| Popis: |
Since project finance is based on loans with no or limited recourse on project sponsors, both lenders and SPV shareholders must carefully assess the ability of the venture to generate sufficient cash flows to repay operating costs, debt service, and dividends to sponsors. In turn, interest and principal payments on loans, together with dividends, are determined by the selected capital structure (i.e., the mix of debt, subordinated debt, and equity) agreed between banks and shareholders. In this chapter, we first focus on the estimation of project cash flows during the different life cycle phases of the initiative and analyze the set of inputs needed for the valuation. Then, in Section 2, we discuss how to identify a sustainable capital structure. Sustainability is based on a satisfactory level of profitability for shareholders and banks but also requires the assessment of financial sustainability by means of specially designed cover ratios (Section 3). Section 4 presents an introduction to the valuation of project risk and the use of simulation techniques, sensitivity, and scenario analysis. |
