Chad-Cameroon Petroleum Development Pipeline project Case

David WangombeStrathmore

Learning Objectives i) Knowledge enhancement a) To demonstrate importance of organisation structure in financing activities•To distinguish between corporate and project finance•To demonstrate the role of risk mitigation and risk sharing as motivation for project financeb) To demonstrate that contractual structure matters:•Influence of the RMP to project success, both financial and social.•Analyse the dangers of incomplete contracting

Objectives cont’dAttitudinal Developmenta) Raise the critical ethical and moral issues in long

term projectsDemonstrate the high risk high return issuesTrade off between project risks (social political and

environmental) and project returns (economic development)

b) Illustrate the world bank involvement/role in structuring fair deals in emerging markets

Is the deal fair Do host countries receive a fair deal commensurate

with the risk they bear

Objectives Cont’dSkills buildinga) Provide practice in identifying and assessing

project risks and returnsb) Offer lessons on negotiating large projects;

Teaching plan Time allocated

1. Distinction between corporate finance (upstream) and project finance ( export system). Show why Exxon Mobil is using project finance

15 minutes

2. What is the world bank/IFC involvement; what are their objectives ( fairness and sustainability)

10 minutes

3. Analysis of project returns. Are the returns fair to all parties? How were they calculated (sensitivity analysis and key drivers).

10 minutes

4. Would you approve the deal? Will the revenue management program work? Should it be changed?

20 minutes

5. Read Case B what would you do now as a world bank? IFC director; As a sponsor.

10 minutes

6. Summary and what happened.

20 minutes

Choice of caseOne the participants would associate withInteresting Pitched at the participants level

Board planProblem Decision Criteria Decision made

&effect Problem Who

Why project finance Distinguish with corp finance

World bank Role/involvem Objective?

Project Fin. Analysis Cash flows NPV

Why Support Decision Vote

Urgency

Project risk Sharing Mitigation ExxonMobil Objective

Chad Deby Objective

Is it fair Returns Distribution

Why not Support

Outcome Summary Closure