B40.3186 – Project Finance and Infrastructure Investment

Rationale
This course will provide students with an understanding of the fast changing dynamics around project
and infrastructure finance. For many years, project finance has been the core technique for financing
infrastructure and other large-scale projects worldwide. Carefully engineered financings have allowed an
efficient allocation of the project risks between sponsors and investors, typically under the umbrella of
government or multilateral finance programs. More recently, private capital has taken the lead. The
syndicated project finance business has given space to direct equity investments and hybrid secured
financings. Specialized funds have flourished using the private equity model to buy the infrastructure
asset and leverage it up to increase the return on capital. This course will also provide students with an
exposure to the current debate on how the credit crunch has tempered the pace of such investments and
how the recent infrastructure spending plans initiated by governments around the world need a
significant private capital participation in order to have a meaningful chance of being implemented.
Course Objectives
The first part of the course will provide the necessary theoretical and conceptual tools for financial
analysis and decision-making in relation to project and infrastructure finance. The course is designed to
introduce students to project feasibility, evaluation, financial analysis and structuring, use of various
sources of funds and markets, and contractual documentation. The second part will focus on the global
need for infrastructure investments (accelerated by the recent stimulus policies) and the increased role
played by private capital in the form of private equity, insurance companies, pension funds and sovereign
wealth funds. Students will appreciate how international investors now consider infrastructure as an
asset class per se. The course will make large use of real case studies, including greenfield and
brownfield projects in energy, renewable power, transportation, and water. Area of focus will be the US,
the UK and emerging markets. Student will learn the cogent analyses of why some deals have succeeded
while others have failed. At least one session will be devoted to derivatives, swaps and financial
modelling as these techniques apply to project finance analysis. The course will be very useful to
students interested in a financial career in the sector, or in a bank/ government institution involved in
project and infrastructure financing, or for portfolio managers that will inevitably consider an exposure to
this asset class.
Course Method
The course aims at providing students with the technical and strategic skills required to analyze and
evaluate infrastructure projects. The case studies provide an opportunity to apply the project finance
principles and valuation methods to real-life projects. The course will be taught in the form of lectures
together with case studies intended for class discussion.
As in any case-based course, the method of analysis and the questions posed are far more important
than the final answers. Consequently, the lessons and insights drawn from these cases are largely a
function of the effort and care students invest into being fully acquainted with the readings and cases for
each session. Classes will include discussion of readings, case analysis and group presentations.
Instructor
Tommaso Albanese is an Adjunct Professor in Finance at Stern. He is a former Managing Director of
Morgan Stanley & Co, Co-Head of Global Capital Markets in Europe and Global Head of Corporate
Derivatives. He also teaches at the Cass Business School in London.
Text and Cases
The textbook for the course is: John D. Finnerty, Project Financing: Asset Based Financial Engineering,
(Wiley Finance, 2007) (“JF”). The additional readings and assigned cases will be provided on Blackboard
during the course. Class notes will be distributed in advance of each session.
Case Assignments
All case assignments will be turned in by groups of three to four students each. In addition to preparing
for each class, groups will be responsible for the following:
-One case presentation in class.
-Two case write-ups out of the remaining cases.
Class presentation. There are five cases assigned for the course to be allocated between groups. Each
presentation will last no longer than 20 minutes. It should focus on the substantive issues rather than
being a question-by-question response. No time should be spent on presenting background information.
Focus should be on presenting insights. Attention should be paid to the clarity and quality of the message.
Write-up. The coversheet should include the name of the case and the group members. The first page
should be titled “Executive Summary” and should contain the main insights that have emerged from
analyzing the case. The next one or two pages (no more) should contain a numbered list with the
answer to each question in the case (all supporting work in appendices). The write-up will be graded for
content and format. Write-ups should be turned in electronic format at talbanes@stern.nyu.edu and in
hardcopy format prior to the session for which they are assigned.
Grading
Grades will be computed as follows:
Case Assignments (as per above) 40%
Final Exam 40%
Class participation 20%
Final Exam. The final exam will be an individual effort. It will last about sixty minutes and will consist of
a list of questions (six to eight) to test the depth of your understanding of the material. The questions
will only refer to the topics covered in class. It is a closed book exam.
Class Participation. It will be evaluated on the basis of participation to the class discussion. Quality is
more important than quantity. Quality comments are those who move the conversation forward, or offer
a different, unique and relevant perspective, or build on other comments, or raise apparent tradeoffs in
the analysis. The evaluation is adversely affected by lack of attendance or the creation of negative
classroom externalities.

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