Project Finance for Construction and Infrastructure

Frederik Pretorius and Berry Hsu, Department of Real Estate and Construction, University of Hong Kong.Paul Lejot and Douglas Arner, Faculty of Law, University of Hong Kong.Arthur McInnis, Faculty of Law, City University of Hong Kong.

"An interesting publication with many key aims, it looks to supply the concepts of project finance to academics and students by the utilisation of real projects." (Building Engineer)

• Preface viAcknowledgements ixAbout the Authors x1 The Nature of Project Finance 11.1 The world of projects today 31.2 Corporations, finance and projects: important concepts 51.3 The project company business model 121.4 The project cycle 211.5 System concepts and the project company 291.6 Plan of the book 39Key concepts 422 Complex Transactions 432.1 Transactions, the cost of transactions, transaction cost economics, and projects 442.2 A more formal approach to disaggregation of transactions 512.3 The influence of agency on transaction costs -- agency costs 582.4 Corporate finance context 642.5 Incentive conflicts in corporate finance 692.6 Transaction costs and agency -- theoretic logic of the project finance model 75Key concepts 78Appendix 2.1 Comparison of long-term debt instruments 79A2.1.1 Syndicated loans 80A2.1.2 International bonds 863 Financial Evaluation 933.1 Valuation and the project company 943.2 Valuation and the project company as a single-asset business 1113.3 Capital budgeting decisions 135Key concepts 1494 Managing Risk in Project Finance Transactions 1504.1 The project cycle revisited 1524.2 Risk management approaches 1554.3 The project company and risk identification 1694.4 Risks in the construction phase 1884.5 The institutional environment and risk 1954.6 Risk management and project lenders 203Key concepts 2145 Continuing Evolution: from PF to PFI, PPP and beyond 2165.1 Introduction 2165.2 PFI origins 2195.3 Types of PFI 2215.4 PFI features 2235.5 Procurement process principles 2255.6 Contract and control structure 2315.7 The special purpose or project vehicle and financing 2325.8 PFI/PPP and rational privatisation 2335.9 Risk management 2345.10 Financial risk in PFI and PPPs 2395.11 Challenges for PFI and PPP and the responses 2395.12 The lessons 242Key concepts 2446 The Relevance of Sound Demand in Infrastructure Project Finance: the Sydney CrossCity Tunnel 2456.1 Infrastructure fi nance: the Sydney CrossCity Tunnel 2456.2 History of the CCT project 2466.3 Cheung Kong Infrastructure Holdings Limited 2526.4 The bidding process 2566.5 Valuing the project 2576.6 Assessing project risks 2616.7 Capital structure 2626.8 Completion of the deal 2666.9 Project outcomes 2787 Financial Structure and Infrastructure Project Finance: the Hong Kong Western Harbour Crossing 2807.1 Refinancing the Western Harbour Crossing, Hong Kong 2807.2 History of the Western Harbour Crossing 2817.3 Valuation of the project 3028 Institutional Risks and Infrastructure Project Finance: the Dabhol Power Project 3088.1 Dabhol Power Project 3098.2 Development of the Dabhol Power Project 3128.3 Power purchase agreement 3148.4 Epilogue 3218.5 Analysis 3219 Extreme Complexity in Transacting: public private partnerships at work in the London Underground 3249.1 Public private partnership: London Underground 3249.2 Two countries, two systems 3259.3 Public private partnership 3289.4 Endnote 346References 348Index 354