Course Syllabus
Development Financing
Course Name
Paul-Henri Forestier
Lecture (es)
Course Status
1. International School of Economics at TSU (ISET)
2. Financial Concentration
3. Elective Course
Course Goal
To develop awareness and skills of future decision makers in respect of
available financing techniques in countries where maturing domestic capital
markets are yet to reach a higher level of sophistication while public and
commercial financial institutions are active substitutes.
ECTS
3 credits
Course Pre-requisite
Course Format
Good knowledge of accounting, financial statement presentations, cash flow
analysis. Basic understanding of corporate finance concepts, primarily DCF,
NPV and IRR.
14 lectures, including three outside participants to share experience and
expertise in IFI activities, public infrastructure financing and private equity
operations. 2 lectures to be case studies focusing on 1) complex financing
documentation and 2) cash flow modelling.
See attached
Course Content
Course Evaluation
Grades:
Final exam - 100%.
See attached
Required Literature
Additional Literature
Course Results
See attached
(1) Cognitive and Methodological Skills:
 Awareness of financing availability from different sources in the
Caucasus countries.
 Extent and limitation of availability of financing.
 Private sector vs. Public sector financing.
 Project finance skills.
Teaching Methods
Additional Conditions
(2) Practical Skills:
 Applying Corporate Finance theory to the development challenges
in emerging economies.
 Identifying conflicting interests between parties involved in loan
negotiations.
 Providing viable alternatives through use of financial modelling.
 Discussing loan proposals summarized as “Term sheets”
 Lessons learned from historical failures.
(3) Making Conclusions:
 Development of arguments.
 Critical thinking.
 Drawing conclusions.
 Suggesting innovative solutions.
(4) Communication skills:
 Team work.
 Participation in discussions.
 Oral presentation skills.
 Written case study analysis
(5) Learning Skills:
 Good understanding of financial statements.
 Use of financial models.
 Essentials of loan documentation.
 Development of capital markets in emerging economies.
(6) Course Values:
 Students learn who the main actors are to finance development in
emerging markets.
 Students learn how investments can be financed in emerging capital
market economies.
 The course should prepare future decision makers to deal with more
complex investment decisions as they will be made by increasingly
sophisticated domestic institutions.
Students are expected to attend all lectures and be on time. They are
notified that the final exam questions are based on topics which are covered
in the reading assignments and have been discussed during the lectures or
topics covered during the lectures, including by guest lecturers.
Since 100% of the grading will be the outcome of the final exam, it is
important for students to attend all lectures or seek notes from others for
lectures they would have been unable to attend.
Course Content
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Lecture Topic
Course introduction and organisation. Availability of Finance:
Georgian domestic banks. Focus on TBC bank and Bank of
Georgia. Strengths and weaknesses, regulatory constraints.
Availability of Finance: IFIs active in the Caucasus countries 1)
MDBs (World Bank, EBRD, IFC, ADB, BSTD, EIB) 2) non
MDBs (KFW/DEG, FMO, AFD/ Proparco) – The role of ECAs International commercial banks and access to international
capital markets.
Live presentation by two IFIs (e.g. EBRD and ADB). Discussion
over similarities and differences / complementarities of
development institutions as they operate in the same countries.
Introduction to Project Finance vs. corporate lending. Lending
against single assets/ source of cash flow. Concept of limited
recourse financing. Private sector vs. public sector lending.
Main applications: extractive industries- transmission-Energyreal estate- infrastructure- shipping/aviation-general industriesforestry. Role and impact of rating agencies.
Project Finance Risk identification and mitigation - specific: 1)
Reserves; 2) Construction/Completion
Project Finance Risk identification and mitigation - specific: 3)
Operation; 4) Market; 5) FX; 6) interest rate.
Project Finance risk mitigation - general: Sovereign/quasi
sovereign guarantees-Syndication (risk sharing) ECA’s/IFI’s.
Reputation risk.
Live presentation by Energy sector MD from the CoInvestment Fund.
Loan documentation / term sheet negotiation: review of main
sections of a Term Sheet for a complex financing focusing on:
Pricing structure-positive covenants-negative covenantsfinancial covenants- Representations and warranties-security
structure-syndication strategy.
Energy Project Financing, 2 recent cases: the Black Sea
Transmission Line and one hydropower facility. Review of the
financial model of the latter, discussion on prospects for limited
recourse financing of HP projects in Georgia.
Literature
Internet information on both
institutions (IPO for TBC and
Financial statements for BoG)
Websites of some of the major
institutions. Recent fixed rate
issues
in
Georgia
(GR,
Government of Georgia and
BoG)
TBD
TBD
Ross-Westerfield-Jaffe p 735738. (TBC)
Material on syndication, CDS
and Preferred creditor status.
Case study based on actual
transaction for large financing of
building materials project in a
developing country. Review of
the “Term Sheet”
Case study based on the financial
model of a “run of the river”
medium size HP plant. Print out
to be handed out, live model
demonstration
during
the
lecture.
Infrastructure Financing: Typical public infrastructure
financings by the World Bank (roads)) concept of Economic
Rate of Return (ERR). Lecture to include presentation by the
IBRD.
The world’s greatest project Finance disaster: Eurotunnel - Financial distress, lender
project flaws (politics, conflicts of interest, cost overruns) - passivity and project finance ...
13
14
project strengths (quasi monopoly, but in the long run, too
large/strategic to fail) – restructuring (creation of different
classes of debt and quasi-equity, distressed debt trading and
hedge funds) - shareholders’ discontent.
Non Banks financing: Placement of securities, mezzanine
financing, convertibles, private equity market, “portage” equity,
Islamic financing
Corporate governance / environment compliance. Wrap up
session to cover any issue from prior lectures that call for
further discussion / explanations.
Final exam
-
Ross -Westerfield-Jaffe p 549573
Vernimmen p833-858