best practice modelling for project finance · this course is aimed at project finance...
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f i n a n c i a l f o r e c a s t i n G
BEST pracT icE mod El l ing f orproj EcT f inancE(adVancEd TEcHniQUES )
© 2017 Near Future Ltd.Registration no. 10321258
www.nearfuturefinance.cominfo@nearfuturefinance.com
coUrS E o VE rV iE W
lEarning o U T co mE S
This course is aimed at Project Finance professionals who have completed our Best Practice
Modelling for Project Finance course (or individuals who have practical experience and a
good understanding of Best Practice Financial Modelling) and would like to build on these
skills to tackle more complex elements of Project Finance modelling.
The content is well suited to Project Finance analysts and associates working for project
sponsors, infrastructure funds, banks or advisors.
Prepare integrated
financial statements
(Balance Sheet, Income
Statement and Cash
Flow) and learn to
debug errors.
Use advanced
modelling techniques
to incorporate complex
operational calculations,
including depreciation
and taxation.
Create an error checking
dashboard to monitor
integrity, signal and macro
issues in the model.
Get to know the VBa
interface and learn how
to write macros to break
circularities.
Optimise the debt size
based on key constraints,
including tenor, debt
service coverage ratio
(DSCR) and gearing.
Incorporate reserve
accounts, short-term
construction facilities and
refinancing into a Project
Finance model using Best
Practice principles.
coUrS E mo dU l E S
Module 1: Debt Sizing and Advanced Ratio Analysis
Module 2: Project Finance Reserve Accounts
Module 3: Cash Flow vs. the Income Statement: Timing Differences
Module 4: Taxation Calculations
Module 5: Integrated Financial Statements
Module 6: Refinancing, Mezzanine Debt and Cash Sweeps
Module 7: Other Construction Facilities: Working Capital & VAT
Debt sizing and different scenarios
• Discuss the importance of scenario
management when sizing debt (bank
vs. equity and sensitivity cases)
• Learn how to freeze debt repayments
where relevant
MODule 2
PROjeCT FInAnCe ReSeRVe ACCOunTS
understand the reserve accounts
commonly required in a Project Finance
transaction
• Discuss the modelling requirements and
financial statement impact of different
types of reserves (DSRA, MMRA,
decommissioning reserve)
• Walk through the various cash flows
impacting a Debt Service Reserve
Account (additions/releases based on
target, releases for shortfalls on CFADS)
• Discuss the reason the reserve target
requirement often results in a circularity
• Learn how to break the circularity
caused by a forward-looking target
using VBA
coUrS E co n T E n T
MODule 1
DeBT SIzInG AnD ADVAnCeD RATIO
AnALySIS
understand the key debt ratios relevant to
debt sizing in Project Finance
• Recap and walk through the sculpted
debt repayment and DSCR calculations
• Discuss other frequently used debt ratios
in Project Finance
• Incorporate an LLCR (Loan Life Cover
Ratio) calculation into the case study
model
• Walk-through the calculation of a PLCR
(Project Life Cover Ratio) and discuss its
interpretation
use debt ratios to incorporate debt sizing
functionality in a model
• Discuss the concept of debt sizing and
understand how this interacts with
sculpted debt repayments
• Learn how to use a basic copy/paste
macro to break the circularity inherent
to the funding calculation
• Calculate the maximum debt which the
project can take given the tenor and
minimum DSCR proposed by the bank
(i.e. sizing the senior debt tranche)
• Add a flag which indicates if the
maximum gearing is breached
• Discuss how to combine the gearing
constraint in the sizing calculation (this is
covered in detail in our Advanced VBA
for Project Finance course)
MODule 3
CASh FLOW VS. The InCOMe STATeMenT:
TIMInG DIFFeRenCeS
understand the purpose of the Income
Statement and Cash Flow Waterfall in a
Project Finance model
• understand the principle of accrual vs.
cash-based accounting
• Discuss the main sources of timing
differences in a Project Finance forecast
learn how to model working capital
• Model debtor (receivable) and creditor
(payable) control accounts
• Incorporate movements and balances
in the P&L, CF and BS
Develop depreciation calculations
• understand the importance of
depreciation calculations in a Project
Finance transaction
• Discuss the most commonly used
depreciation methods (straight-line,
declining balance, units-of-production)
• Learn a streamlined approach to
modelling depreciation forecasts where
multiple capex additions occur over
time (eliminating the need for extensive
‘matrix’ calculations)
• Learn how to develop a dynamic and
flexible depreciation calculation block
which can be replicated for different
categories
MODule 4
TAxATIOn CALCuLATIOnS
learn how to model current tax expense,
tax paid and tax payable (geared and
ungeared)
• Discuss the most common sources of
differences between accounting profit
and taxable profit (both timing and
permanent differences)
• Calculate the tax expense in each period
• Prepare a tax payable control account
based on the tax expense and timing of
tax payments
• understand the impact of tax losses
and incorporate functionality to
account for this
• Discuss the impact of deferred tax and
how to incorporate this
• Walk through the differences between
a geared and ungeared tax calculation
and understand the purpose of each
MODule 5
InTeGRATeD FInAnCIAL STATeMenTS
• Discuss the purpose of including a fully
integrated set of financial statements
(Cash Flow Waterfall, Income
Statement/P&L and Balance Sheet) in a
Project Finance model
• Incorporate the Income Statement and
Balance Sheet by linking in movements
and balances from calculation tabs
• Incorporate relevant Balance Sheet
checks and learn how to trouble shoot
imbalances
MODule 6
ReFInAnCInG, MezzAnIne DeBT AnD
CASh SWeePS
understand the purpose of refinancing in
a Project Finance transaction
• Discuss the impact on model
assumptions and functionality such as
repayments, fees and interest
• Walk through the approach to
modelling a rolling refinance vs.
a re-gearing refinance
• Incorporate a refinancing functionality
into the case study model
Incorporate a mezzanine debt tranche
with cash sweep repayments
• understand the rationale for using a
mezzanine loan in Project Finance
• use the Cash Flow waterfall to calculate
mezzanine repayments using a cash
sweep functionality
• Learn how to model PIK interest on the
mezzanine loan
• Discuss how mezzanine debt can be
incorporated in a debt sizing
MODule 7
OTheR COnSTRuCTIOn FACILITIeS:
WORKInG CAPITAL & VAT
understand the impact of the timing of
payments and receipts on cash flow
• Discuss the types of construction facilities
commonly used in Project Finance
• Walk through the mechanics of a
VAT facility
• Incorporate a working capital facility in
the case study model
f i n a n c i a l f o r e c a s t i n G
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