Project Financing: Asset–Based Financial Engineering

Praise for the Previous Edition of Project Financing "Owing to his teaching as a finance professor and as an experienced investment banker, John Finnerty brings to his book, Project Financing , an insightful perspective, blending the theoretical with the practical." —Zoltan Merszei , former chairman, president, and CEO, The Dow Chemical Company "Finnerty has managed to distill the complexities of project financing with its myriad components and variations. Clear, practical, and in-depth, Project Financing is a valuable user's guide for project sponsors, regulators, host governments (local and foreign), and financiers alike." —Ricardo M. Campoy , former director, Kilgore Minerals Ltd. " Project Financing warrants a place in the essential libraries of corporate financial managers, their advisors, senior strategists, bankers, large private investors, government officials, and anyone who aspires to master innovation in corporate finance." —Robert F. Bruner , Dean and Charles C. Abbott Professor of Business Administration, Darden School of Business, University of Virginia "This book is the first comprehensive treatment of project financing. It provides an invaluable contribution to financial management literature and practice." —Andrew H. Chen , Distinguished Professor of Finance, Edwin L. Cox School of Business, Southern Methodist University

Preface xi Acknowledgments xv CHAPTER 1 What Is Project Financing? 1 CHAPTER 2 The Rationale for Project Financing 13 CHAPTER 3 What Is Special about Large Projects? 33 CHAPTER 4 Who Finances Large Projects? 53 CHAPTER 5 Analyzing Project Viability 71 CHAPTER 6 Analysis and Financing of Renewable Energy Projects 91 CHAPTER 7 Designing Security Arrangements 115 CHAPTER 8 Structuring the Project 131 CHAPTER 9 Preparing the Project Financing Plan 151 CHAPTER 10 Discounted Cash Flow Analysis 169 CHAPTER 11 Financial Modeling and Project Evaluation 193 CHAPTER 12 Using Real–Options Analysis to Evaluate a Project 215 CHAPTER 13 Sources of Project Funds 239 CHAPTER 14 Managing Project Risks 271 CHAPTER 15 Sharia–Compliant Project Financing 305 CHAPTER 16 Issues for the Host Government 331 CHAPTER 17 Case Study: The Indiantown Cogeneration Project 347 CHAPTER 18 Case Study: The Tribasa Toll Road Project 379 CHAPTER 19 Case Study: The Euro Disneyland Project 399 CHAPTER 20 Case Study: The Eurotunnel Project 431 CHAPTER 21 Conclusion 457 APPENDIX A Comparative Terms of Selected Projects 463 APPENDIX B Other Examples of Project Financings 475 APPENDIX C Legal Investment Requirements Governing New York Life Insurance Companies 489 Notes 495 Bibliography 513 Websites 521 Index 523

John D. Finnerty, PhD, is Professor of Finance at Fordham University's Graduate School of Business and served as the founding director of the MS in Quantitative Finance Program. He is also Managing Principal of Finnerty Economic Consulting, LLC, which specializes in business valuation, securities valuation, solvency analysis, calculation of damages, and litigation support. Finnerty has testified as an expert in valuation, securities, and other financial matters in federal and state court, and in arbitration and mediation proceedings. His research focuses on corporate finance, including project financing and fixed income securities and derivatives valuation. Finnerty has published thirteen books, including the first and second editions of Project Financing , and more than one hundred articles and professional papers. He is a former president and director of the Fixed Income Analysts Society, and a former president, director, and chair of the trustees of the Eastern Finance Association. Finnerty is a trustee of the Eastern Finance Association and a Director of the Financial Management Association. He was inducted into the Fixed Income Analysts Society Hall of Fame in 2011.