Project and Infrastructure Finance: An Introduction with Karl Lins | London Business School

>>>Karl Lins: Project finance and the use
of it to fund infrastructure is an amazingly high growth opportunity area, because the
needs for infrastructure around the world, both in emerging markets and developed economies,
just continue to be underestimated by everyone. So, to think about what goes into a successful
infrastructure and project finance situation, you’ve got to have people that can actually
assess the risks properly, understand where they can be mitigated and understand whether
finance is comfortable with the fact that people are talking about putting projects
in extremely developing countries, sometimes called frontier markets, which have their
own sets of risk or, possibly, highly developed economies such as the United States or other
places in Europe, where the political will to get the public to pay for it has dropped
off and you’re going to be asking private sector providers to put amazing amounts of
capital in, in situations they may not even know the return they’re going to get. The need to understand project and infrastructure
finance is certainly clear, the question is whether we can get enough capital into the
sector to build out what the world needs. So what we are trying to do in this course
is bring a variety of possible participants into it, to try to learn more about the financing
structure. We’ll sometimes have lawyers; we’ll sometimes have people that are already
corporate finance specialists, we’ll have accountants, we’ll have bankers. I occasionally
see engineers that have a little bit of finance training. Really all we need is that you have
a moderate amount of finance background enough to do a cost of capital, an internal rate
of return, understand about discount and cash flows and also just get a general idea for
a timeline of a financial structure and the difference between debt and equity and some
of the risks that each takes on, and that’s enough to get the background and then we want
to have a variety of participants from all over the world, which we have had in each
of the offerings of the programme so far. We try to teach the course through a variety
of case examples, including cases on different types of infrastructure, some industrial projects,
such as an aluminium smelter for instance, and from all over parts of the world. So various
continents with various political risk and various expertise in providing funding. Because London is literally the world capital
for project and infrastructure finance, we are able to get a variety of top notch guest
speakers that have personal experience spending decades in some cases in the project and infrastructure
finance sector; and these folks will intersperse their practical experience, some specifics
of deals that have gone well and gone bad and what their takeaways are after a lot of
experience with our more academic framing and kind of the general case studies that
we do in the course. So it’s the combination of a theory and why it makes sense but we
are not too heavy on that, we want to understand that project finance structures are extremely
living instruments, so to speak, they are not “one size fits all”, each one is an
individual assessment of risk and whether the risk can be mitigated and by bringing
guest speakers as well as what we do in the classroom and as well as what you guys do
in cases and what you guys do in the class by sharing your personal experiences it’s
an enriching environment that you just can’t get anywhere else.

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