Financial Modeling and Project Finance Blog

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What Are The Risks In Project Finance?

In this article, we will be looking at the risks in project finance transactions. As in any business venture, the project company in project finance faces 4 types of risks, these are project-specific risks, macroeconomic risks, political risks, and natural disaster risks. And, it is an...

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What is a Financial Model? - Part 1

What is a financial model? – Part 1 A financial model is typically built in Excel to forecast a company’s operational and financial performance into the future. The forecast can be based on the company’s historical performance or it can purely be based on the set of assumptions that the...

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How Do We Do "Debt Sizing" in Project Finance?

In this article, we will be looking at the issue of debt sizing in project finance transactions. The key question that lenders have to answer is how much debt can we lend to the project company. Since lenders will only be repaid from the cash flows generated by the project company, the...

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What is Debt Service Reserve Account ("DSRA") in Project Finance?

In this article, we will be looking at the debt service reserve account (DSRA) in project finance. The debt service reserve account is one of the most common control accounts in project finance. Control accounts are the bank accounts, withdrawals from which, are controlled by the...

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What is Debt Sculpting in Project Finance?

In this article, we will be looking at debt sculpting in project finance modeling. The concept of “Debt Sculpting” is extensively used in project finance transactions and financial modes for project finance transaction evaluation. Debt sculpting is essentially a calculation of debt repayment...

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Construction Contracts in Renewable Energy Project Finance

In this article, we will review the construction contracts involved in the development of renewable projects. The typical project cost of wind farms in the United States is in the range of 1,000 to 2,000 per kilowatt of nameplate capacity, with average project cost of 1,450 per kilowatt....

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How to Calculate Loan Life Cover Ratio (LLCR) in Project Finance

In this article, we will be looking at loan life cover ratio ( LLCR ) that is typical debt metric in project finance transactions. LLCR provides an analyst with a measure of the net present value of the cashflow during the loan’s life over the outstanding loan balance. Let’s take a look at...

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PPA in Renewable Energy Project Finance

In today’s article, we will discuss how renewable projects sell energy under power purchase agreements. A power purchase agreement or PPA is a long-term contract between the energy seller, which is typically an independent power producer and the buyer called an off-taker, which can be a...

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What Is The Role of the Government in Project Finance?

In today’s article, we will talk about the role of the Government and public private partnerships in project finance. A public-private partnership or PPP is a long-term contract between a private party and a government for providing a public service, in which the private party bears...

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Construction Funding in Project Finance

In this article, we will review the construction funding concepts necessary to model the construction funding. Construction funding has to cover the construction and equipment costs, and construction funding sources are debt and equity in project finance. However, in addition to the...

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