Tony Merna & Yang Chu 
Project Finance in Construction 
A Structured Guide to Assessment

Project finance has spread worldwide and includes numerous
industrial projects from power stations and waste-disposal plants
to telecommunication facilities, bridges, tunnels, railway
networks, and now also the building of hospitals, education
facilities, government accommodation and tourist facilities.

Despite financial assessment of PF projects being fundamental to
the lender’s decision, there is little understanding of how
the use of finance is perceived by individual stakeholders; why and
how a financial assessment is performed; who should be involved;
where and when it should be performed; what data should be used;
and how financial assessments should be presented.

Current uncertainty in financial markets makes many sponsors of
construction project financings carefully consider bank liquidity,
the higher cost of finance, and general uncertainty for demand.
This has resulted in the postponement of a number of projects in
certain industry sectors. Governments have seen tax receipts
drastically reduced which has affected their ability to finance
infrastructure projects, often irrespective of the perceived
demand. Equity providers still seek to invest, however there are
less opportunities due to market dislocation. Due to the demand for
global infrastructure it is believed that project financings will
return to their pre-crunch levels, or more so, however
lenders’ liquidity costs will be passed on to the borrowers.
Lenders will also be under stricter regulation both internally and
externally.

The steps outlined in the guide are designed to provide a basic
understanding for all those involved or interested in both
structuring and assessing project financings. Secondary contracts
involving constructors, operators, finance providers, suppliers and
offtakers can be developed and assessed to determine their
commercial viability over a projects life cycle.

Special Features

* a structured guide to assessing the commercial viability
of construction projects

* explains economic metrics to use in the decision making
process

* detailed case study shows how stakeholders apply the concept of
project finance

Circa l’autore

Anthony Merna is senior partner of Oriel Group Practice, a
multidisciplinary research and consultancy practice based in
Manchester and a visiting lecturer to Manchester Business School at
the University of Manchester. He has been teaching Project Finance
for the last 14 years to a number of UK and overseas universities,
businesses and government agencies.

Yang Chu is a graduate of the School of Mechanical,
Aerospace and Civil Engineering at the University of Manchester and
a research consultant with Oriel Group Practice specialising in the
areas of project finance and risk modelling. He is currently
carrying out risk management research at Manchester Business
School.

Faisal Al-Thani is Senior Development Manager, Middle
East for Maersk Oil based in Doha and a board member of the Marsh
International Risk Council.