Refinancing and restructuring projects utilising project finance in developing countries

Project finance has occupied an increasingly important role in infrastructure, communication and energy projects in many developing countries over the last two decades. This work reviews the concepts of project finance, and its application in developing countries, with emphasis on the process of project refinancing and restructuring. Refinancing and restructuring techniques have been widely applied to improve financial viability and avoid project termination, but in general have been little utilised in strategic planning or risk evaluation. In this work a methodology has been developed throughout which risk evaluation has been applied, and which enables the determination of refinancing packages at any stage of the project. The methodology facilitates the selection of refinancing and restructuring techniques utilising project finance strategies, which are evaluated and validated through a case study. The case study is based on an infrastructure project in China, and the analysis follows the assumptions presented in the methodology. The simulation of the methodology for the cases study includes the evaluation of original financial package, the management of risks, and the assessment of refinancing and restructuring techniques in the best case scenario and the worst case scenario. The software tool of CASPAR (Computer Aided Simulation for Project Appraisal and Review) was used in the simulation. The outcomes the case study indicate that the methodology could be applied to a wide range of projects, and at any stage of a project. With the aid of a modelling tool-CASPAR, it is practicable to anticipate and evaluate the outputs of each refinancing and restructuring technique, and the probability of the future cash flow and the impacts of risks. In this way, the performance of a project can be simulated and improved by the selection and application of an optimised refinancing and restructuring package.