Selected Other Project Finance Exercises

This lesson describes some difficult details of Project Finance models. Subjects include S-curves with delay or acceleration in construction; dealing with interest during construction, fees and the associated funding needs and construction; equity bridge loans; and, sculpting in situations where the amount of debt is given.

Power Point Slides that Review Theoretical and Modelling Issues Associated with Terminal Value in PF

Timing is one of the keys to project finance. Different stages have different risks and must be defined in a model. Exercise 2 demonstrates how to structure inputs in a basic project finance model (it is associated with the project finance inputs video). The second exercise addresses how to structure a model with flexible dates so that different construction periods and project lives can be included in the analysis. The flexible dates and the advanced timing exercises demonstrate alternative ways to deal with different timing structures.

Exercise 2 – Flexible Dates.xls
Exercise 7 – Advanced Timing Issues.xlsm
Exercise 16 – Periodic Exercise.xls
Exercise 19 -Timing Exercise.xls
Exercise 9 – Delay Exercise.xls
Exercise 10 – Liquidated Damages.xls

Corporate Finance involves comparing the ROIC with WACC while project IRR is computed in project finance. This file demonstrates how to reconcile the ROIC and the IRR over the life of a project (it is associated with the IRR reconciliation video). The project IRR is related to WACC (although it is not very useful to evaluate WACC in project finance) and should be computed after tax. After-tax IRR is computed without IDC but after depreciation on the base plant. This file demonstrates how to compute after-tax IRR in a project finance model (it is associated with the project finance after-tax IRR video).

Exercise 28 – IRR Exercise.xls

The exercises below address various issues associated with cash flow waterfalls. Exercise six addresses the issue of adding cash sweeps to a model. The first part of the exercise shows how to model a basic cash sweep and evaluate the benefits of the cash flow sweep when cash flow falls off a cliff. One of the key issues with cash sweeps is to not include the cash sweep in the debt structuring part of the model. The fourth exercise illustrates how to create a cash flow waterfall that includes a default on debt and repayment of the default. Including provisions for a default on debt allows computation of the break-even point for things like delay in construction and other items. It also enables the evaluation of debt IRR for alternative types of securities. Exercise eight describes various modelling issues associated with cash lock-up accounts.

Exercise 4 – Debt Default and Debt IRR.xls
Exercise 6 – Cash Flow Sweep.xls
Exercise 8 – Cash Lock-up Covenant.xls
Exercise 17 – Subordinated Debt.xls
Exercise 18 – Sweep and trap.xls

Sizing debt is a key issue in a project finance model. This file demonstrates basic sizing from the DSCR (it is associated with the debt sizing video).

Exercise 19 – Level Debt and Goal Seek.xlsm
Exercise 10 – Debt Sizing with Function 1.xlsm
Exercise 11 – Debt Sizing Macro.xls
Exercise 3 – IDC and Debt Commitment.xls
Exercise 12 – Break Even.xls
Exercise 13 – Net Operating Loss Carryforward.xls
Exercise 15 – Average Life and Duration of Debt.xls
Exercise 21 – Re-Financing.xls
Exercise 25 – S-Curve with Normal and Weibull.xlsx
Exercise 3 – Project Finance Working.xlsm
Sample_Project_FM_Test_2016-01-3-2016.xlsm

 

 

Miscellaneous Project Finance Exercises Files with Exercises Video Links
Converting from Monthly to Quarterly and Monthly/Semi-Annual Exercise 7: Advanced Timing https://www.youtube.com/watch?v=G3dEapTxaqk
Reconciliation of IRR and ROI Exercise 6: ROI and IRR Reconciliation https://www.youtube.com/watch?v=yD0LfAAoxPU
Multiple Equity Owners in Project Finance Exercise 22: Equity Allocations
Multiple Equity Owners and Cash Flip Exercise 23: Flip Exercise Pre-tax https://www.youtube.com/watch?v=gFERDTjqtXg
Find the flip period with fraction of year Flip period.xlsm https://www.youtube.com/watch?v=IqghCkfMg1I
Create a payback function with period fractions Payback.xlsm https://www.youtube.com/watch?v=7Cmbh_XMnks
Annual Fees and IDC Annual IDC Fees.xlsm https://www.youtube.com/watch?v=mUrS-bFk2SE
End of Quarter Function End of Quarter Function
Half Year and Monthly Function Half Year and Month Function
Percent of Time Function Percent of Time Function
Complex Working Capital in Project Finance Model Gas Plant Example https://www.youtube.com/watch?v=v5BXBpnFbXQ
Computing the outages from periodic maintenance periods Gas Plant Example https://www.youtube.com/watch?v=0Xt7p5z3o18