Training program on Project Finance and Environment , Social and Governance (ESG)


Training program on Project Finance and Environment , Social and Governance (ESG)

The Federation of Indian Petroleum Industry (FIPI) in association with Great Lakes Institute of Management organized a three-day training program on “Project Finance and Environment, Social and Governance (ESG)” on September 28-30, 2022 at Radisson Hotel, Varanasi. The program was attended by 39 mid to senior level executives from Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd, GAIL India Ltd, Oil & Natural Gas Corporation, ONGC Videsh Ltd, Oil India Ltd, and Reliance Industries Ltd.

The training program commenced on the 28th September with the opening remarks of Mr. Vivekanand, Director (Finance, Taxation and Legal), FIPI. Mr. Vivekanand welcomed the participants and the distinguished faculty members comprising of Dr. Ahindra Chakrabarti, Professor of Finance, Great Lakes Institute of Management, Dr. Chanchal Chatterjee, Professor of Finance, IMI Kolkata, Mr. Arjay Kumar Mishra, Consultant – ICRIER and Mr. Ruchir Agarwal, CGM (CF & T), IOCL. He highlighted the growing importance of project finance for companies as against balance sheet finance. He also explained the difference between project finance and balance sheet financing. He shared his personal experience in handling project finance matter for a major multi-billion-dollar international project. He also highlighted the increasing importance of ESG consideration for financing by oil and gas companies.

During the training program Dr. Ahindra Chakrabarti, covered a range of topics related to project finance. During his sessions he highlighted that distinguishing feature of project financing is that the project is a distinct legal entity & project assets, project-related contracts, and project cash flow are segregated to a substantial degree from the sponsoring entity. For practical learning, he discussed important case studies from the Indian context that gave insights into analyzing cash flows from infrastructure projects, sources, and cost of funding, role of mezzanine finance, weighted average cost and capital (WACC) and steps in evaluation of WACC. He also spoke about creation of a specific economic entity— commonly known as special-purpose vehicle (SPV), or the project company created for project finance, wherein the lender considers projects cash flows as the only source of loan servicing and repayment, whereas assets represent only collateral. Dr. Chakrabarti also discussed on risk management and the expectations of large investors about the outcome from projects in addition to financial returns. He also highlighted the non-technical risks and the influence of Environmental, Social and Governance (ESG) factors, which are often overlooked or not fully accounted for in project finance.

Mr. Arjay Kumar Mishra covered the topics related to ESG. His sessions included discussions on sustainability and environment related issues in the energy sector and the efforts being made by oil and gas companies to promote sustainable operations. He spoke on the relevance of integration of environment, sustainability, and governance aspects, since in recent years, ESG factors related to project investing has slowly and steadily made its way to becoming an investment strategy whereby investors put their money in companies and projects that are focusing on clean development. ESG investing requires balancing the consideration of environmental, social and governance factors alongside financial factors in the investment decision-making process. Investors are increasingly applying these non-financial factors as part of their evaluation process to identify material risks and growth opportunities.

Dr. Chanchal Chatterjee’s sessions on corporate governance, covered the corporate governance parameters such as environmental awareness, ethical behavior, corporate strategy, compensation, risk management etc., its Indian context and addressing investors’ concerns about governance. He also discussed the importance of corporate governance in choice of Board members of a company since they directly influence all major decisions of the company.

Mr. Ruchir Agarwal, CGM (CF & T), IOCL took a session on Credit Rating for Oil & Gas companies and ESG considerations as an industry expert. During the session he spoke on the major rating agencies present both globally and in India and importance of credit rating from a lender’s perspective. His session covered in detail the rating considerations and parameters for downstream and integrated companies. He also spoke about how the credit rating of a country affects the credit rating of companies within the country.

The training program ended in the evening on 30th September with the valedictory session. During the session, Mr. Vivekanand, Director (Finance, Taxation and Legal), FIPI awarded the participants with a certificate for successfully completing the three-day training program on Project Finance and Environment, Social and Governance. During his closing remarks, Mr. Vivekanand reemphasized importance of Project Finance in Mega projects like LNG in Oil & Gas sector. He also informed the participants about “India Energy Week (IEW),” erstwhile known as Petrotech, that is going to be held at Bengaluru International Exhibition Centre on February 6th-8th, 2023. The training program concluded with a vote of thanks by Mr. Praveen Rai, Deputy Director (Economic Policy & Planning), FIPI to all participants, companies that nominated their executives, and the faculty.