GPFAC's mission is to create a distinct competitive advantage for its clients by offering leading-edge:
• Project Finance Advisory Services;
• Financial Modeling Services; and
• Training Services.
Project Finance Advisory Services
GPFAC has assembled an amazing team of Principals to drive its project finance advisory business. There are four main factors differentiating GPFAC Principals from other consultants and advisors:
This team’s experience includes closing over $100 billion in project finance deals worldwide. It has the breadth and the depth to offer comprehensive project finance services to support any project finance transaction.
- Experience with industrial companies and major equipment contractors that has led to a deep understanding of the business and commercial issues in a transaction;
- Experience working across the financial services sector in a variety of roles (advisor, underwriter, and equity investor) that has led to an appreciation of risks from a lender and investor standpoint;
- Unique experience with renewable energy (leading the effort in the US for utility-scale solar, wind, bimass, and nuclear energy projects); and
- Extensive emerging market experience.
One of the primary advantages of using GPFAC is that our Principals have the knowledge and experience to guide projects towards a successful financial closing. Getting ir right the first time can increase the probability of success and dramatically reduce development time and cost.
Depending on the needs of a particular project, GPFAC shall appoint the most appropriate team, in close consultation with the client, to support that project.
GPFAC’s Project Finance Consulting Services include the following:
- Structuring and credit support. GPFAC Principals will support project finance transactions as consultants during the project development, financing, and closing stage. Services would include support for the following activities: review of commercial contracts and agreements; assessment of counterparties; review of the insurance program; financial modeling; sensitivity analysis and stress testing; risk analysis and mitigation; financial structuring; design of an appropriate security package; and structuring of appropriate loan covenants in the loan documents.
- Due Diligence. GPFAC has the capability to conduct a thorough and comprehensive review of a project finance transaction and produce a summary Due Diligence Report that outlines the critical risks and possible solutions to mitigate those risks. This service can help drive the closing process by focusing resources on the major deal-breakers from a financing standpoint. This service can take anywhere from 3-6 weeks, depending on the scope of work and availability of relevant information.
- Project preparation GPFAC is extremely well placed to support clients, especially in the emerging markets, with project preparation so that their projects have a significantly higher likelihood of success. This would include a commercial and financial review of the project documents available to bidders and potential project participants (including concession agreements, implementation agreements, etc.), review of the security package offered to lenders, assessment of bankability, and recommendations. Our deep experience with international lenders and investors,combined with our insight into what it takes to close a transaction, can help guide the development process to create an environment that fosters institutional investment.
- Portfolio Management. GPFAC can support portfolio managers with three specific services. The first is to review and update existing policy and procedure manuals, or help develop new manuals if none exist, that incorporate uniform credit standards across the organization to monitor projects and report performance. One of the most common problems is that these manuals generally are difficult to read and they lose relevance over time such that they are not followed as they should be. GPFAC would refresh these policies and incorporate a training element that often is more effective than asking people to refer to large policy manuals. The objective, of course, is to guard against potential write-offs.
The second is to supplement existing resources by offering day-to-day support in the monitoring, reporting, restructuring (if needed), and management of individual transactions.
The third is to review the portfolio from an enterprise perspective. Typically, GPFAC would follow four steps in conducting this review: (1) Screen each project in the portfolio across industry and geographic location to identify critical issues and propose solutions; (2) Assess the quality of each project by rating the top 10 drivers
and assigning a score
for each driver; (3) Use this analysis, combined with an assessment of that project’s profitability (as measured by EBITDA/capital cost) to classify
each project in the portfolio based on its quality and profitability and map
the entire portfolio; and (4) Establish a rational basis to allocate resources
for projects under development and guide strategic portfolio decisions, including acquisition and divestiture.
There are many examples worldwide where GPFAC Principals have demonstrated exceptional value-addition, including many of the pioneering deals in privatization where GPFAC Principals successfully closed complex, first-of-a-kind transactions in emerging economies. For GVK Industries, Limited, the first IPP in India, GPFAC Princiapls were involved in multiple roles as financial advisor, lead underwriter, and project sponsor and they successfully managed the potential conflicts of interest associated with these roles.
Another illustrative example of value-addition has been the approach taken in guiding the credit underwriting process for issuing loan guarantees at the Loan Programs Office at the US Department of Energy ("DOE"). One of the challenges was to extend guarantees for projects that were not commercially proven and, therefore, any underwriting would carry an element of technical risk. Another key challenge was the willingness of utilities to accept the higher tariff for such renewable energy projects in order to meet their Renewable Fuel Standards. Finally, such projects experience considerable difficulty in meeting Debt Service Cover Ratio covenants, particularly in the early operating years.
To meet these challenges, the general approach taken by GPFAC Principals included the following four elements: (1) Making the clear distinction between taking limited technical risk versus taking the risk of non-performance by the contractor; (2) Stretching the loan repayment schedule such that the loan tenor was almost as long as the underlying power purchase agreement or concession (except for a 'tail' between 2 and 5 years to deal with any shortfall in loan payments); (3) Sculpting the loan principal payments such that the Debt Service Cover Ratio was at an acceptable level throughout the loan term; and (4) Structuring a sophisticated security package that included appropriate loan covenants, contingent equity, reserve funds, cash sweeps, and retention accounts. The loss record at DOE is less than 50 basis points to-date - a remarkable achievement considering that the projects, by policy, culd not be commercially proven.
GPFAC Principals have a client base that is a virtual list of ‘who’s-who’ among industrial firms, contractors, project sponsors, financial institutions, and Government agencies worldwide. GPFAC would be pleased to discuss this client base, subject to confidentiality agreements.
GPFAC has a low level of overhead expenses and, as a result, it can offer its leading-edge services at a competitive price. Transactions fees may be priced at an hourly rate, or on a fixed price basis, but with no success fee. GPFAC may agree to defer some, but never all, of its fees until a project achieves financial closing; however, this determination is made strictly on a case-by-case basis. All reasonable travel and out-of-pocket expenses are documented and billed at cost.
Disclaimer: GPFAC is not a securities firm, broker, or financial advisor. It does not provide any funds and it is not a member of the Financial Industry Regulatory Authority (“FINRA”). It is neither qualified, nor does it intend, to offer any services to place debt, equity, or any other financial product.
Financial Modeling Services
Project finance models
For projects that are in the project development through financial closing phase, GPFAC has developed a proprietary modeling approach that has gained universal acceptance from developers, project participants, lenders, and international rating agencies. What differntiates GPFAC financial models is that they are built not just by Excel experts, but by project finance professionals who have an in-depth business and commercial understanding of the transaction as well as the required background in finance and accounting basics. Some of the most creative ideas are generated by Principals who actually do the modeling.
With this approach, GPFAC can rapidly generate a sohisticated financial model for any project finance transaction that is consistent with the loan documents. These models are so well structured that they meet prevailing audit standards, while remaining commercially acceptable to key project constituents. GPFAC offers a 2-day workshop to train clients and in this approach.
Asset management models
GPFAC does not, in general, recommend that the Base Case Financial Model used to close a project finance transaction also be used to monitor that project during operations. There are a number of reasons for this position:
These are the very reasons why Borrowers and Lenders invariably agree to revise the closing Base Case Model to reflect reality.
- The Base Case Model at closing often does not reflect actual construction costs, even with a lump-sum contract, because of change orders and Force Majeure events;
- Monitoring models do not need a front-end that includes detailed construction financing or loan repayment calculations. These items increase model size and complexity and already are known at the end of construction;
- The Base Case Model projects performance for an extended period of time (15-20 years) and the forecasts for revenue, feedstock, and O&M costs get increasingly inaccurate over the operating years;
- The Base Case Model does not reflect the actual operating data that the Borrower is required to submit on a regular monthly or quarterly basis; and
- The focus of monitoring is on the near-term (not the next 15-20 years) and it often is on a monthly or quarterly basis.
GPFAC will work with clients and lenders to develop an easier-to-use monitoring model that meets their reporting needs and also checks compliance with covenants in the loan documents.
GPFAC offers a comprehensive credit training program in Project & Structured Finance. This program has three components:
Each of these components is described below.
- Classroom Instruction;
- Experience-Based Learning (“EBL”); and
DC&F has developed a broad range of training modules in the area of Project & Structured Finance, including courses in the following:
GPFAC also will coordinate training programs from other providers to structure a comprehensive Classroom Instruction program that includes other courses in Project & Structured Finance or Corporate Finance not offered by GPFAC or other courses on industry sectors and soft skills.
GPFAC has put together an off-the-shelf 4-day workshop in Project & Structured Finance that focuses on the business and commercial aspects of project finance and it is structured as a workshop.It can be custom-tailored to meet an individual organization’s classroom training needs, as the approach is modular: it is based on combining courses that are structured as modules. GPFAC’s training workshops are highly interactive with spot quizzes, class exercises, and case studies. They focus on imparting knowledge with practical applications and tools that can be used on-the-job.
GPFAC also has developed a 2-day workshop in Financial Modeling workshop that introduces participants to the building of financial models for complex project finance transactions.
GPFAC has been delivering custom-tailored workshops for over 30 years to various customers, including several locations for ABB worldwide, GE Capital, US Department of Energy, National Commercial Bank (largest commercial bank in Saudi Arabia), PDVSA in Venezuela, European Bank for Reconstruction & Development, a private equity firm in the US, and other customers.
Experience-Based Learning (EBL)
EBL is an extension of Classroom Instruction that enables rotational employees to gain a practical understanding of the role and the core tasks performed by other departments in an organization through short-term assignments (typically of 3-6 months duration). The objectives, over time, are to improve each employee’s understanding the organization, improve job performance through cooperation across departments, and promote a common credit culture within the organization.
DC&F has developed a description of the key concepts in such a program as well as a set of administrative guidelines to support an EBL training program, based upon best practices in the industry. These guidelines include a detailed framework containing all the administrative tools necessary to implement a successful program.
Mentoring is the third leg of a comprehensive training program where an employee (the “Mentee’) is matched with a Mentor with the objective of facilitating the Mentee’s personal and professional career growth. It is synergistic with Classroom Instruction and EBL; however, the duration of a Mentor-Mentee relationship generally is of a significantly longer duration. The benefits to an organization include: better career development of employees, increased retention rates, and higher productivity. One of the key challenges, of course, is ensuring that the role of the Mentor does not undermine the role of the employee’s supervisor.
GPFAC has developed a description of the key concepts in a Mentoring program as well as a set of administrative guidelines to support such a program, based upon best practices in the industry. This includes a detailed framework containing all the administrative tools necessary to implement a successful program.
See case study on training at the US Department of Energy.