Project Finance and Risk Management - Thesis Proposal Example

?Proposal for Project Finance Finance is one of the most crucial aspects of any project, since no company could even consider the aspect of setting up a project without adequate funding to keep it floating and to achieving its aims and objectives. However, mobilization of funds and project financing at each stage of project completion are also complex matters that need to be carefully identified, monitored and enforced on a consensus basis by the team headed by the Project Manager, or Project Director. In this proposal, it is proposed to take up legal and financial structures that impact upon project finance and in terms of associated costs in the United Kingdom. It is also proposed to consider the barriers for legal and financial structures in terms of financing of projects. At the outset, the proposal also needs to consider the fact that financing is the lifeblood of projects since major cost overruns and budgetary variances could throw the entire project out of gear and could, in extreme cases, also lead to abandonment of the project due to financial and budgetary constraints.”This enables you to use our sector insight and knowledge to leverage relationships with key players in banks, capital markets, institutional investors and government” (Project Finance, 2011). The main determinants of project finance could be seen in terms of the following: 1. Identification of the funding for project and analysis of its constituent elements including “scoping and developing the project and the implementation of the procurement process.” (Project Finance & Public Private Partnerships Delivering value at the public/private interface, 2011). 2. Preparation of preliminary reports like the feasibility reports and financial statements that are necessary for gaining credit and finance for the taking up of this project. It is also seen that in many cases, these financial statements need to be affirmed and its veracity and genuineness audited and attested by a practising Chartered Accountant (CA). 3. In the context of the United Kingdom, the legal impacts and implications of several legislations and byelaws that govern and underpin project financing of projects must also be considered. This could be applicable for both ongoing projects as well as newly assigned projects that need to be completed. The correct assessment of the future performance of the project is very important. “Because the ability of the project sponsors to produce revenue from the project is the foundation of project financing” (Hoffman , n.d., P.5). 4. There are several barriers to the gaining of required funding for project development. This could be in terms of administrative bottlenecks, need to provide latest permits, certificates and licenses, etc. In the event the funds are to be gained from Governmental sources, or government banks/financial institutions, there may be need for greater quantum and time for documentation and processing of funding procedures and processes.”There may be a lack of interest, or opposition, from decision-makers, policy leaders and programme managers. Resources may be hard to find and protect.” (Overcoming Barriers to Implement Best Practice, n.d). This proposal now needs to take cognisance of each element discussed about more elaborately. 1. Identification: What kind of funding or project financing does the company envisage? Is this it through private or public sources? Both the advantages and disadvantages of private and public funding needs to be considered. Is the management considering debt or even an IPO to raise funds for the projects.”Corporates may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both.” (About Public Issues, n.d). 2. What are its estimated associated costs like preliminary expenses, documentation and legal charges and so on? Many projects funding is done by country banks or financial institutions since they are fully aware of the prevalent local conditions and are also fully conversant with rules and regulatory regime underpinning such grant of credits Would recourse be made to seek succour from such financial agencies or institutions. What are its terms and conditionalties and how and when is repayment of loan amounts and interests to be disbursed off. Should the promoters of the project seek one line of credit or several lines in line with their loan requirements over the currency of the life of the project. These are all major issues that need to be asked and answered in order to reach a good solution for the issue of project financing and optimum use and deployment of scare resources, “in order to mobilize the financial resources needed to finance integration efforts such as infrastructure projects.” (Highlights, n.d). 3. The need for project finance needs to be quantified and documented. Therefore, this proposal seeks out the need for providing financial statements like audited statements of accounts of promoters, declaration of their personal assets and liabilities, tax records and proposed financial reviews and projections of the future of this project in terms of cost and revenue streams. These could be in structured and formatted reports given by the loan sanctioning and disbursing authorities, or generally accepted accounting and financial formats. However, it is also to be cautioned in this proposal that many of the information and statistical data available in cost and feasibility reports would have to be amended or recast to suit current requirements of project finance, including the list of assets that could be placed at the disposal of the credit funds providing agencies, as collateral securities. Often additional collateral securities would have to be provided as margin money for the cover of the project costs.”Such securities are deposited as a pledge or guarantee that the loan will be repaid at maturity; if not paid the securities may be sold to reimburse the lender.” (Holds worth, 2009). It is necessary to mention in the context of this proposal that there are many abiding and relevant legal provisions and jurisprudence that need to be considered in the context of setting up a project in the United Kingdoms and truing to gain funding facility for it. For one thing the UK context of Sarbanes Oxley Laws would be in place as would be the need to adhere to the various aspects of IASB laws, or the International Accounting Standards Board recommendations“ to take account of, as appropriate, the special needs of small and medium-sized entities and emerging economies.” (What is the IASB, 2010). 4. Besides country specific and domain specific strictures would be applicable as deemed necessary by the approving panel. 5. Finally, this proposal also needs to consider the barriers to gaining credit, in terms of country specific or project specific laws, which may include environmental and ecological audit.”Environmental auditing is a management tool to objectively and systematically evaluate environment management systems with the following objectives: i) Waste prevention and reduction: ii) Assessing compliance with regulatory requirements. iii) Placing environmental information in the public domain.” (Environmental Auditing, n.d). Safe and secure waste management practices and also whether the said project conforms to statutory and legal guidelines and practices as deemed by the relevant authority in the United Kingdom have to be ensured. “Successfully achieving these objectives since 1998 has not only built political support for project finance and increased public awareness regarding the vital role that project finance can play in seeking more cost effective ways to provide essential economic infrastructure services;” ( Haley, n.d). Reference List About Public Issues, n.d. [Online [BSE India. Available at: http://www.bseindia.com/bookbuilding/about.asp [Accessed 26 February 2011]. Environmental Auditing, n.d. [Online] Department of Ecology & Environment. Available at: http://parisara.kar.nic.in/envaudit.htm [Accessed 26 February 2011]. Haley, G., n.d. About IPFA, [Online] Ipfa. Available at: http://www.ipfa.org/page.asp?p=5435 [Accessed 26 February 2011]. Highlights, n.d. [Online] uneca Available at: http://www.uneca.org/aria3/highlights.pdf [Accessed 26 February 2011]. Holds worth, J.T., (2009). 129. Collateral Security. [Online] Free Books/Finance/ Money and Banking. Available at: http://chestofbooks.com/finance/banking/Money-And-Banking-Holdsworth/129-Collateral-Security.html [Accessed 26 February 2011]. Hoffman, S.L., n.d. The Law and Business of International Project. [Online] Amazon. Available at: http://www.amazon.com/Law-Business-International-Project-Finance/dp/0521708788#reader_0521708788 [Accessed 26 February 2011]. Overcoming Barriers to Implement Best Practice, n.d. [Online] EMAS. Available at: http://www.emasnetwork.org/FCKeditor/data/File/factsheets/Overcoming%20Barriers.pdf [Accessed 26 February 2011]. Project Finance, 2011. [Online] Grant-Thornton. Available at: http://www.grant-thornton.co.uk/government__infrastructure/project_finance.aspx [Accessed 26 February 2011]. Project Finance & Public Private Partnerships Delivering value at the public/private interface, 2011. [Online] PWC. Available at: http://www.pwc.co.uk/eng/services/project_finance_public_private_partnerships.html [Accessed 26 February 2011]. What is the IASB, 2010. [Online]Deloitte Global .Available at: http://www.iasplus.com/restruct/whatis.htm [Accessed 26 February 2011]. Read More