Project Finance Modelling

Transcription

1 Project Finance Modelling A 3 Day Programme This course is presented in London on: 28 February 2 March 2018, September 2018 The Banking and Corporate Finance Training Specialist

2 Course Objectives Participants will: Get an introduction on the project finance modelling Have explained to them the best practice in model structures Learn about the revenue & cost build-ups Be taught about the inflation and escalation factors Master the financing question Gain an understanding Course Overview of the modelling taxes Get to grips the interest and fee calculations Gain an appreciation of the balance sheet but also the ratios & covenants in Project Finance Model Be appraised of a sensitive analysis in a project finance model Background of the trainer The trainer has over 30 years experience in a wide range of roles in finance. He has delivered training courses on behalf of a number of international training companies since For the past 18 years, he has worked as a specialist financial modeller, trainer and analyst for a range of blue-chip clients, building financial models for major projects, structured financing, restructuring, outsourcing and PPP transactions in numerous sectors. He has built, developed and used models to support commercial negotiations, analyse risk, test scenarios and forecast results. The trainer has trained others in his specialism of financial modelling, running both inhouse tailored courses for clients and public courses with major training companies all around the world. Course Content Day One Introduction & Course Objectives Basic Introduction What is a project? What are its defining factors? What is a financial model? How do we use models in project finance deals? Revision of Best Practice in Model Structures Best financial modelling practice Overall structure of a project finance model Separation of inputs, calculations and outputs Logic flow within a project finance model Using flags to control timing factors in a project finance model Using switches to allow choices of different options in a project finance model Checks and totals, and error reporting Set-up to make the project finance model flexible Use of corkscrews to determine the value of items which change during the project Building assumptions off the project finance term sheets Building-in ability to change and work changes through the project finance model

3 Using validation to restrict ranges of inputs into the project finance model Version control for multiple versions of the project finance model Exercise create an assumptions input sheet with built-in flexibility; use that to build a project finance cash flow calculation with flags, switches and corkscrews Revenue & Cost Build-Ups Build-up of project construction or other capital costs (capex) Use of lookup functions to change expenditure timings Building in sensitivities Correct matching of units Build-up of project operating expenditure (opex) Use of Maintenance Reserve Accounts in project finance Build-up of project revenues in the project finance model Exercise to be done after inflation module Day Two Inflation / Escalation Factors Using inflation indices in the project finance model Controlling start time of inflation in the project finance model Applying multiple rates to different cost & revenue items Varying inflation rates over life of the project Exercise building-up project revenue and costs, including multiple inflation rates Brief Overview of Modelling Taxes Tax treatment of costs - deductible and non-deductible Capital allowances in project finance Modelling tax losses in project finance Distinguishing tax payable and instalment payments Example - add tax calculations into in the project finance model Interest and Fee Calculations Circular references in the project finance model and consequences 5 ways to deal with circular references Calculations of interest and debt fees in project finance Use of Debt Service Reserve Accounts in project finance Capitalised fees and interest in project finance Fee costs, upfront and spread Exercise add a DSRA calculation into the project finance model, and solve the resulting circular reference Financing Section Leverage, risk and funding project with debt and equity Calculating the cost of debt capital in project finance Calculating the cost of equity capital in project finance The project finance cash flow waterfall Equity and debt drawdowns to fund the project

4 Interest costs to the project Debt repayment profiles out of project cash flow Project returns: overall viability of the project Constraints on dividend payments to the project sponsors Equity returns: viability measures for the project sponsors Exercise: create a project finance cash flow waterfall with debt costs, repayment profiles, and returns to equity under constraints. Day Three The Balance Sheet in a Project Finance Model Balance sheet as the link between modelled cash flow and P&L (income statement) Calculating key balance sheet items in project finance Non-cash items in a project finance balance sheet: depreciation, deferred tax Assumptions required Adding existing figures or opening balance sheets for an expansion project Check totals to check overall integrity of the project finance model Exercise from the previously calculated project finance cash flow, calculate the related P&L (income statement) and balance sheet Ratios & Covenants in Project Finance Purpose of ratios in project finance Project finance concepts: cash available for debt service, cash available for distribution and free cash flow Best practice in calculation & presentation of ratios in a project finance model Debt service coverage ratio (DSCR) Interest cover ratio (ICR) Loan life cover ratio (LLCR) Using the DSCR to create a debt repayment profile Equity returns: IRR & NPV calculations Exercise from a given project finance cash flow and balance sheet, calculate the above ratios Documenting a Project Finance Model Setting up the base case project finance model Recording changes to the structure of the project finance model Recording changes to assumptions made in the project finance model Documenting scenarios run for a project: descriptions, comparisons to base, version control Review an example user guide for a project Review an example data book for a project Sensitivity Analysis in a Project Finance Model Purpose of sensitivity analysis in project finance Stress-testing a project finance model Varying the inputs to assess effect on results of the project Assessing the level of inputs needed to achieve a given result for a project Use of Excel tools to support the analysis goal seek watch window data tables

5 scenario manager Exercise using the previous project finance cash flow model, calculate effect of varying inputs to a given degree, assess inputs to reach break-even, build data tables and set-up scenarios for the project Wrap-Up Overall review of the course material Key points to re-iterate about project finance Brief introduction to further exercises Further reading about project finance Final questions and issues to discuss Course Summary Objective The course is designed to support analysts to create and analyse project financial models on a consistent and focussed basis. Aims The principal aim of the course is enable participants to create, use and analyse a project finance model. This will be done by reviewing best practice in model structures and logic, building up calculations and using tools to analyse outputs, highlight areas of risk and perform sensitivity analysis. Methodology The learning methods used are practical, as practicing newly-learned techniques enables deeper and more effective building of skills. Each section will be covered briefly as a module in a traditional class style, but the real learning experience is in the exercises after each module. These gives delegates the chance to build project finance models based on real-life situations, practising what has been learned with support from the instructor. Suggested solutions to each exercise will be provided and discussed, and participants will be encouraged to review their work independently. Further supporting materials, including real-life project finance models and additional exercises will be available for further post-course learning, with ongoing support from the instructor. Practical Exercises Each module ends with a practical exercise, in which delegates put to use the skills they have just learned. Two small but comprehensive models will be created from scratch, with help and support provided by the facilitator. Starting with basic assumptions and input data, delegates will build models with financial structures, inflation, cash flow waterfalls, balance sheet and P&L, equity returns, ratios and cover factors, and sensitivities. Headlines Best practice in structure and techniques for financial modelling Building flexible models to accommodate change Understanding the cost of capital and financial structures for projects Modelling funding structures and cash flow waterfalls Integrated modelling with balance sheets and P&L statements Using the outputs of the model ratios, sensitivity analysis, scenarios

6 09:30-17:00 London Standard Price: 1,800 + VAT Membership Price: 1,440 + VAT Delivering this course in-house for you to a number of participants could be very cost effective.

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