Question

a) In order to improve health care delivery in Ghana, among other things, the Government of Ghana in 2012 signed a contract with an Israeli construction company - Messrs Engineering and Development Consultant to build a 650-bed medical facility. Construction began in April 2013 as a turnkey project. In 2015, the University of Ghana, which had provided a 400-acre land for the construction of the hospital, established a Special Purpose Vehicle (SPV) that will operate the facility. The name of the company is the University of Ghana Medical Centre (UGMC) Limited. UGMC was completed in August 2017 and requires about 800 personnel when it is fully operational. The first phase of the project is priced at $217 million. The second phase of the project requires about $50 million.

i. According to the typical features of project finance, does the project described above fit the description of project finance? [4 marks]

ii. What is a turnkey contract and who does a Project company sign one with?

[3 marks]

iii. Under what conditions can the procurement of funds for the second phase of the project be termed

as mezzanine debt? [3 marks]

iv. Using probable scenarios, describe how the project may be affected by political and commercial

risks.

Answer 1

1) yes, the above mentioned project comes under the category of project finance.It comprises the features of project finance especially the main ones:

Project Financings Are Capital-Intensive

A less obvious component of project finance is that it includes gigantic measures of financing since it is utilized to finance significant worldwide turn of events and framework projects. As indicated by Project Finance International, the normal project financing in 2017 was nearly $750 million. While Global Trade Funding gives project financing of in any event $20 million, project financings regularly include sums running $50 million to more than one billion dollars. Think framework projects principally in creating nations.

Project Financings Have Numerous Participants

Another element of project financings is that they generally include many, numerous members. Starting with the project supports, the huge sums engaged with project finance for the most part require value financial specialists, project finance suppliers like Global Trade Funding, project banks which as often as possible become a consortium of loan specialists, to share the hazard, etc. Audit our Project Finance Learning Center for broadened data about the project members and partners.

Project Financings Are Non-Recourse

Project finance is either non-plan of action or restricted response as to singular investors, including the project supports. Non-plan of action financing implies the borrowers have no close to home risk in case of money related default. Project organizations are commonly restricted obligation particular reason substances, so any plan of action the loan specialist may have will be constrained to the project resources if the project defaults on the obligation.

The project is claimed by a specific reason substance which is shaped for the express motivation behind possessing the project. The project organization has no credit or resources so moneylenders don't assess the project organization while endorsing the project. Since project advances are non-response and the borrowers have no resources for fulfill lacks in case of project default, guaranteeing is centered altogether around the suitability of the project. 2) An agreement in which a builder agrees to complete a facility thus it will be ready for use when delivered to the other contracting party.for example A contractor may agree to build a fully equipped ad operational factory under the turnkey contract. The responsibility of the contractor ends when he hands the completed installation over the other party.   Messrs Engineering and Development Consultant Is the one with turnkey contract is made. 3) Mezzanine debt - the middle layer of capital that lay between secured senior debt and equity. Usually This type of capital is not secured by assets, and is lent strictly based on a company's ability to repay the debt from free cash flow. 4)

. Assessment and financial arrangements: Increasing or diminishing pace of expenses is a genuine case of a political segment. Government guidelines may raise the expense rate for certain organizations and can bring down the equivalent for others because of explicit reasons. This choice will legitimately affect organizations. This is the reason keeping up a system which can manage such circumstances is significant.

Political strength: Lack of political soundness inside a nation can essentially affect the activities of a business. This can particularly be valid for organizations that are working on the worldwide scale. For example, an antagonistic takeover can assume control over a legislature. In the long run, such a circumstance will prompt plundering, mobs and general issue inside nature. Such circumstances can disturb business tasks and exercises which can majorly affect its main concern.

Outside Trade Regulations: Every business has a need to grow business activity to different nations. Be that as it may, political foundation of a nation can impact the longing for a business to extend its activities. Duty arrangements that are especially constrained by the legislature can actuate a specific business to extend activities in various districts while; other assessment strategies can thwart the procedure of business extension for certain enterprises. Government activities, which have been intended to help neighborhood organizations, may neutralize universal organizations when the inquiry is of their intensity in a remote district.

Business Laws: Employment laws are made to ensure the privileges of workers and incorporate each part of boss/representative relationship. Work law is a perspective that is mind boggling and includes a few traps too. At the point when organizations' are in contact with the most recent improvements in this law, they can figure out how to take their business the correct way in any case, the individuals who fail to understand the situation should be totally arranged for the costly outcomes it will produce. In present day companies, representatives are practically 98% of the organization for the achievements or scarcity in that department and any progressions inside work law will, obviously, greatly affect the business tasks