Airports, toll roads, power plants are all examples of incredibly complex endeavors, both logistically and from a financial analysis perspective. Project finance requires specialized skills and techniques, such as modeling pre-completion costs and financing, debt facilities, sculpted debt schedules, and unique tax issues. This three-day course covers the theory and implementation of analyzing a project finance deal through the lens of a toll road example.
Introduction to Project Finance Modeling
I. What is Financial Modeling?
II. Why Professionals Build Models
III. Which Models to Implement
IV. Basic Model Layout & Design
Exercise: Working with a Bad Model
Building a ToolKit
I. Time Value of Money Functions
II. Mathematical/Statistical Functions
III. Logical Functions
IV. Lookup Functions
V. Naming Ranges / Data Validation Lists
VI. Function Combinations
Exercise: Time Value of Money Functions
Exercise: Mathematical/Statistical Functions
Exercise: Logical functions
Exercise: Lookup Functions
Exercise: Naming Ranges / Data Validation Lists
Scenario Selectors: The first Step in a Model
I. Overview of a Scenario Selector
II. Specific Scenario Selector Setup & Use
Exercise: Scenario Selectors
Dates and Timing: The Framework for a Model
I. Overview of Dates and Timing Set Up
II. Specific Date and Timing Functions and Organization
Exercise: Dates & Timing
Core Concepts: Constructions Phase Details
I. Financing Construction: Debt and Equity
Exercise: Calculating Construction Financing, Including Interest During Construction
Core Concepts: Capex and Depreciation
I. Capital Expenditures: Setting up a schedule for CAPEX
Exercise: CAPEX Schedules
II. Depreciation Calculations
Exercise: Depreciation Functions & Methodology
III. Book Depreciation vs. Tax Depreciation
Core Concepts: Project Revenue and Cost
I. A Bottom-Up Approach
II. Flexible Approach to Project Finance Scenarios
Exercise: Calculating Revenue and Cost for a Toll Road
Core Concepts: Current and Long-Term Liabilities
I. Basic Fixed Rate Amortization
Exercise: Amortizing a Fixed Rate Loan
II. Floating Rate Amortization
Exercise: Amortizing a Floating Rate Loan
III. Revolving Credit Facilities
Exercise: Setting Up All Aspects of a Revolving Credit Facility
IV. Creating Sculpted Debt Amortization
Exercise: Sculpting Debt Using a DSCR
Core Concepts: Reserve Accounts
I. Theory and Types of Reserve Accounts
II. Example Calculation
Exercise: Setting Up a Reserve Account in a Model
Core Concepts: Triggers
I. Theory and Types of Triggers
II. Example Calculation and Cash Flow Adjustments
Exercise: Setting Up a Triggers and Their Breach Repercussions in a Model
Core Concepts: Tax
I. The Effects of Differences in Depreciation
Internal Rate of Return and Discounted Cash Flow Valuation
I. Project Flows vs. Equity Flows
II. IRR and NPV Calculations
Exercise: Calculating Project and Equity IRR/NPV
III. The Cost of Equity, Cost of Capital, & WACC
Exercise: Calculating the Correct Rates
IV. Calibrating Other Discounts: Size, Liquidity, Sovereign, and Control Risk
V. Terminal Value: Various Methodologies & Calculations
Exercise: The Differences & Sensitivity of Terminal Value Methods
Model Integrity: Ensuring Everything is Correct
I. Building Checks into the Model to Make Sure Calculations are Correct
II. Cash Checks
Output Reporting: Ensuring Everything is Understandable
I. Changing the Periodicity of Results
II. Building Snapshot Views
III. Relevant Metrics and Ratios
IV. Charting