Course code MP17
Course title Project Finance : Non-Recourse Finance
Institution Mines ParisTech
Course address 60 boulevard Saint-Michel, 75272 Paris Cedex 06
City Paris
Minimum year of study 4th year
Minimum level of English Good
Minimum level of French None
Key words Project evaluation, non-recourse financing, mining, oil industry, infrastructure, power generation
Language English
Professor responsible Margaret ARMSTRONG, Professor, EMAp School of Applied Mathematics, FGV Rio de Janeiro, Brazil and Chercheur AssociƩ, Centre d'Economie Industrielle, MINES ParisTech
Participating professors

Alain GALLI,

 1 -Professor part-time, EMAp School of Applied Mathematics, FGV, Rio de Janeiro, Brazil

 2-Chercheur Associé, Centre d'Économie Industrielle, MINES ParisTech

Number of places Minimum: 8, Maximum: 25, Reserved for local students: 0
Objectives Hundreds of millions of dollars are required in capital expenditure, to build and develop projects such oil fields and mines, electric power stations, satellites and telecom, auto-routes and bridges. In return, revenues are highly uncertain. For natural resources such as oil and metals, they depend on commodity prices that fluctuate wildly. Over the past 20 years, the price of crude oil has risen from about $10 per barrel to $144 and is currently about $55 while gold has risen from $250 to over $1800 and is currently about $1250. Similarly even if tolls can be fixed for new auto-routes, it is difficult to predict the traffic.
From a financial point of view, borrowing the funds as a corporate loan would be problematic. Small companies do not have the cash-flows to provide the guarantees required; large companies prefer to develop the projects off their balance sheets in order to keep their ratings high and their interest rates low. This has led to the development of non-recourse project financing.
These types of projects are characterised by high capital expenditures, long loan periods (often 10 - 20 years) and uncertain revenue streams. Analysing them requires a sound knowledge of the underlying technical domain as well as financial modelling skills. This is why engineers play a leading role in project finance - both in industry and in banks.
Please note that the course does not cover market finance or corporate finance (mergers & acquisitions) etc.....
Programme to be followed


The aim of this course is to introduce students to non-recourse finance in general and to show them how it is applied in several important domains :

*0               - Mining  

*1               -  Petroleum

*2               - Infrastructure

*3               - Power generation

Speakers from industry and from banking will present case studies, from different points of view. As many of the projects are based in developing countries, the special problems of working in these areas will be addressed. A presentation on credit export agencies will cover this topic. Another presentation will focus on the impact on climate change on the financing of coal projects.

Prerequisites Students should be interested in industry as well as finance. Those who have a laptop computer are requested to bring it.
Course exam During the course, students working in small groups prepare and deliver a powerpoint presentation in English on a topic related to project finance. Afterwards, they are given a 2 week period after the end of the course to submit a written report in English or in French. Marks will be based on the report content and level of understanding of the subject.