Introduction

In the complex world of project finance, where long-term assets are funded by a highly leveraged, non-recourse capital structure, robust risk management is not just a best practice—it's a necessity. Unlike corporate finance, project finance deals rely solely on the project's future cash flows for repayment, making them particularly vulnerable to unforeseen events. Stress testing, a powerful analytical tool, goes beyond standard sensitivity analysis to systematically assess a project's financial viability under a variety of adverse market and operational conditions. This advanced training course will give you the specialized skills to design, execute, and interpret stress tests that reveal a project's true resilience.

This program provides a deep dive into the theoretical and practical aspects of stress testing in project finance. You will learn to identify key risk variables, develop realistic stress scenarios, and quantify their impact on a project's financial metrics, including debt service coverage ratios and the loan life coverage ratio. The course emphasizes the use of financial modeling to simulate a range of market downturns, commodity price shocks, and operational failures. By the end of this training, you will be proficient in using stress testing to identify and mitigate a project's vulnerabilities, ensuring the financial stability of the deal and providing confidence to investors and lenders.

Duration: 10 Days

Target Audience

• Financial analysts
• Project developers
• Lenders and investors
• Project managers
• Risk management professionals
• Infrastructure funds
• Legal and compliance professionals
• Government officials
• Financial modelers
• Consultants

Objectives

• Understand the role of stress testing in project finance.
• Master the design of effective stress test scenarios.
• Learn to build and manipulate financial models for stress testing.
• Analyze the impact of stress on key financial ratios.
• Understand the requirements of lenders and rating agencies.
• Develop a framework for reporting stress test results.
• Identify the key risk variables in a project finance model.
• Explore the use of macro and micro stress scenarios.
• Evaluate a project's resilience to external shocks.
• Use stress testing to inform deal structuring and pricing.

Course Modules

Module 1: Foundations of Project Finance Risk

• The key risks in project finance deals
• The concept of non-recourse financing
• The difference between sensitivity and stress analysis
• The importance of a robust financial model
• The role of risk mitigation in deal structuring

Module 2: Introduction to Stress Testing

• The purpose and benefits of stress testing
• The difference between a single-variable and a multi-variable stress test
• The historical context of stress testing
• The role of stress testing in the financial crisis
• The key steps in a stress testing process

Module 3: Identifying Key Risk Variables

• Revenue-side variables: commodity prices and offtake risk
• Cost-side variables: operating and capital expenditure
• Financial variables: interest rates and exchange rates
• Operational variables: performance and downtime
• Macroeconomic variables: inflation and GDP growth

Module 4: Designing Stress Scenarios

• The art of scenario planning
• The use of historical data to inform scenarios
• Creating hypothetical or forward-looking scenarios
• The impact of a "perfect storm" scenario
• The importance of scenario narratives

Module 5: Building a Financial Model for Stress Testing

• The structure of a typical project finance model
• The importance of clean and transparent model design
• Building in switches and toggles for scenarios
• The use of formulas and lookup tables
• Debugging and auditing a financial model

Module 6: Running the Stress Test

• Step-by-step guide to executing a stress test
• Using data tables and scenario managers
• The importance of saving and versioning scenarios
• The use of VBA or Python for automating scenarios
• The challenges of running a large number of scenarios

Module 7: Analysis of Stress Test Results

• Key financial metrics to analyze: DSCR, LLCR, PLCR
• Interpreting the results of a stress test
• Identifying the point of financial distress
• The importance of comparing results to base case
• Creating clear and concise charts and tables

Module 8: Case Studies

• A case study of a solar power project
• A case study of a toll road project
• A case study of an oil and gas pipeline project
• A case study of a public-private partnership
• Lessons learned from real-world projects

Module 9: Lender and Rating Agency Requirements

• The expectations of lenders for stress testing
• The role of stress testing in credit ratings
• The importance of an independent third-party review
• The use of stress tests in due diligence
• Negotiating a deal based on stress test results

Module 10: Capstone Project Part 1: Design

• Defining a specific project for analysis
• Mapping the data requirements and model architecture
• Outlining the key technical and analytical requirements
• Creating a detailed project plan
• Presenting the design to a mock review board

Module 11: Capstone Project Part 2: Development

• Implementing a stress test scenario in a financial model
• Using a model to evaluate a real-world scenario
• Analyzing the impact on key financial ratios
• Building a presentation to explain the analysis
• Documenting all assumptions and data sources

Module 12: Capstone Project Part 3: Presentation

• Presenting the full stress test analysis of the chosen project
• Discussing the risks and benefits of the approach
• Proposing a plan for risk mitigation
• Q&A and peer feedback session
• Receiving expert recommendations and insights

Module 13: Advanced Stress Testing

• The use of Monte Carlo simulation
• Correlation and its impact on scenarios
• The importance of liquidity stress testing
• The use of reverse stress testing
• The integration of ESG factors in stress testing

Module 14: Reporting and Communication

• The audience for stress test reports
• The key elements of a clear and effective report
• The use of data visualization to communicate results
• The importance of a clear and concise narrative
• Presenting results to senior management and stakeholders

Module 15: Course Certification

• A final comprehensive assessment
• A final review of key concepts and objectives
• Issuance of a certificate of completion
• Post-course career guidance and networking
• A final Q&A with instructors

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 10 working days before commencement of the training.