ProjectFinance

Modelling

2931May2017

Brazil,RiodeJaneiro

US$3,500

ExaminethelatestcashflowmodellingtechniquesinProjectFinance

CourseInstructor

Edhascreatedinnovativeforwardpricing,productivitymeasurementandinvestmentvaluationsoftwarefor
consultingclientsthroughouttheUnitedStates.Hehastaughtenergyeconomicsandfinancethroughoutthe
world,andformulatedsignificantgovernmentpolicyandcorporatestrategyintheU.S.

CourseDescription

Thecourseaddressesawidevarietyofprogramming,financial,statisticalandeconomicissues.The
programmingissuesincludedesigningmacrosrelevantforprojectfinancemodels,auditingfinancialmodels,
resolvingcircularity,modelingofdebtservicereserves,cashsweepsandotherenhancementsandorganizing
projectfinancemodelsforeffectivepresentationtoinvestors.Financialissuesincludethetheoryofdebt
capacityfromaprojectfinanceperspective,useofoptionpricingconceptsinprojectfinance,equityIRR
requirementsandcostofcapital,probabilityofdefaultandlossgivendefault.

A3daycoursefocusedonprovidingdelegateswiththeskillsandtechniquestodevelopaprojectfinance
model:

l Understandthefundamentalstructureofaprojectfinancemodelandlearnexceltechniquesthatcreate
efficient,robustandstableprojectfinancemodels
l Incorporatesimpleapplicationsinvolvingdebtcapacity,contractpricing,debtstructuring,breakeven
analysisandprobabilityofdefault
l Applyaprojectfinancemodelinanenergyorinfrastructurecasestudytoconsidertheappropriatedebt
servicereservelevels,covenants,liquidateddamageprovisions,debtamortizationschedulesandcontract
prices
l Understandhowbreakevenanalysis,scenarioanalysis,tornadodiagrams,timeseriesequationsand
MonteCarlosimulationscanbeusedtoanalyzeriskwithprojectfinancemodels
l Addressdetailedandcomplexissuesassociatedwithdebt,riskanalysis,constructiondelays,reserve
accounts,incometaxesandotherissues
l Incorporatethedebtaspectsofprojectfinancemodelsincludingconstructionofacashflowwaterfall
sculptingrepayments,accountingforfinancingfeesandevaluationofdebtcapacity
l Measuretheriskandreturntradeoffsandtheeffectivenessofcovenants,cashflowtraps,seniorand
subordinateddebtissues,financemodels
l Addresshowtimeseriesmodelscanattachmathematicalconceptstoevaluationofrisk
l ApplyMonteCarlosimulationstomeasuretheprobabilityofdefaultandthelossgivendefaultinthe
modelusingalternativefinancialstructures

Supportedby:

Agenda

Day1

IntroductionandModelStructure

RiskMeasurementandFinancialModeling

Entertwoinvestmentsandcompareprojectfinancetocorporatefinanceevaluatetwodifferent
l

renewableprojects
l Introductiontoshortcutkeysusedbyinvestmentbanks,effectiveuseofdatatablesanduseofformsin

excel
l ComputationofDSCRandIRRoninvestmentversusNPVrulesforcorporatefinance
l Useofswitches(TRUE/FALSE)formodelflexibility

l Spreadsheetlayoutstyleandconventionsincludingtechniquestocolorinputcells,limitthesizeof

spreadsheetsthroughgroupingcells
StructuringandBuildingaBasicProjectFinanceModel
 l Developageneralmodellayout
l Inputsforprojectphases,operationalassumptionsandfinancingassumptions
l Fundamentalstructureofanyprojectfinancemodelsourcesanduses,debtschedule,assetschedule,
profitandlossfortaxes,cashflowwaterfall,balancesheet,summarypage

DetailsofModelStructure

l Periodcodeforpreconstructionandconstruction
l Switchesforconstructionandoperationalphases
l Workinganalysisforcomputationofconstructionexpenditures,revenuesandexpenses
l Sourcesandusesdetailsincludingmultipledrawdownsofdifferenttypesofdebtfacilities,interestduring

constructionandequityfunding
l Debtschedulewithalternativerepaymentoptionsincludinglevelrepayment,annuityrepaymentand

sculptedrepayment
l Assetschedulewithinterestduringconstructionanddepreciationexpense

l Profitandlossscheduletocomputeincometax
l Cashflowstatementwithbasicwaterfall

l EquitycashflowandequityIRR

l CashflowavailablefordebtserviceandDSCR

l Balancesheetandmodelverificationincludingsetoftestsfordebtrepayment,assetbalanceandbalance

sheet
PresentationofModelandRiskAnalysis

l Sensitivityanalysisfordelay,capitalexpendituresensitivityandrevenuesensitivitywithalternativedebt

levels
l Useoftechniquestoeffectivelymakegraphicalpresentationspresentationofcashflowanddebtservice

todiscussnotionsofdebtservicebufferandtail
l UseofMATCHandINDEXfunctiontocomputebreakevenpoints

DebtStructureandCashFlowWaterfallExercises

DebtSizingandCapacity

l UseofmacrowithVBAtoeffectivelycomputedebtsizegivenDSCRcriteria

DebtStructuringusingAlternativeRepaymentTechniques
l Illustrationoftheimportanceofdebtstructure

l UseofINDEXfunctiontoallowalternativedebtrepaymentscenarios

l Scenarioanalysisforallowingleveloramortizingdebt

l UseofPPMTfunctionandmacrotocomputeamortizingdebt

DebtSculptingusingSolverandMacro

l Discussionofsculpting
l ComputationofsculpteddebtrepaymentusingSOLVER
l ComputationofsculpteddebtrepaymentusingformulaandMacro
l Sensitivityanalysiswithdifferentdebtrepayment
l EffectsofdebttenoranddebtstructureonequityIRRandDSCR
l UseofVBAversusdatatablesforscenarioanalysis
Day2

ModelStructuringIssuesDetailedModel

MonthlyConstructiononaMonthlyBasiswithDelayandLiquidatedDamage

l Setupofdetailedmodelwithspecificdatesforfinancialclose,commercialoperation,andproject
retirement
l Setupofperiodsinmodel(monthlyduringconstructionandsemiannualafterconstruction)
l Setupofdetailedoperatingassumptionswithvaryinginflationratesandgrowthrates
l Setupoffinancialassumptionsincluding
l Multipledrawdownsindifferentcurrencies
l Useofdebtcommitmentratherthandebtleverageassumptions
l Inclusionofupfrontfeesandcommitmentfees
l Alternativerepaymentoptions
l Dividendlockupcovenants
 l Cashflowsweeps
l Debtservicereserveaccounts
l Varyingcreditspreads(withDSCRorlifeofproject)

ComputationofPeriodsandDates

l Computationofmonthsinperiodfromtheconstructionandoperationswitches
l Useofperiodcodesfromconstructionstartdate,completiondateandretirementdate
l UseofEDATEandEOMONTHfunctionstomodelstartandenddatesforeachperiod
l ConversionofperiodicmodeltoannualmodelusingSUMIFfunction

ComputationofWorkingAnalysis

l Developmentofgrowthratesusingdailycompoundingwithdifferentperiodicassumptions(cannotuse
simplegrowthindices)
l UseofMATCHandINDEXformodelingvaryinginflationrates

DetailedConstructionPeriodModeling

l Computationofinterestduringconstructionwithandwithoutcapitalizationofinterest
l Modelingdebtdrawsusingdebtcommitmentanddrawdownschedule
l AlternativemodelingofScurveduringconstruction
l Modelingofuncommitteddebtandcommitmentfees
l Modelingofconstructionanddrawdownsinalternativecurrencies
l Inclusionofdebtservicereservesinusesoffunds

DetailedDebtScheduleModeling

l Computationofcommitmentaswellasdebtbalance
l Addingtotaldebtborrowedline
l Provisionforcashfollowsweeps
l Calculationofinterestwithdifferentperiodicassumptions(monthly,semiannually)usingDAYS360
function
l UseofDebtrepaymentswitch
l ComputationofdebtoutstandingafterscheduledtenorusingSUMPRODUCTwithperiodtest
l Incorporationofvaryingcreditspreads

ReserveSection

l Computationofrequireddebtservicebalancewithexpirations
l Computationofneededtoupsthroughcomparingopeningbalancewithrequiredbalance
l Additionofprovisionsforreducingaccountthroughwithdrawlsduringcashflowdeficits
l Settingupthecashlockupaccount
l Inflowsintocashlockupaccountforcovenantviolations
l Outflowsfromcashlockupaccountwhencovenantsmet
l Operatingreserveaccount
l Difficultyofcomputingoperatingreserveaccountwithinflationandperiodicoutflows

DetailedAssetModeling

l Basicassetbalanceschedules
l Useoftaxversusbookdepreciation
l Computationoffeebalanceinsimilarmannertoassetbalances
l Separationintodifferentassetcategories

DetailedProfitandLossStatement

l Inclusionoffeeamortizationandinterestincomeprovisions
l Computationofnetoperatinglossfortaxcalculations

DetailedCashFlowStatementwithCashFlowWaterfall

l OperatingcashflowsfromEBITDAandtaxespaid
 l Inclusionofconstructionperiodcashflowsincashflowstatement
l Begincashflowforwaterfallwithsubtotal
l Removecashflowputintooperatingreserveaccount
l ComputationofdefaultsandrequireduseofdebtservicereserveaccountusingMAXandMINfunctions
l ComputationofcashavailableforcashsweepandcashsweepsusingsubtotalsandMINfunction
l Computationofcovenantsusingswitchtodeterminewhethercovenantisviolated
l Calculationofcashflowsweepforsubordinateddebt

ComputationandBasisforLLCR,PLCRandAverageDebtLife

l ReasonforLLCRwithcashflowsweeps
l ProblemswithLLCRforuseincovenants
l ComputationofLLCRandPLCRusingSHIFT,CNTL,ENTER
l CalculationofAverageLoanLifewithPeriodicModel

AlternativeSpecificationsoftheDebtServiceCoverageRatioandIRRs

l UseofXIRRandMIRR
l AlternativespecificationsofDSCR
l SeniorandsubordinatedDSCR
Day3

RiskAnalysisfromAlternativePerspectives

EconomicValueDriversinProjects

l Calculationofvolatilityandconstructionofdownsidecases
l Developmentofscenarioanalysisforkeyvariables
l Useofdownsidecasetodefinedebtcapacity

SensitivityAnalysisandFlexibleGraphs

l UseofOFFSETfunctiontocreateflexiblerangenames
l Incorporationofflexiblerangenamesingraphs
l Extendingscenarioanalysistocomputespiderdiagrams
l Creatingtornadodiagrams

ReFinancing

l EconomicsofRefinancing
l Discussionoftheimportanceofrefinancingforsomeprojects
l Optionaspectsofrefinancing
l SoftnessofequityIRRwithrefinancing

StructuringaModelforReFinancing

l Creationofbasicmodeltodemonstraterefinancingissues
l Inputsforrefinancingdateofrefinancing,DSCRtosizerefinancing,termofrefinancing,interestrate
onrefinancing,feesforrefinancing
l Switchesforrefinancingprerefinancingandpostrefinancing
l Sourcesandusesforrefinancing
l Retirementofexistingdebtandbreakagefees
l IncorporationofinterestandrepaymentsofrefinanceddebtinP&Landcashflow
l Incorporationofproceedsfromnewdebtanddividendsfromrefinancing
l Sensitivityanalysisforfindingoptimalrefinancing

CreditSpreadsandMonteCarloSimulation

l Theoryofcreditspreadsandprobabilityofdefault
l SimpleanalysisofminimumcreditspreadusingMonteCarlosimulation
l ComputationofsimpleMonteCarlowithoutmacros
l UseofsimplemacroforMonteCarlo
l IncorporationofMonteCarlointootherspreadsheets
 l Additionofinputsformeanreversionandboundaryconditions
l Problemswithsimulation

Abouttheinstructors

Edhascreatedinnovativeforwardpricing,productivitymeasurementandinvestmentvaluationsoftwarefor
consultingclientsthroughouttheUnitedStates.Hehastaughtenergyeconomicsandfinancethroughoutthe
world,andformulatedsignificantgovernmentpolicyandcorporatestrategyintheU.S.

Hisconsultingclientsincludeinvestmentbanks,commercialbanks,researchinstitutionsandgovernment
agenciesonawidevarietyofcomplexvaluationandadvisorymatters.Hehasconstructedauniqueframework
forelectricitypriceforecastingandvaluationusingproductioncostmodellingtechniquescombinedwithoption
pricetheoryandMonteCarlosimulation.

HeisalsoanadjunctprofessoratleadingUniversitywhereheteachescoursesinmicroeconomics.Alongwith
hispracticalexperiencethatcoversamultitudeofmajoradvisoryprojects,hehastaughtspecialisedcourses
infinancialmodelling,electricitypricing,optionvaluation,mergersandacquisitionsandcontractingto
investmentbanks,commercialbanks,industrialcorporationsandelectricutilitycompanies.

HewasformerlyVicePresidentattheFirstNationalBankofChicagowherehedirectedanalysisofenergy
loansandalsocreatedfinancialmodellingtechniquesusedinadvisoryprojects.Hehasusedthemodelsin
providingexperttestimonyonsubjectsrangingfromcapitalstructuretoinvestmentsinmultibilliondollar
nuclearplantstocomplexvaluationofnewinvestments.

HereceivedanMBAdegreespecialisingineconometrics(withhonours)fromtheUniversityofChicagoanda
BSdegreeinfinancefromtheUniversityofIllinois(withhighestuniversityhonours).Hehaswrittenmany
articlesandisintheprocessofcompletingatextbookonvaluationofelectricityassets.
Coursesrunbythisinstructor

AdvancedProjectFinanceModelling

Venue

RiodeJaneiro,RiodeJaneiro,Brazil

ThisprogramtakesplaceonanonresidentialbasisatacentralRiodeJaneirohotel.Nonresidentialcourse
feesincludetrainingfacilities,documentation,lunchesandrefreshmentsforthedurationoftheprogram.
Delegatesareresponsibleforarrangingtheirownaccommodation,however,alistofconvenienthotels(many
atspeciallynegotiatedrates)isavailableuponregistration.

WhoShouldAttend
 CorporateFinance/CorporateTreasury
CapitalMarkets
Audit/ProductControl/RiskManagement/ALM
ResearchandAnalysis
SalesandTrading
InvestmentManagement
Origination
Securitisation/Syndication
StructuredFinance
MoneyMarkets/Repo
SystemsProgramming
Funding
Government/AgencyFundingandInvestment
Regulation/Compliance/Documentation

WhyUs

Whyus

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organisationsandareprivilegedtohavecontributedtotheirsuccess.Weviewourclientsaspartnersand
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Knowledgeour150strongteamofindustryspecialisttrainersareworldleadingfinancialleadersand
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