Project Finance Modelling

Course Overview:

Modern project finance transactions requires a high level of expertise in building financial models which are reliable and flexible to accommodate the changing requirements occurring during the life of a project. The course covers such issues as how to model the role of debt, debt covenants, cash waterfalls, inter-creditor relations, restructuring and rescheduling of debt, how to model risk, and the role of equity and its rewards.

In the course of the two days delegates will build and evaluate a range of project finance models,covering projects as diverse as Public-Private Partnerships, major energy investments and private hospitals. Delegates will overcome the most complex aspects of building a reliable model, including uncertainty, currency and timescale mismatches, debt amortisation, depreciation, control account waterfall, cost structures, and the ability to easily shift time scales, as well as the ability to identify and control key sensitivities through spreadsheet simulation.

Course Methodology:

This course will teach you all the available techniques and how to practically apply them through the use of Excel – although the level of Excel required is actually quite basic, because what matters in project finance modelling is structure, and accuracy, whilst complexity in spreadsheet design can often be self-defeating.  Delegates will get practical tips on layout and style in building and analysing user-friendly models – numerous models are made available as additional benefits of the course

Who Should Attend:

• Bankers and financiers involved in project finance
• Directors and business development executives from corporates,
  equity sponsors and consultancies
• Trade finance managers
• Accountants and Lawyers

Day 1

Revision of basic Excel modelling tools

• Worksheet organization
• Data input, management and verification
• Use of colour/add-ins
• Naming of cells
• Location of input variables
• Review of Excel functions and their use
• Macros and their use
• Goal seeking
• Optimisation
• Circularity and how to resolve it
• Working with range names
• Graphs and charts
• What is needed from Excel and what is superfluous
• Principles of spreadsheets and workbooks

Case Study:
Evaluating good and bad Excel financial models

Project cash flow

• Limited recourse
• Quantification and allocation of risk
• Structuring and financing solutions
• Project finance experience worldwide

Case Study: Project finance worldwide

Project finance models

• The fundamentals of project finance model design:
• Objectives of project finance models
• Design, testing and feedback
• Model sensitivity and auditing Definitions and analysis
• Revenue and cost modelling
• Cash adequacy, recourse, standby and liquidity
• Financial coverage ratios and the bank perspective

Case Study: Examples of project finance models

Equity valuation

• Equity NPV/ IRR and project IRR
• XNPV, XIRR, MIRR
• Modelling cash flow and ratios:
• Allowing for accountancy – depreciation, tax
• and capital allowances

Case Study:
Valuation and Cash Flow models

Project dynamics

• Demand and Capacity Driven Forecasts
• Consistency of Capital Expenditures and Volume
• Operating Revenue and Expense Drivers
• Cash flow design

Case Study: Revenue and cost models

Project Finance in practice

• Design tolerance
• Dealing with escalation/inflation
• Dealing with non-correlated variables
• Pre-completion elements
• Estimating damages

Case Study: Examples of Excel project modelling

Project Finance model issues

• Depreciation of fixed assets
• Control accounts – waterfall/cascade
• Status checking
• Modelling securitization in project finance
• Working capital

Case Study:
Modelling cash flow waterfalls

Approaches to rating in Project Finance Models

• Debt issues sheet
• Financial Statements
• Introducing flexible time dimensions
• Debt amortisation schedules
• Senior debt, mezzanine and equity tranches

Case Study: Rating Agency models of project finance transactions

Using Project Finance Models

• Input of Models to the Decision-Making Process
• Modelling a PPP transaction
• Deciding between corporate and project finance
• Benefit allocation between stakeholders

Case Study: Review of several project finance models and their decision-making input

Day 2

Building a project finance model. Based on a real example, provided by an equity investor in a project finance transaction,delegates will construct and use a model for the transaction.

The exercise will include:

• Project Review
• Analysing the inputs
• Dealing with input priorities
• Data plausibility
• Cashflow Projections
• Loan assessment
• IRR NPV and other valuation analysis

Delivering this course in-house for you to a number of participants could be very cost effective. Please call us on 020 7387 4484 to discuss this further.

If you have any questions about this seminar please write to us at post@redcliffetraining.co.uk.