treatment

Plant commencement date was

announced

This was the first successful project

on BOT basis in Jordan and the first

mix financed project that includes a

grant component from USAID withthe participation of local Jordanian

banks and financial institutions.

As-Samra Wastewater Treatment

Plant Jordan


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Barter Trade/ Counter Trade

Which a party from an industrialized

country supplies goods, services, or

technology to a second party in a

developing country, and in return, the first

party purchases from the second party an

agreed amount of goods, services, or

technology

Barter

Offsets-McDonnel Douglas sold MD 82

mid size passenger Aircraft to China.


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RISK ASSOCIATED WITH PROJECT FINANCE

AND THEIR MITIGATION

TYPES OF RISKS MITIGATIONCOMMERIAL RISK

1. Interest rate risk2. Currency risk

Negotiate a fix rate of interest,

interest rate swapsCurrency swap, Real exchange rate

liquidity facilityPOLITICAL RISK

1. Changing governments

authority, legislation , budgetPolitical risk insurance

LEGAL RISK1. Changes to the laws governing

elements of agreement, status,

or operations of the projectGuarantees from participants

CONSTRUCTION, OPERATION AND

TECHNICAL RISK Guarantee from participants


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THANK YOU

international finance management - financing international project

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