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About this Virtual Instructor Led Training (VILT) 

The course will address a variety of contract and loan structuring issues associated with geothermal energy projects as well as comparison with solar, wind and battery storage. The course is designed to investigate how various project finance techniques and contract structures can be used to achieve a competitive power prices while maintaining a satisfactory equity return. Distinctive project finance features of power facilities that depend on geothermal, wind, hydro or solar resources will be evaluated with financial models.

The course will cover economic analysis of exploration and development of geothermal facilities and how to incorporate probability of failure and success into an IRR framework. Subsequent sessions will address the theory underlying liquidated damages for delay, and performance as well as design of other incentives that is inherent in different contract structures. Nuanced project finance issues associated with structuring debt for renewable projects will be discussed including under what conditions the DSCR drives debt capacity and when the debt to capital ratio is instrumental.

The course will be taught with a combination of theoretical discussions, term sheet review and focused financial models.

  • Evaluation of the economic risks that arise from uncertainty associated with drilling exploration wells and development wells for geothermal projects.
  • Analyse the theoretical issues with computing LCOE for geothermal projects compared to other renewable and non-renewable resources and the importance of cost of capital for renewable projects;
  • Understand differences in contract structures for renewable projects and dispatchable projects and how a single price structure can distort incentives for efficient construction and operation;
  • Understand components of financing that influence the bid price required to meet a required rate of return on equity and can result in relatively low prices with reasonable returns.
  • Understand the importance of debt sizing constraints and what strategies are relevant when the debt to capital constraint applies relative to when the debt service coverage ratio drives the debt size;
  • Understand how to compute P50, P90 and P99 for different projects driven by resource risk;
  • Understand the difference between mean reverting resource variation and estimation mistakes that do not correct as the basis for 1-year P90 and 10-year P90.
  • Understand under what conditions debt sculpting can affect returns and how synthetic sculpting can be used to increase returns when the DSCR constraint applies.
  • Understand the theory of credit spreads, variable rate debt and interest rates in different currencies and compute the implied probability of default that in inherent in credit spreads.
  • Understand how to evaluate the costs to equity investors and the benefits to lenders for various credit enhancements including DSRA accounts, cash flow sweeps and covenants.

The VILT will be delivered online in 4 sessions comprising 4 hours per day, with 2 breaks of 10 minutes per day, including time for lectures, discussion, quizzes and short classroom exercises.

Your expert course leader provides financial and economic consulting services to a variety of clients, he teaches professional development courses in an assortment of modelling topics (project finance, M&A, and energy). He is passionate about teaching in Africa, South America, Asia and Europe. Many of the unique analytical concepts and modelling techniques he has developed have arisen from discussion with participants in his courses. He has taught customized courses for MIT’s Sloan Business School, Bank Paribas, Shell Oil, Society General, General Electric, HSBC, GDF Suez, Citibank, CIMB, Lind Lakers, Saudi Aramco and many other energy and industrial clients. His consulting activities include developing complex project finance, corporate and simulation models, providing expert testimony on financial and economic issues before energy regulatory agencies, and advisory services to support merger and acquisition projects.

Our key course expert has written a textbook titled Corporate and Project Finance Modelling, Theory and Practice published by Wiley Finance. The book introduces unique modelling techniques that address many complex issues that are not typically used by even the most experienced financial analysts. For example, it describes how to build user-defined functions to solve circular logic without cumbersome copy and paste macros; how to write function that derives the ratio of EV/EBITDA accounting for asset life, historical growth, taxes, return on investment, and cost of capital; and how to efficiently solve many project finance issues related to debt structuring. He is in the process of writing a second book that describes a series of valuation and analytical mistakes made in finance. This book uses many case studies from Harvard Business School that were thought to represent effective business strategies and later turned into valuation nightmares.

Over the course of his career our key course expert has been involved in formulating significant government policy related to electricity deregulation; he has prepared models and analyses for many clients around the world; he has evaluated energy purchasing decisions for many corporations; and, he has provided advice on corporate strategy. His projects include development of a biomass plant, analysis and advisory work for purchase of electricity generation, distribution and transmission assets by the City of Chicago, formulation of rate policy for major metro systems and street lighting networks, advocacy testimony on behalf of low income consumers, risk analysis for toll roads, and evaluation of solar and wind projects. He has constructed many advisory analyses for project finance and merger and acquisition transactions.

Lastly, our key course expert was formerly Vice President at the First National Bank of Chicago where he directed analysis of energy loans and also created financial modelling techniques used in advisory projects. He received an MBA specializing in econometrics (with honours) from the University of Chicago and a BSc in Finance from the University of Illinois (with highest university honours).