Financing and Investing in Infrastructure

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Description

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About this course: Learn how debt and equity can be used to finance infrastructure investments and how investors approach infrastructure investments! According to the OECD, the global infrastructure investment requirement by 2030 for transport, electricity generation, transmission & distribution, and water & telecommunications totals to 71 trillion dollars. This figure represents about 3.5% of the annual World GDP from 2007 to 2030. The European Commission estimated, that by 2020, Europe will need between 1.5 - 2 trillion Euros in infrastructure investments. Between 2011 and 2020, about 500 billion Euros will be required for the implementation of the Trans-European Transport Network (TE…

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When you enroll for courses through Coursera you get to choose for a paid plan or for a free plan

  • Free plan: No certicification and/or audit only. You will have access to all course materials except graded items.
  • Paid plan: Commit to earning a Certificate—it's a trusted, shareable way to showcase your new skills.

About this course: Learn how debt and equity can be used to finance infrastructure investments and how investors approach infrastructure investments! According to the OECD, the global infrastructure investment requirement by 2030 for transport, electricity generation, transmission & distribution, and water & telecommunications totals to 71 trillion dollars. This figure represents about 3.5% of the annual World GDP from 2007 to 2030. The European Commission estimated, that by 2020, Europe will need between 1.5 - 2 trillion Euros in infrastructure investments. Between 2011 and 2020, about 500 billion Euros will be required for the implementation of the Trans-European Transport Network (TEN-T) program, 400 billion Euros for Energy distribution networks and smart grids, 200 billion Euros on Energy transmission networks and storage, and 500 billion Euros for the upgrade and construction of new power plants. An additional 38 - 58 billion Euros and 181 - 268 billion Euros in capital investment will be needed to achieve the targets set by the European Commission for broadband diffusion. Traditionally investments in infrastructure were financed using public sources. However, severe budget constraints and inefficient management of infrastructure by public entities have led to an increased involvement of private investors in the business. The course focuses on how private investors approach infrastructure projects from the standpoint of equity, debt, and hybrid instruments. The course concentrates on the practical aspects of project finance: the most frequently used financial techniques for infrastructure investments. The repeated use of real life examples and case studies will allow students to link the theoretical background to actual business practices. In the end of the course, students will be capable of analyzing a complex transaction, identifying the key elements of a deal, and suggesting proper solutions for deal structuring from a financial advisor's perspective. Course Format The course will consist of lecture videos, readings, and talks given by guest speakers. Although we do hope you will attend the entire course, it is possible to just focus on single topics. Suggested Readings The course is designed to be self-contained, there are no obligatory readings that must be acquired outside of the course. For students interested in additional study material, you may refer to: • Gatti Stefano, "Project Finance in theory and practice", Academic Press, 2nd edition, 2012.

Who is this class for: No particular background in finance is required, although a basic knowledge of principles of corporate finance is recommended.

Created by:  Università Bocconi
  • Taught by:  Stefano Gatti, Director

    Full Time MBA, SDA Bocconi School of Management
Commitment 6 weeks of study, 1-2 hours/week Language English How To Pass Pass all graded assignments to complete the course. User Ratings 4.8 stars Average User Rating 4.8See what learners said Coursework

Each course is like an interactive textbook, featuring pre-recorded videos, quizzes and projects.

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Università Bocconi Our ambition is to develop students' potential and foster knowledge in Business, Economics and Law through innovative learning and research activities in a multicultural environment. Bocconi is a community that constantly innovates teaching and learning technologies and that strongly believes in the power of life-long learning and networking. Now available online.

Syllabus


WEEK 1


Project Finance and the Network of Contracts
Module 1 explores the nature of project finance as a nexus of contracts. We will analyze the nature of the SPV (Special Purpose Vehicle) as an empty shell and the key contracts surrounding it (project contracts and financial contracts).


9 videos, 5 readings expand


  1. Video: Course Overview
  2. Reading: Additional Material
  3. Reading: Grading Policy
  4. Discussion Prompt: Ready, steady, go!
  5. Video: 1.1 - Project Finance and the Network of Contracts Introduction
  6. Video: 1.2 - What Is Project Finance?
  7. Video: 1.3 - Financial Contracts: Shareholder
  8. Video: 1.4 - Financial Contracts: Lenders
  9. Video: 1.5 - Metro 5 #1
  10. Video: 1.6 - Industrial Contracts
  11. Video: 1.7 - Metro 5 #2
  12. Video: 1.8 - Module 1 Takeaways
  13. Reading: SLIDE SET WEEK 1
  14. Reading: About Quizzes - Read Carefully
  15. Reading: Quiz 1 - ProjectCo Case

Graded: Project Finance and the Network of Contracts

WEEK 2


Syndicate



Module 2 analyzes the relationship between the SPV and its lenders. We will start from the introduction of what a syndicate is looking at the different roles performed by banks in a syndicate and the options available to organize such a syndicate. We will also look at the cost paid by the SPV for the organization of the financing and reflect on how the recent financial crisis has reshaped the syndicated loans market.


7 videos, 1 reading expand


  1. Video: 2.1 - Syndicate Introduction
  2. Video: 2.2 - What Is a Syndicate?
  3. Video: 2.3 - What Roles Do Banks Perform?
  4. Video: 2.4 - Which Syndication Strategy Can Be Used?
  5. Video: 2.5 - How Much Does the Customer Pay?
  6. Video: 2.6 - How Has the Financial Crisis Reshaped the Market?
  7. Video: 2.7 - Takeaways
  8. Reading: SLIDE SET WEEK 2

Graded: Syndicate

WEEK 3


Risk Analysis



Module 3 introduces the topic of risk in infrastructure financing. We will introduce a possible risk taxonomy (pre-, post-, and both pre- and post-completion risks) useful for analyzing risk as a preliminary step for its allocation to the parties best able to manage and control risk. Our final learning outcome will be the preparation of a risk matrix for an infrastructure project.


6 videos, 1 reading expand


  1. Video: 3.1 - Introduction - The Need of Risk Management
  2. Video: 3.2 - Risk Taxonomy
  3. Video: 3.3 - Pre-Completion Risks
  4. Video: 3.4 - Post-Completion Risks
  5. Video: 3.5 - Risks Common to Both Phases
  6. Video: 3.6 - The Risk Matrix and Takeaways
  7. Reading: SLIDE SET WEEK 3

Graded: Risk Analysis

WEEK 4


Capital Budgeting



Module 4 introduces capital budgeting of infrastructure deals. Firstly, we will present the key elements making up the budget of the construction phase and the sources of finance used for the construction of said infrastructure. We will then move on with the analysis of the budgeting of the operational phase pointing our attention to the sources and uses of funds. Special care will be given to the analysis of the system of reserve accounts of the SPV.


7 videos, 1 reading expand


  1. Video: 4.1 - Project Finance and the Set up of Capital Budgeting
  2. Video: 4.2 - Setting Up The Construction Phase Budget
  3. Video: 4.3 - How to Finance Construction
  4. Video: 4.4 - Exercise #1: Construction Phase Budgeting
  5. Video: 4.5 - Setting up the Operational Phase Budget
  6. Video: 4.6 - Exercise #2: Operational Phase Budgeting
  7. Video: 4.7 - Takeaways
  8. Reading: SLIDE SET WEEK 4

Graded: Capital Budgeting

WEEK 5


The Financial Sustainability of an Infrastructure Project



Module 5 covers whether an infrastructure project is doable or not from the dual perspective of the shareholders and lenders. We will answer this question in the module by analyzing the criteria for measuring the profitability for project sponsors and lenders. We will also look at measurements of financial sustainability and the key role played by cover ratios in disciplining the performance of the SPV.


7 videos, 1 reading expand


  1. Video: 5.1 - Introduction
  2. Video: 5.2 - Profitability for Shareholders
  3. Video: 5.3 - Profitability for Creditors
  4. Video: 5.4 - From Profitability to Financial Sustainability
  5. Video: 5.5 - Cover Ratios
  6. Video: 5.6 - Cover Ratio Calculation
  7. Video: 5.7 - Takeaways
  8. Reading: SLIDE SET WEEK 5

Graded: The Financial Sustainability of an Infrastructure Project

WEEK 6


How Can Creditors Protect Themselves?



Module 6 looks at a number of subjects that share the need for creditors to protect themselves against pathological situations of the infrastructure. We will analyze the standard security package offered by the SPV to its creditors, together with an in-depth look at the system of covenants assisting the credit agreement. We will then look at the methods used to amortize a base facility in project finance.


7 videos, 1 reading expand


  1. Video: 6.1 - Introduction
  2. Video: 6.2 - Security Package
  3. Video: 6.3 - Covenants of the Credit Agreement
  4. Video: 6.4 - How to Use Cover Ratios to Monitor the Borrower
  5. Video: 6.5 - Loan Amortization Methods
  6. Video: 6.6 - Application of Different Amortization Methods
  7. Video: 6.7 - Takeaways
  8. Reading: SLIDE SET WEEK 6

Graded: How Can Creditors Protect Themselves?

WEEK 7


Additional Videos and Final Quiz
Here you can find the lectures on the business cases and the final quiz


2 videos expand


  1. Video: 7.1 - CASE STUDY: Bonollo Energia
  2. Video: 7.2 - CASE STUDY: Port De Paita

Graded: Final
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