Project Finance Modelling

Building on your existing modelling skills, this Euromoney Financial Training course focuses on how to develop sophisticated and robust project finance models. You will build on this in a step-by-step approach until completing a full financial model complete with sensitivity analysis. The emphasis will be on avoiding common mistakes found in project finance models by anticipating requirements and building in checks at the design stage. How will this course assist you? On this 4-day programme, the course will address the following: How to build a model according to modelling best practice Learn how to structure a project finance model How to calculate capital expenditure and construction timelines Build operational cashflow statements Learn how to develop debt tracking accounts Discover the key ratios used in project finance and how to calculate them in a financial model How to model a range of financing structures, including cash sweeps, refinancing and bullet loans Build in sensitivity analysis to your models Who should attend? Project Finance, Structured Finance & Corporate Finance Professionals Analysts Investment Officers Risk Managers Financial Consultants Supported By:
Day 1 Project finance modelling What are financial models used for in project finance? Introduction to the modelling exercise Developing a project finance model for an independent power project (IPP) How the exercise applies to other types of project What is involved in building a financial model? How to approach the problem Gathering the information you will need Understanding the requirements of the model The structure of a model Materiality Good modelling practice How to structure your models so that they can easily be understood and audited Separating assumptions from calculations Assumptions required for construction phase calculations Sources of information Project timings Costs and timing of costs Practical exercise: participants will start to construct their project finance models. They will be taught how to use named ranges and learn how to establish a timeline using date functions. The course director will provide guidance on the use of Excel where necessary and will break to highlight key learning points. Modelling the effects of inflation The use of real and nominal values How to tackle indexation The importance of timing of the costs Modelling in multiple currencies Setting up your model to work with more than one currency The use of forward exchange rate curves and purchasing power parity Construction phase sensitivities Discover how to set up sensitivities Using lookup functions Introduction to the choice of lookup functions Why we use lookup functions Problems associated with lookup functions Construction phase funding Modelling interest during construction How to calculate commitment and arrangement fees Building a debt tracking account Circular references What are they? How do they occur? Why should we avoid them? Practical exercise: participants will develop a construction funding worksheet including idc, commitment fees and a debt tracking account Day 2 Review of first day’s topics Summary and Q&A session During day two, participants will continue to build their models, adding operating phase revenues and costs Modelling project revenues How are the revenues of project financed projects structured The reasoning behind tariff structures The differences between capacity, availability and output Modelling bonus and penalty mechanisms Dealing with multiple currency tariffs Operating revenue assumptions Source of assumptions Operating revenue sensitivities The effects of over / under performance Practical exercise: participants will build operational revenue calculations including fixed/variable tariff elements and bonus/penalty mechanisms. The course director will also show real life examples of thesemechanisms. Setting up the operating costs calculations Source of assumptions Operating cost sensitivities Practical exercise: participants will develop operational cost calculations including fixed and variable components applying the relevant indexation to each of the cost items. Modelling taxation Modelling different types of depreciation Carrying tax losses Practical exercise: participants will develop tax calculations including depreciation and a tax loss tracking account. Day 3 Review of second day’s topics Summary and Q&A session followed by quiz Determining the project’s debt capacity Sources of funding Practical exercise: participants will develop funding calculations including base and standby debt tracking accounts and debt service reserve account. How to model different senior debt structures Refinancing Cash sweep mechanisms Bullet loans How to construct a cashflow statement Key funding ratios Introduction to NPV and IRR Calculating cash available for debt service Learn how to calculate annual debt service cover ratios and loan life cover ratios Practical exercise: participants will develop a cashflow worksheet including calculation of key funding ratios. They will learn how to calculate the debt capacity based on these funding ratios. Model optimisation Adjusting repayment profiles to maximise debt capacity Use of macros How they are used in project finance deals The dangers and precautions that could be taken Income statement Pulling together relevant information to produce an income statement Dividends and other points related to equity financing Balance sheet Constructing a balance sheet Techniques for balancing Using the balance sheet as an internal check on your model Techniques for project appraisal Evaluating investor returns Using the offset function Day 4 Review of first three day’s topics Summary and Q&A session followed by quiz Output from financial model Producing reports Examples from real life projects developed by the course director Risk assessment Sensitivity and break-even / default analysis Pre-completion and post completion risks Problem solving session: participants are invited to ask questions related to using the models they have built in their own workplaces, or ask questions related to models they have inherited. Course summary and close