LAUNCHING satellites, laying trans-oceanic cables, building motorways and power plants; we tend to take these feats of engineering and construction for granted. Yet, without the specialist knowledge and skills of a group of finance professionals, many of these projects would never happen.

Project financing involves huge sums of money, many organisations, and in the bigger deals, hundreds of contracts. The basic skills required are taught in the core modules on most MSc in Finance programmes and a few courses include additional specialist electives on the subject.

Dick Davies, director of MSc in finance at Strathclyde University, who teaches on the university’s project finance elective, says: “It is a mode of financing used to fund big projects, hundreds of millions of dollars plus, and is tied into the private finance initiative (PFI) and public-private partnerships (PPP). In using project financing the critical element is separating an activity from the ongoing business of the company sponsoring a project, which is then financed on a no-recourse basis.”

In other words the activity is put in a separate legal entity. If the project fails and there is no money to pay the investors or lenders who funded it, those investors or lenders cannot, in theory, go after the assets of the company sponsor which set up the project.

At London Business School (LBS) the project finance elective on the Masters in Finance programme is taught by Sreenivas Kamma, who says: “The course is divided into three modules. The first is about understanding the rationale of project finance. The second looks at how to analyse the risks involved and structure project finance deals to maximise the value. Finally, we try to understand how banks and sponsors value these deals – how debt payment is structured, the financing options available, and how you choose among them.”

Project financing has had a renewed impetus globally, especially in infrastructure financing, because governments view it as a different way of financing capital assets. Ramya Viswanathan, who is taking the LBS elective, says: “The project finance process is taking off strongly in India, more infrastructure projects are taking place, and business in this area is growing quickly. The course will help me to understand how a deal works within a project finance framework, how to analyse the structure of a project, the way that you value it, and so on. I intend to work on the capital markets side of finance and expect to use a lot of the skills I pick up on this elective.”

There are many avenues in which finance masters postgraduates can exercise their project financing skills. Michael Dance, a consultant who teaches project finance at Cass Business School at the City of London, says it is a very international market. He has worked at several City firms and has extensive experience of infrastructure financing, including PPP/PFI transactions in the UK and abroad.

“On the lending side, postgraduates could work for a commercial bank, or some of the investment banks – Royal Bank of Scotland is probably one of the market leaders in infrastructure finance. You could also do advisory work, providing advice on structuring the projects, working for one of the big accounting firms.” Another option would be to work for project sponsors, or government agencies, such as the European Bank of Reconstruction and Development.

Although the market for infrastructure development over the next few decades will need trillions of dollars in funding, Dance points out that any slow down in its rapid progress is unlikely to stem from a lack of money but lack of people with the right skills.

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