Syllabus

The following syllabus shows the area of coverage for the course, listing mutual expectations between the faculty and students of the Business School in the offering of this course.

SYLLABUS

FALL, 2004

BSAD
295B

Advanced Special Topics (Project Finance)

INSTRUCTOR(s):

Marc Monheimer
PHONE:	656-8273
OFFICE:
OFFICE HOURS:	or by Appointment
E-MAIL:	marc.monheimer@uvm.edu

COURSE INFO:

MEETS:	T 6:30-9:10
LOCATION:	001 Kalkin

Pre-requisites:

BSAD major or minor; BSAD 180 or Instructor permission, Sr. or MBA standing.

Goals & Objectives:

Course Description:
Limited recourse or non-recourse financing is one of the principal means used to finance large infrastructure and strong revenue producing projects both domestically and internationally. Lenders, particularly bilateral and multilateral lenders in emerging market transactions, are willing to take post-completion project revenue risk when the myriad of commercial and political risks are properly allocated among the transaction participants or adequately mitigated. Project financing will be contrasted with balance sheet financing for similar transactions. Case studies will be used to analyze issues that are confronted in utilizing project financing, with emphasis on international project financing, at the development, construction, and operations phases, emphasizing lender concerns, but including environmental, labor, political, and other issues. Emphasis will be placed on understanding risk analysis, the rationale for appropriately allocating risk among the parties, and the means of mitigating risks by the parties to whom risks are allocated. Coverage will include selected documentation issues and the underlying international legal and regulatory drivers behind various provisions in agreements for project finance transactions. Coverage will also include an introduction to workouts and restructurings of failing project finance transactions. Selected international investment transactions, both actual and hypothetical, will be used to illustrate recurring issues.

Course Content:

1. Prerequisites: There are no prerquisites. However, students should be familiar with basic accounting and financial concepts and the different business organization structures available for operating enterprises. Some knowledge of secured lending will be useful, but not essential.
2. Papers and examinations: One (1) single page paper; one (1) hour, in class mid-term examination, consisting of one-two essay questions; two (2) hours, in class, closed book final examination, consisting of several essay questions.
3. Required & Optional Readings: As indicated.

Books & Materials

Required Text(s):

Hoffman, Scott L., The Law and Business of International Project Finance (2d edition, 2001) (hereinafter "Hoffman")

Optional Materials:

Giles, Milton, Nathaniel's Nutmeg

Other:

CLASS SESSIONS, SUBJECTS, AND READINGS
#1 An Overview of International Project Finance: Who, What, Why, When, and Where (From Nathaniel's Nutmeg to Logan Airport Revenue Bonds); Glossary of Basic Project Finance Terminology and Accounting Concepts.
Basic components of project finance; project participants and their roles; importance of structuring; review of structuring vehicles,
Required Reading:
Hoffman, Ch. 1; Glossary of Terms, pp 675-686;
HBS 9-102-105, April 2002, An Overview of Project Finance;
HBS, 9-203-040, May 2003, Project Finance Glossary
Optional Reading:
Giles, Milton, Nathaniel's Nutmeg, Ch.1
#2 Basic Considerations: To Project Finance or Corporate Finance? Project Participants, Structuring, and Structuring Vehicles
Required Reading:
Hoffman, Chs. 5, 6, 7, 27
HBS 9 201 054, February 2001, BP AMOCO: Policy Statement on the Use of Project Finance
Castle, Grover R., "Project Financing Guidelines for the Commercial Banker" (reprint)
Optional Reading:
Bilateral Investment Treaty between the United States and Argentina
3 Evaluating the Project; Sources of Financing
Required Reading:
Hoffman, Ch.21
Nevitt & Fabozzi, Euromoney Books 2000, Ch.2, " Criteria for a Successful Project Financing";
HBS, Sources of Equity & Debt (reprint)
#4 Host Country Policy Considerations; Concessions, Licenses, Privatizations
Required Reading:
Hoffman, Chs. 9, 14
BOT Projects in Asia-The Concessions Agreement and the Allocation of Risk (reprint)
#5 Lender Analysis; Project Finance Risk; Introduction to Project and Financing Documentation.
Required Reading
Hoffman, Chs 2, 3, 4, 12
Optional Reading:
Zimmerman, An Approach to Writing Loan Agreement Covenants, in International Financial Law, 2d ed. (Robert S. Rendell, ed.)
Case Study:
HBS 9-202-010, January 2002, The Chad-Cameroon Petroleum Development and Pipeline Project
or
A New case study covering the financing of the Baku-Tiblisi-ehan Pipeline (funding closed January 2004)
#6 Project Documentation: The Route to Risk Allocation; the Construction and Operation Phases; Documentation for Economic Survival
Required Reading:
Hoffman, Chs. 15, 17
Criteria For Successful Project Financing (reprint)
Galvao, Daniel, "Political Risk Insurance: Project Finance Perspectives and New Developments"
#7 Loan Documentation/The Lender's View of Risk Allocation: Memorandum of Understanding, Term Sheet, Commitment Letter, Loan Agreement (A review of project risks identification, allocation, and management)
Required Reading:
Hoffman, Ch. 23, 24.01-.04
Nevitt & Fabozzi, "Risks Which a Lender May Assume", Project Finance. (6th ed.) 35 38.
John C. Dell et al., "Rating Approach to Project Finance", Fitch IBCA, Duff & Phelps, April 26, 2001.
Optional Reading:
Esteban C. Buljevich & Yoon S. Park, Project Financing and the International Financial Markets, pp 143 214 (1999).
OPIC form Credit Facility Agreement (reprint)
Redacted Common Terms Term Sheet for a Multi-Lender Project Finance Transaction
Case Study:
HBS 9-202-029, January 2003, Australian-Japan Cable: Structuring the Project Company
#8 Collateral Security Arrangements: What They Are and Why They Are Needed
Required Reading:
Hoffman, Ch. 26
Tarrega & Sharma, Security for Projects, pp75-80
Schnebel, "Intercreditor and Subordination Agreements A Practical Guide" (reprint)
Hays, Larry, "How Preferred Creditor Support Enhances Ratings" (reprint)
Mini-Case Study:
A Project's Collateral Package (reprint) (project TBD)
#9 Risk Mitigation Methods for Natural and Political Force Majeure: Opinions of Counsel, Commercial and Political Risk Insurance
Required Reading
Hoffman, Ch. 2, 20.10
Case Study:
HBS, 9-596-100, Enron Development Corporation: The Dahbol Power Project in Maharashtra, India (B)
HBS, 9-596-101, Enron Development Corporation: The Dahbol Power Project in Maharashtra, India (C)
#10 Political Risk: Nemisis or just another?
Required Reading
Hoffman, 20.11
OPIC Equity Insurance Contract
OPIC Debt Insurance Contract A redacted case study contract
#11 Credit Support: Equity, Guarantees, and other Credit Enhancements
Required Reading:
Hoffman, Ch. 20
Redacted Completion Agreement I
Redacted Completion Agreement II
TBD
Optional Reading:
Ciricillo, Fremontie, and Hamburg, "A Cultural Perspective on International Negotiations" (reprint)
TBD
#12 Environmental, Worker Rights, Human Rights, Anti-Corruption, and other Policy Issues
Required Reading:
Hoffman, Chs. 29, 32
U.S. Foreign Corrupt Practices Act (reprint)
OECD Corrupt Practices Convention (reprint)
OPIC Statutory provisions relating to environmental and worker rights requirements
OPIC Environmental Handbook
#13 Troubled Loan Management (When All Else Fails): Dispute Resolution, Foreclosure, Restructuring, and Other Remedies
Required Reading:
Hoffman, Ch. 31
Kielmas, Maria, "Arguing About Arbitration" (reprint)
Typical Arbitration Provisions and Quickies (reprint)
#14 A Risk Comparison Study
Required Reading:
Materials to be provided
#15 Course Review, Discussion, and Questions

Grading:

Class participation	20%
Paper and mid-term examination	0-20%
Final examintion	60-80%

Academic Honesty

The principal objective of the policy on academic honesty is to promote an intellectual climate and support the academic integrity of the University of Vermont. Academic dishonesty or an offense against academic honesty includes acts that may subvert or compromise the integrity of the educational process. Such acts are serious offenses that insult the integrity of the entire academic community.

Offenses against academic honesty are any acts that would have the effect of unfairly promoting or enhancing one's academic standing within the entire community of learners which includes, but is not limited to, the faculty and students of the University of Vermont. Academic dishonesty includes knowingly permitting or assisting any person in the committing of an act of academic dishonesty.

The policy distinguishes between minor and major offenses. Offenses purely technical in nature or in which the instructor does not perceive intent to achieve advantage are deemed minor and handled by the instructor. Major offenses are those in which intent to achieve academic advantages is perceived. A full statement of the policy can be found in the Cat's Tale. Each student is responsible for knowing and observing this policy.

Classroom Code of Conduct

Faculty and students will at all times conduct themselves in a manner that serves to maintain, promote, and enhance the high quality academic environment befitting the University of Vermont. To this end, it is expected that all members of the learning community will adhere to the following guidelines:

Faculty and students will attend all regularly scheduled classes, except for those occasions warranting an excused absence under the policy detailed in the catalogue (e.g., religious, athletic, medical).
Students and faculty will arrive prepared for class and on time, and they will remain in class until the class is dismissed.
Faculty and students will treat all members of the learning community with respect. Toward this end, they will promote academic discourse and the free exchange of ideas by listening with civil attention to the comments made by all individuals.
Students and faculty will maintain an appropriate academic climate by refraining from all actions which disrupt the learning environment (e.g., making noise, ostentatiously not paying attention, and leaving and reentering the classroom inappropriately).
Food and drink are not allowed in classrooms.

Instructors will inform students of any special/additional expectations.