Confessions of a Project Finance Modeler

Private Sector-led Urban Development Projects. Management, Partnerships and Effects in the Netherlands and the UK

The private sector has an important role on the development of cities, and governments are encouraging this sector to implement civilian projects. The BOT approach is one of the ways that increases private sector participation in government infrastructure development. Today, paying attention to the financing of urban projects and new financing approaches, including the BOT approach, is necessity in most of the major cities, especially in Tehran. But it is necessary to use the BOT method to address and understand all the dimensions and issues behind the implementation of this method. In many cases, failure to complete the projects in due time is due to the lack of proper management of the project, which results from a lack of understanding of the risks involved in these projects. Therefore, assessment and prioritization of risks in BOT projects, especially when the number of risk factors increases, is considered as an important part of the complex risk management process. In this paper, the method of structural equations and integrated model of fuzzy AHP and fuzzy TOPSIS are used to evaluate and prioritize the risks in Tehran Municipality's development projects that are implemented in the form of BOT contract method. Structural equations are used to measure the validity of identified risks. The fuzzy AHP method is used to determine the weight of the risk assessment criteria and the fuzzy TOPSIS method is utilized to evaluate and prioritize the risks of BOT projects. The results indicate that the risk of commodity price fluctuations, the risk of rising inflation, the risk of exchange rate fluctuations, and the risk of non-application of techniques and project management knowledge are the most important risks in BOT projects.

The market of the South East Europe (SEE) is recognized as emerging market of the transition countries which needs priority investment in different infrastructure projects for sustainable development. Infrastructure of a country is understood as the fundamental service foundation of economy, society and overall development. It is very well known that adequate services are necessary for the development of the economy, including transport, electric power, telecommunications, water supply etc. The transition countries are financially constrained and they have big problems in financing infrastructure projects, especially during the global financial crisis. These projects are generally characterised by high development and maintenance costs, and historically it was seen as the role of the government to fund and manage these assets. A way to fund and manage these assets in this challenging environment is via Public Private Partnership (PPP). Financing and development of infrastructure on the base of PPP means introducing the private sector in financing and management of public services and physical infrastructure. The key question is how to implement PPP on the emerging market of the SEE? The methodology to implement PPP has to be understandable, functional and practicable. It has to cover core tasks and performers which can produce planed results. The base Methodology for safe implementation of PPP needs cohesion of the following important elements: training, projects development, finance structure arrangement and implementation. The units and individual experts of the organisation structure need strong cohesion and it is necessary that everybody understands individual and complete process. Training Unit has task to train experts of the beneficiaries for PPP. It has to have corresponding infrastructure and equipment, good trainer, experience in education and training and possibility to organise training. The Project Developer (project development and finance structure arrangement) has task to develop PPP projects. The Developer will develop projects based on strategic document of the beneficiaries (municipalities, cantons, entities and state). Certified experts from Training Unit will be included. Implementation of the PPP project is guided by the Beneficiary (including certified experts trained according to their needs), with assistance of the Developer.

프로젝트 파이낸싱(PF) 개발사업은 다수의 차명자와 대규모의 금융조달을 통하여 공사를 수행함으로 국가경제개발과 건축 산업의 발전에 큰 영향을 끼치는 프로젝트의 형태이다. 그러나 국내 PF 개발사업의 경우 프로젝트에 대한 충분한 검토보다는 개발이익의 극대화의 측면에서 프로젝트를 진행함으로 인하여 현재 글로벌 금융위기와 부동산 침체에 의하여 사업의 중단이 속출하고 있다. 이에 본 연구에서는 PF사업의 리스크 요인을 도출하고 이를 요인분석을 통하여 PF사업의 성공영향요인을 도출하였고, 이를 Fuzzy-AHP기법을 활용하여 영향요인에 대한 정량화를 수행하였다. 그리고 도출된 PF 성공영향요인의 실제 사례 평가를 통하여 PF성공평가 점수와 프로젝트의 수익률에 대한 상관관계를 도출할 수 있었으며, 이를 통해 PF사업의 평가를 통하여 프로젝트 의사결정자의 의사결정에 도움을 줄 수 있을 것으로 사료된다. Project Financing (PF) development project is the type which influences national economy and building industry largely because it is exerted by using borrowed money from many kinds of investors and huge amount of financial raising. Many domestic PF projects are focused mainly on the profit maximization lacking in a sufficient feasibility study. Nowadays many projects are suspending due to the global finance debacle and stagnation of real estate industry. Therefore, in this paper, risk factors of PF project are deducted and Key Success Factors (KSFs) are derived through Factor-Analysis and qualified using Fuzzy-AHP method. And through the evaluation of the derived success factors in real projects, a strong correlationship has been identified between the score of each PF success factor and the level of success and/or expected rate of return (ROR). So, the result of this paper can help decision makers of the PF projects make a better decision and give a meaningful guidance in achieving successful PF projects.

Understanding performance is the key to risk management in energy storage project financing. Technical performance underlies both capital and operating costs, directly impacting the system's economic performance Since project development is an exercise in risk management, financing costs are the clearest view into how lenders' perceive a project's riskiness. Addressing this perception is the challenge facing the energy storage industry today. Growth in the early solar market was hindered until OEMs and project developers used verifiable performance to allay lenders' apprehension about the long-term viability of those projects. The energy storage industry is similarly laying the groundwork for sustained growth through better technical Standards and best practices. However, the storage industry remains far more complex than other markets, leading lenders to need better data, analytical tools, and performance metrics to invest not only to maximize returns, but also safely--through incorporating more precise performance metrics into the project's documents.

The costs of electric power projects utilizing renewable energy technologies are highly sensitive to financing terms. Consequently, as the electricity industry is restructured and new renewables policies are created, it is important for policymakers to consider the impacts of renewables policy design on project financing. This report describes the power plant financing process and provides insights to policymakers on the important nexus between renewables policy design and finance. A cash-flow model is used to estimate the impact of various financing variables on renewable energy costs. Past and current renewable energy policies are then evaluated to demonstrate the influence of policy design on the financing process and on financing costs. The possible impacts of electricity restructuring on power plant financing are discussed and key design issues are identified for three specific renewable energy programs being considered in the restructuring process: (1) surcharge-funded policies; (2) renewables portfolio standards; and (3) green marketing programs. Finally, several policies that are intended to directly reduce financing costs and barriers are analyzed. The authors find that one of the key reasons that renewables policies are not more effective is that project development and financing processes are frequently ignored or misunderstood when designing and implementing renewable energy incentives. A policy that is carefully designed can reduce renewable energy costs dramatically by providing revenue certainty that will, in turn, reduce financing risk premiums.

The investments for the development of thermal timeshare facilities have started to grow rapidly. Timeshare property can be defined as a guaranteed, transferable and alternative right that allows its owner(s) to have a limited-term vacation, guarantees to spend at the same time and place every year, provides comfort and legally registered in the land registry. Timeshare properties are used only during a certain period of the year, leasing the remaining times to prevent the facilities from being idle, and this investment model allows a significant contribution to the local economy through the right holders. In this study, the development of timeshare investments in the field of thermal tourism has been examined in general, and in the second stage, interviews were conducted with the right holders and investors of timeshare investments in selected districts of Ankara Province. According to the Turkish Legal System ,the development and management of timeshare investment projects, the buildings and independent sections in the timeshare system must be residential properties, the beneficiary period of each property right holders should be not less than 15 days, the timeshare right can be transferred and left as a heritage to heirs, the facilities must be furnished with the annual maintenance-repair and other operating expenses equally shared, the facilities can be rented in case it cannot be used by the right holders, and the management of the facilities must be realized in accordance with the legal regulations regarding the condominium properties. The research results represent that in timeshare projects based on a condominium-principled ownership system; the total present value of the property price paid by the right owners for a certain use in the selected period of the year and the annual operating expenses are much higher than the present value of the annual rental prices, there is an option to have a holiday in comfortable conditions with the sum of the current value of the annual operating expenses and the cost of the timeshare acquisition, and consequently, timeshare investments are not rational. In the districts where field studies were conducted, although the rental prices/fees and sales values of the real estate subject to timeshare properties are 2-3 times higher than the equivalent properties in the district centre, it has been determined that the attraction of timeshare investments is low for the right holders. It should be emphasized that timeshare facilities need to be analyzed together with both timeshare investor and project developer, and that project development, appraisals, financing, construction, facility and property management services are carried out under the responsibility of real estate development and management experts to increase the project and investment success.

Risks in Project Finance Initiatives: Current Trends and Future Directions

The automotive industry is constantly involved in the development of new projects aimed at reducing weight, fuel consumptions and costs while improving passengers? safety. In order to achieve these increasing demands, Advanced High Strength Steels (AHSS) have been introduced in recent years reducing vehicle structure weights and improving the crashworthiness. With the increase in the bearing capacity of crash-relevant structural components, the sheet metal joining techniques such as adhesive bonding and resistance spot welding (RSW) become critical. In order to develop the vehicle structure in these new projects, full-vehicle crash finite element simulations are usually performed. Simplified beam-like models are currently used in these simulations (with thousands of spot welds) to represent RSW joints response. The maximum bearing force of these models are fitted using large experimental campaigns, considering all the main factors that have the highest influence on the fracture response of a welded joint. The objective of this thesis is twofold: (1) to develop a model that is able to partially replace the extensive experimental campaign in providing parameters for the crash simulation simplified spot weld models, and (2) to gain understanding of spot weld joints failure response in order to improve the current simplified models. To achieve these objectives, a detailed spot weld model for the prediction of spot weld failure in joints in AHSS sheets is presented. The presented model includes a definition of the local material properties as well as the geometry features of a spot weld. In addition, an industrially suited fracture criterion, i.e. robust and without a long-term calibration, is used for the prediction of maximum force. An energetic fracture criterion based on the use of elastic-plastic fracture-mechanics is identified as the better suited for the prediction of spot weld failure and joint bearing capacity. The J-integral is evaluated in the weld notch and this value is compared with a material parameter, the fracture toughness, in order to obtain the joint maximum force. The presented detailed FE spot weld model is validated to joints of two different steel grades of the AHSS family usually present in the current vehicle structure, a hot formed martensitic boron-alloyed steel (22MnB5) and a cold formed dual phase steel (DP 980). The validation is performed comparing the results obtained with the finite element model and the experimental results extracted from an extensive loading test experimental campaign where the main factors that have an influence in the spot weld fracture response are considered. The obtained simulated critical forces of the loading tests present good agreement with the experimental ones in all tested configurations. Finally, based on the presented finite element spot weld model, some recommendations are exposed for extending the model for new combinations and loading conditions. The proposed procedure can be used to reduce the long-term characterization campaigns used to calibrate the joints of a new AHSS grade, where fracture is triggered by stress concentration ahead of a notch. Furthermore, some recommendations for the future structure design are given taking into account the information obtained with the present model.

Geochemical Impacts of Carbon Dioxide, Brine, Trace Metal and Organic Leakage into an Unconfined, Oxidizing Limestone Aquifer

Horizontal wells give a great opportunity for maximizing the potential of unconventional resource play developments by providing enhanced reservoir contact but present multiple challenges in the process due to the heterogeneous nature of the unconventional reservoir rock. This study covers the implementation of an integrated completion and production workflow to optimize a horizontal well development project in the Delaware Basin located in Reeves County, Texas. By undertaking a vertical well pilot logging program, the acreage was evaluated for petrophysical and geomechanical properties using advanced geo-chemical and full-wave sonic tools to quantify reservoir quality (RQ) and completion quality (CQ), respectively. Detailed fracture simulations were performed at multiple depths to locate the optimum landing point that maximized reservoir contact. Incorporating the key findings of the wellbore stability analysis, the well was geo-steered using a rotary steerable system (RSS) and a logging-while drilling (LWD) resistivity tool that placed 100% of the lateral in the target zone. Further completion simulations were performed to determine a perforating and staging strategy which would optimize the number of stages. The flow-channel fracturing technique, which provides a novel approach for achieving fracture conductivity, was also implemented on the studied well to significantly improve the effectiveness of the fracture stimulation treatment. Fracture diagnostics, detailed post fracture modeling, and production analysis techniques, which utilized rate-transient analysis and history matching, were performed to provide better understanding of the effectiveness of the stimulation treatments (fracture lengths/conductivity), thereby allowing further optimization of the stimulation program. This study has demonstrated how the implementation of an integrated design and evaluation workflow can optimize the overall well production performance as well as reduce drilling and stimulation costs in unconventional resource play developments.

GENERALLY As a project financing is structured, project sponsors and host governments should constantly monitor the availability of debt and equity, as affected by the unique goals and risks involved in the particular deal being pursued. Lender and investor interest will vary depending on these goals and risks. Commercial lenders will pursue projects with predictable political and economic environments. Meanwhile, multilateral institutions, with less emphasis on political and economic stability, will seek involvement in projects where they can also promote technology, social goals, exports, and environmental goals. Close attention to the potential debt and equity sources is also necessary because of the frequent changes in the goals and capacities of lenders and investors. A risk that materializes with an individual project in the same country as a project in development could temporarily delay all financings in the same country. Debt crises (like the 1998 Asian currencies instability and the Mexican peso crisis), philosophical changes at multilateral institutions (like increased attention to the effect of projects on the environment), and other factors can also influence loan and investment fund availability. Thus, it is sometimes prudent for the project sponsor to pursue simultaneously alternative financing schemes for the same project, such as pursuing commercial bank financing with bilateral or multilateral support, while pursuing a bond offering rated by a credit rating agency.

Crowdfunding (CF), in which financing for projects is sought via the Internet from large groups of individuals, is a $3.3 billion per year phenomenon. But it's not clear how well CF, typically used for creative arts projects, can be used to finance science and technology (“tech”) projects. We analyzed nearly 112 thousand CF campaigns launched on [Kickstarter.com][1] through late 2014 (see supplementary materials). The share of tech projects is increasing, from 4% of total projects in 2009 to 8% in 2014. Tech projects have the largest average target budgets ($86,529; nontech average, $18,003). The rate of tech projects that reached their target budget and were funded, 38%, is lower than the overall 58% success rate. Tech projects received 14% of the capital raised through Kickstarter, totaling $139.8 million. Although this is a substantial amount, it is only 3% of the $4.7 billion invested by venture capitalists in high-tech ventures in the United States in 2013. CF also differs qualitatively from other forms of entrepreneurial finance. CF money is not invested in exchange for a financial return but is pledged in the form of product prepurchasing from end users as consumers. This has three important implications. First, CF invites gathering feedback from users during project development, a practice shown to be effective in problem-solving and product-testing in open-source and open-innovation platforms. By cutting development time and failure rates, this feature offers new means for tech transfer. Second, crowdfunders are highly responsive to social exchanges that the entrepreneur uses inside the CF community and beyond ([ 1 ][2]). Third, CF is more suitable when the project outcome is a ready-to-use product that can be offered in exchange for the pledge. This makes CF more suitable for applied projects, which are close to market delivery, but calls into doubt the suitability of CF as a means for funding basic research. [www.sciencemag.org/content/348/6240/1201/suppl/DC1][3] 1. [↵][4]1. M. G. Colombo, 2. C. Franzoni, 3. C. Rossi-Lamastra , Entrep. Theory Pract. 39, 75 (2015). [OpenUrl][5][CrossRef][6] [1]: http://Kickstarter.com [2]: #ref-1 [3]: http://www.sciencemag.org/content/348/6240/1201/suppl/DC1 [4]: #xref-ref-1-1 View reference 1 in text [5]: {openurl}?query=rft.jtitle%253DEntrep.%2BTheory%2BPract.%26rft.volume%253D39%26rft.spage%253D75%26rft_id%253Dinfo%253Adoi%252F10.1111%252Fetap.12118%26rft.genre%253Darticle%26rft_val_fmt%253Dinfo%253Aofi%252Ffmt%253Akev%253Amtx%253Ajournal%26ctx_ver%253DZ39.88-2004%26url_ver%253DZ39.88-2004%26url_ctx_fmt%253Dinfo%253Aofi%252Ffmt%253Akev%253Amtx%253Actx [6]: /lookup/external-ref?access_num=10.1111/etap.12118&link_type=DOI

The article discusses the risks of planning using project finance. The project financing model is assessed. Planning is considered in a broader sense than it is customary (traditionally, when studying the organization in construction). The authors conduct a research work of the unsolved problem of domestic housing construction in science and economic practice, determine the prospects for its development in Russia during the transition to project financing of housing construction. The experience of concluding equity participation agreements was set aside, and the adaptation of Western experience in project financing to Russian realities did not take place. The authors rely on the methodology of techno-structures, according to which authority and management have passed from the owners to the techno-structure of engineers and technicians. Analyzing the “pros” and “cons” of relations between developers and the legislator in the context of the concept of techno-structures and planning strategies, the authors come to the disappointing conclusion that inefficiency has become the main feature of the “growth” of housing construction in the capital and the largest regions. Recommendations are also provided to resolve the shortcomings of project financing.

Recent Research in Project Finance – A Commented Bibliography