Accounting for Financial Modeling

In this lesson will explore the development of project financing method and review latest trend.

In this lesson, we will review the important financial players, that participate in project finance transaction. These include investors, which are called project sponsors in project finance. Project sponsors, as we shall see, can further be divided into industrial investors, financial investors and sometimes government may also be an investor in the project.

Lender is another financial player which participate in project finance transaction. In fact, lender make project finance possible, because, typically, a majority of construction costs are financed with debt in project finance transaction.  We shall see that due to transaction size, lenders typically unite and form a syndicate to arrange a syndicated loan to the project.

In this lesson we will explore the role of industrial players in project finance transaction. These are the companies which build the project, provide operations & maintenance service, supply raw materials and buy the product of the project company.

In this lesson, 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. We will discuss these risks and see how they are allocated to the party which is best capable of managing those risks.

In this lesson, we will be looking at the capital and operating cash flows in project finance at different stages of project development. We will review the composition of project costs and project's Capex, different financing methods and forms, and important cash flows for lenders and equity investors.

In project finance, lenders usually impose strict restrictions on how the project company uses its cash. Cash movement in project company is controlled by means of control accounts and cash flow waterfall structure. In this lesson we will review these two important aspects of project finance transaction.

In this lesson we will talk about the covenants in project finance documentation. A covenant, also called an undertaking, is a promise by the borrower to the lender to do something or refrain from doing something in return for getting the loan.  Covenants appear in the loan agreement. The financial covenants are extremely important to understand for modelers, because they are part of project finance models.

In this lesson, we will review Quezon power plant case study which will show how proper risk allocation made it possible to finance construction of 800 million dollar power plant in the Philippines. 

In this lesson we will continue with Quezon Power Plant project. 

In this lesson, we will be talking about timeline development in project finance.

In this lesson we will model important dates in our project finance model.

In this lesson we will start with modeling flags in our project finance model.

In this lesson we will continue with modeling important flags in our project finance model.

In this lesson, we will introduce you to the calculation of escalation factors based on the such price index as Consumer Price Index.

In this lesson we will incorporate escalation calculations in our project finance model.

In this lesson we will review construction costs in infrastructure projects.

In this lesson we will model construction funding in our project finance model.

In this lesson, we will learn about the financing costs that construction debt generates. These are arranging or upfront fee, commitment fee, agent bank fee and interest during construction.

In this lesson we will model construction debt drawdowns and equity investment on pro-rata basis, and after that, we will model upfront fee and commitment fee.

In this lesson, we will continue with financing costs modeling, and will focus on agent bank fee and interest during construction modeling. After that, we will complete the modeling of sources and uses of funds.

In this lesson we will review the revenue that toll road project generates.

In this lesson we will model toll road project revenue generated by light vehicles and trucks.

In this lesson we will learn about the fixed and variable maintenance costs and fixed management cost that the toll road project generates.

In this lesson we will model the operating costs that the toll road project generates.

In this lesson we will learn about non-current assets and depreciation expense.

In this lesson, we will model non-current assets ("NCA"), NCA depreciation expense and maintenance capex.

In this lesson we will continue with NCA modeling. We will model maintenance capex depreciation expense  and we will link the NCA balance, maintenance capex and depreciation expense to financial statements.

In this lesson we will model working capital in our project finance model.

In this lesson we will go over the construction debt refinancing and term loan.

In this lesson we will model term loan and interest expense.

In this lesson we will learn about tax expense, tax paid and deferred tax liabilities.

In this lesson we will model tax depreciation.

In this lesson we will learn about what constitutes equity and how dividends are paid out.

In this lesson we will model current DSCR and backward - looking DSCR.

In this lesson, we will model forward-looking DSCR, average DSCR and weighted average DSCR.

In this lesson, we will review the definition of debt sculpting and go over the debt sculpting calculations.

In this lesson, we will remodel the debt repayment based on the sculpted debt repayment profile.

In this lesson we will go over the shareholder loan and learn about: what is shareholder loan, why project sponsors may structure their investment as shareholder loan and some other important features of shareholder loan in project finance transaction.

In this lesson, we will work out the shareholder loan calculation. We will work on the shareholder loan balance and on items that increase (interest expense rollover, drawdown) and decrease (principal repayment) shareholder loan balances.

In this excel based lesson, we will start modeling shareholder loan in our project finance model.

In this excel based lesson, we will continue with shareholder loan modeling and see how shareholder loan interest expense creates circularity in our project finance model.

In this lecture, we will learn why shareholder interest expense produces circularity in our project finance model.

Using the macros and vba coding in excel, we will carry out automation of the manual tasks of resolving construction debt or debt sculpting, when we have to manually use goal seek to bring those values to their target values.

In this lesson, we will introduce circuit breaker to break the circularity in this project finance model.

In this lesson, we will explore the concept of time value of money and review NPV and IRR analysis.

In this lesson, we will perform valuation analysis based on the NPV and IRR methods in the project finance model.

In this lesson, will optimize our project finance model with respect to Blended Equity IRR, Debt Size and Toll Road Pass Fees.