Download F1F9’s example renewables development model here

We are delighted to invite you to download this renewables development model. (And if you haven't already seen our original example model, you may be interested in that one as well.)

We’re sharing it with you to demonstrate our approach to building financial models, which makes our models easy to read and review, and straightforward to operate and amend.

Best practice and the FAST Standard

Financial modelling best practice is at the heart of our approach. There are two key points of reference that document these best practices and set out how they should be implemented:

a) The ICAEW financial modelling code, which sets out generally accepted best practice rules based on the institutes consultation with the modelling community

b) The FAST Standard, which captures the same rules, but takes us a step further by explaining how the rules can be implemented.

What’s in the example model?

This is a cut-down version of the Finance Model Template we use for both our advanced training courses and as a starting point for client projects.

We’ve stripped it down to focus on the core elements of a project finance development model, but it can be built back up to include all the items you need to satisfy lenders, investors and other stakeholders.

There is a summary of the functionalities you can expect to find in each of these models on the ‘Scope!’ sheet.

Dual timelines

You’ll also note that this model has a dual timeline to deal with the modelling of the development and operational phases:

• The dark grey sheets are for the development phase and have a monthly timeline. This is to align with the timing of construction invoices and the corresponding drawdowns of senior debt;

• The pale grey sheets are for the operations period and have a quarterly timeline. This is to align with repayments and interest on the senior loans (typically quarterly or semi-annually in the repayment phase.

Because of the dual timelines, we need to consolidate monthly figures on our primary (quarterly) timeline, and you can see how we do this on the ‘Transition’ sheet.

Interest and fees during the drawdown phase

A key challenge in a project finance model is modelling the interest and fees during the drawdown phase. That’s because drawing down from sources of external finance is the only means of paying costs while the project is unable to generate its own cash inflows. Model logic inevitably creates unavoidable circularities.

For example, in relation to the arrangement fees payable on the senior facility – the arrangement fee is based upon the senior facility size and the senior facility size is required to fund the arrangement fee.

Debt capacity in the repayment phase

Moving into the repayment phase, we need to understand the debt capacity of the project. This is going to be dependent on the cash inflows that the project is generating and the requirements of our senior lender (measured using the Debt Service Cover Ratio, or DSCR).

To maximise debt capacity and gearing / leverage we need to repay debt using a sculpted profile. You will find the calculation of that profile on the ‘Repayment!’ sheet.

Follow the logic flow through 4 simple calculation blocks to see how we calculate this.

Model optimisation

Once you’ve reviewed the model’s workings, you can turn your attention to the ‘Opt!’ sheet and experiment with changes to gearing / leverage and to target DSCR.

If you want to assess the impact of increasing or decreasing gearing, then change cell F8. Once you’ve recalculated (using Ctrl+Alt+F9) you will see that the ‘financing solved’ alert has activated. This means you need to run the finance break macro before reviewing the results. Do this by pressing the button.

Changes to target DSCR do not need you to run the macro.

You’ll find some presentation of key model outputs to help inform your resolving of the model. There are a more complete set of model outputs on the ‘Charts!’ sheet. Try making changes to the gearing percentage and target DSCR on the ‘Opt!’ sheet, and then review the impact on the calculation sheets, the financial statements and the Charts sheet.

Can we help you further?

If you’d like us to build you a more complete version of this model, or be able to build it yourself, we will be very happy to help. My contact details are below, please don’t hesitate to get in touch.