FIE445 Infrastructure and Project Finance

• Topics

  The course is about financing, valuing, and structuring infrastructure projects. We will cover a wide range of sectors including energy (oil & renewables), transportation, utilities, and social infrastructure (hospitals & prisons). The course is applied and involves various international case studies. We will focus on the role of the private sector in financing infrastructure, in particular on the perspectives of equity and debt investors. A central theme is how and why major infrastructure investments succeed or fail.

  The course first introduces students to project financing, a unique mechanism for financing large-scale projects that differs from standard corporate finance. Issues at stake include the determination of a project’s debt capacity as well as risk management, especially of completion risk, operation risk, and political risk. Another part of the course deals with public-private partnerships that involve contracting between the public sector and the private sector for the provision and management of infrastructure projects. Finally, we will consider infrastructure equity as an asset class for institutional investors such as private equity.

  The aim of the course is to endow students with practical tools grounded in rigorous financial analysis.

• Learning outcome

  Knowledge

  • understand infrastructure assets
  • critically reflect on value creation through project and infrastructure finance
  • critically evaluate the advantages and disadvantages of public private partnerships
  • understand how green energy projects can be valued and financed

  Skills

  • prepare a financing plan for an infrastructure project, including debt and dividend schedules
  • assess and mitigate project risks, specifically completion, operation, and political risk
  • identify and compare key financing sources: bank loans, bond issues, multilateral funding
  • design an optimal capital structure for a project
  • assess the viability of public private partnerships
  • identify optimal risk allocation between the private sector and the public sector in public private partnerships
  • apply performance metrics such as internal rate of return, cash multiple, and dividend yield, that are used by private equity investors, to infrastructure assets

  General competence

  • Use the ideas and techniques of financial economics to deal with applied real-world problems.

• Teaching

  The course is based on a mixture of lectures and case discussions. A significant part of the course is devoted to discussion and analysis of assigned cases. Active student participation is crucial to ensure the maximum benefit for all students. Students have a responsibility to come well prepared to class and to participate actively in classroom discussions. 

• Recommended prerequisites

  Students are recommended to have taken a master-level corporate finance course such as FIE402 or equivalent before taking this course.

• Required prerequisites

  Students are required to be familiar with basic concepts in finance (including NPV and time value of money; valuation of stocks and bonds; capital budgeting; the choice between debt and equity; CAPM), which are covered in a bachelor-level finance course such as BED3E or equivalent. Students must also be familiar with excel.

• Compulsory Activity

  One written, individual homework assignment. The homework assignment is graded on an 'approved/not approved' basis. 

• Assessment

  The assessment has to elements:

  1.Portfolio assessment (60%)

  • Quizzes throughout the semester (individually, approximately 1/3 of the portfolio grade)
  • Written case assignments throughout the semester (individually or in groups, approximately 2/3 of the portfolio grade)

  2.Written school  exam (2 hours) (40%)

  All elements must be in English

• Grading Scale

  A-F

• Literature

  Finnerty, John D., 2013. Project financing: asset-based financial engineering. John Wiley & Sons. 

  Yescombe, E.R. and Farquharson, E., 2018. Public-Private Partnerships for infrastructure: Principles of policy and finance. Butterworth-Heinemann.

• Permitted Support Material

  One bilingual dictionary

  Calculator

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support material https://www.nhh.no/en/for-students/regulations/https://www.nhh.no/en/for-students/regulations/ and https://www.nhh.no/en/for-students/examinations/examination-support-materials/https://www.nhh.no/en/for-students/examinations/examination-support-materials/