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# Project Finance Modelling and Analysis

Peek over an expert’s shoulder and get the skills you need to succeed in project finance. Learn how to build best practice project finance models suitable for all industry sectors. Develop checklists for key stages of the project financing process and get tips and tricks on project life cover ratio, cash sweep analysis, CFADS, debt sculpting to target DSCR, mezzanine debt, DSRA, MMRA, LLCR and other elements related to project finance.

Feb 13, 2013

#### ADSCR (Average DSCR) in financial modelling

By Nick Crawley

There are two different ways to calculate the average DSCR (“ADSCR”) that could result in different numerical outcomes. What are the methods? What are the limitations that we should be aware of? And which one shall be used? DSCR (Debt … read more

Dec 29, 2011

#### Project Life Cover Ratio

By Grace Utama

The Project Life Cover Ratio is a widely used debt metric in project finance. In this tutorial we learn the steps to calculate the Project Life Cover Ratio, as well as some common modelling mistakes to avoid. Introduction The Project … read more

Dec 16, 2011

#### Debt Service Reserve Account

By Grace Utama

The Debt Service Reserve Account provides additional security for lenders as it acts as a cash buffer during periods of weak cashflows. In this tutorial, we learn how the DSRA/c links to the Financial Statements and how to model the … read more

Dec 07, 2011

#### Debt Sculpting to Target DSCR without VBA

By Grace Utama

Debt Sculpting is a commonly used term in project finance. It means that the principal repayment obligations have been calculated to ensure that the principal and interest obligations are appropriately matched to the strength and pattern of the cashflows in … read more

Dec 06, 2011

#### Circular Interest – Interest on average balances

By Grace Utama

When authoring formulas in Excel, a user may often encounter a circular reference. In this article we demonstrate how to solve a common problem related to interest using high school mathematics rather than Visual Basic. A circular reference is created … read more

Oct 26, 2011

#### Cash Sweep Analysis in Project Finance

By Rickard Warnelid

Stand Alone Cash Sweep Introduction Stand alone cash sweep analysis is an alternative metric for refinance risk and repayment ability in cashflow models for project finance. This article outlines the key features of a modelling cash sweep calculation and its … read more

Oct 19, 2011

#### Cashflow Available for Debt Service (CFADS)

By Rickard Warnelid

CFADS introduction A project’s Cashflow Available for Debt Service (CFADS or CADS) is analysed by project lenders (senior debt banks) to determine debt sizes and repayment criteria. CFADS is calculated by netting out Revenue, Operating Expenditure (OpEx), Capital Expenditure (CapEx), … read more

May 10, 2011

#### Modelling Stockpiles in a Mining Project

By Nick Crawley

Introduction For many mining projects, the open pit/cut mining process often begins months or even years before the milling plant starts operating. The build up of stockpile requires careful treatment to ensure the right grade of the ore milled is … read more

May 04, 2011

#### Using Goal Seek to Achieve Maximum Debt Limit

By Nick Crawley

Introduction This tutorial shows how in when modeling a project finance project the maximum debt limit can be solved based on a target Debt Service Cover Ratio (DSCR). This exercise indicates the maximum debt size that can be supported by … read more

Nov 29, 2010

#### Accounting for Finance Leases by the Lessee

By Nick Crawley

Introduction A Finance Lease or Capital Lease is often incorrectly disclosed and treated in the financial statements. This tutorial will focus on how to practically incorporate the principles of accounting for finance leases in the financial statement of the lessee. … read more

Nov 11, 2009

#### Debt repayment modelling – multiple methods

By Nick Crawley

Financiers are often required to analyse multiple debt repayment methods in a project finance transaction. This process is particularly important in the structuring or credit approval processes. This tutorial demonstrates step-by-step techniques on how to dynamically build such optionality into … read more

Oct 12, 2009

#### Mezzanine debt – financial modelling

By Nick Crawley

Mezzanine debt and financial modelling can often fill a critical shortfall between senior debt capacity / availability and equity funding. Mezzanine debt is a form of subordinated debt, often with an equity aspect, which ranks below senior debt in terms … read more

Sep 25, 2009

#### Borrowing base lending in resources projects

By Nick Crawley

When developing mining projects it is not uncommon to discover resources that are, on their own, too small to project finance. For many years this has meant that smaller scale projects have not been developed even in favourable prevailing market … read more

Jul 30, 2009

#### Pre-operating cashflow utilisation for funding

By Nick Crawley

Ramp-up or commissioning period which starts prior to formal project Completion can complicate financial modelling. This tutorial demonstrates how to model such pre-operating cashflows to fund construction in a transparent way. The inclusion of these cashflows is very important to … read more

May 27, 2009

#### Semi-annual debt repayment in a quarterly model

By Nick Crawley

In a project finance transaction, we often need to model semi-annual debt service in a quarterly period model. This tutorial demonstrates how to code this concept in a flexible way which minimises a whole range of potential errors. For illustration, … read more

Mar 23, 2009

#### Financial modelling of interest rate hedging

By Nick Crawley

Interest rate risk is where the risk that interest rates move and adversely affect the project economics. There are a range of approaches to interest rate risk management to protect your cost of funds on borrowings. This tutorial explains how … read more

Mar 09, 2009

#### PLCR – Project Life Cover Ratio

By Nick Crawley

The Project Life Cover Ratio (“PLCR”) is commonly used debt metric in project finance. Together with the Debt Service Cover Ratio (“DSCR”) and Loan Life Cover Ratio (“LLCR”), these debt metrics in one form or another usually appear in project … read more

Feb 26, 2009

#### Scenario Manager for project finance

By Nick Crawley

A good scenario manager allows you to look at a different ‘world’ in the model by changing just one cell. When combined with our 1-D Data Table approach the results of the Scenarios are shown without pressing any buttons! Introduction … read more

Jan 29, 2009

#### How to Simplify a Project Finance Model

By Nick Crawley

We have earlier published a Tutorial titled “Project Finance Modelling Top 10 Mistakes”, describing a wide variety of problems in Project Finance Models which can be attributed to a lack of model simplicity. This article together with the examples in … read more

Oct 20, 2008

#### Top 10 Excel functions to avoid in project finance models

By Nick Crawley

When building project finance models, one of the key Best Practice methods adhered to is that models are transparent. This is done by using simple formulas that are laid out in a logical manner. Simple models will ensure that the … read more

Sep 28, 2008

#### Reserve Tails in Resource Projects

By Nick Crawley

What are reserve tails and what implications do they have in financial modelling and associated debt sizing? One practical definition of reserves is ‘the economically mineable part of a measured and / or indicated mineral resource’. A reserve tail on … read more

Sep 25, 2008

#### Project financing of wind power and renewable energy projects

By Nick Crawley

Demand for renewable forms of energy is growing rapidly around the world, with wind power leading this global trend in most regions. In this article we introduce the concept of Project Financing, and highlight current trends along with the implications … read more

Sep 25, 2008

#### DSRA – Debt Service Reserve Account

By Nick Crawley

Free tutorial (PDF + XLS) on financial modelling of DSRA in project finance without circular references. The Debt Service Reserve Account (DSRA) works as an additional security measure for lenders as it is generally a deposit equal to a given … read more

Sep 25, 2008

#### Features of a Cashflow Waterfall in Project Finance

By Nick Crawley

The Cashflow Waterfall ensures that each cashflow item occurs at the correct seniority to other items. This article outlines key categories of cashflow items and how to present Cashflow Waterfall in comparison to Cashflow Statement in a Project Finance Model. … read more

Sep 25, 2008

#### DSCR – Debt Service Coverage Ratio

By Nick Crawley

This tutorial and the accompanying sample workbook focuses on the Debt Service Coverage Ratio (DSCR) which is widely used in Project Finance models. It is a debt metric used to analyse the project’s ability to repay debt periodically. DSCR = … read more

Sep 25, 2008

#### Project Finance Modelling top ten mistakes

By Nick Crawley

Financial models in project finance are often plagued with a wide variety of problems. The vast majority of these can be attributed to a lack of simplicity, a failure to clearly segregate different elements of the model, and the absence … read more

Sep 25, 2008

#### LLCR – Loan Life Coverage Ratio

By Nick Crawley

The Loan Life Cover Ratio (LLCR) is one of the most commonly used debt metrics in Project Finance. Unlike period-on-period measures such as the Debt Service Cover Ratio (DSCR) it provides an analyst with a measure of the number of … read more

Sep 25, 2008

#### What is Project Finance?

By Nick Crawley

Project Finance is the financing of, often long-term, industrial projects and increasingly those which provide public services or infrastructure. They are often based upon complex financial and contractual structures commonly involving many legal entities. The cashflows from the project are … read more

Sep 25, 2008

#### Financial Modelling of Convertible Notes

By Nick Crawley

A convertible note is a debt instrument which grants the bondholder the right to convert the debt obligation into a predetermined number of shares of common or other stock of the issuer. They are traditionally offered by lenders requiring a … read more

Sep 24, 2008

#### CFADS & DSCR Dynamic Graph

By Nick Crawley

In this article, we introduce how to use a dynamic graph of CFADS/DSCR as a useful tool for debt sculpting/sizing and credit analysis, particularly in project financings. In Project Finance, Cashflow Available for Debt Service (CFADS) is analysed by project … read more

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