Project Finance Model Sample

A project is defined by primarily by time. It has a desired start date/time and an expected end date/time. Financing aims at sourcing for available and affordable funds, strategizing the utilization of sourced funds and generating the desired returns from the use of such sourced funds. Against this backgrounds, we can comfortably marry the two words together and say that Project Finance can be seen as the sourcing of funds and the utilizations of such sourced funds to finance the start of the desired business endeavour and to complete it with a view to realizing, at least, minimum expected returns. Clearly, this is different from financing an ongoing business that may need external financing to expand in scale – product-wise, market-wise or otherwise. Simply put, Project finance is different from Operations financing.

Project finance can be defined as the structured financing of a new economic unit “the Special Project Vehicle (SPV) or the project company on a non-recourse or limited recourse basis. This means the lenders and investors rely on the cash flow generated by the project to repay their loans and a return on their investments. This is in contrast with lending to ongoing corporate organizations where lenders rely on the strength of the borrower’s balance sheet as can be seen with financing existing business operations.

The calculation of projected cash flow is vital for valuing the ability of the initiative to generate enough cash to cover debt servicing and to pay sponsors dividends that are in line with expected returns.

The financial model is the analytical framework that presents the financial assumptions, workings and expectations of a project and provides a basis for analyzing quantifiable risks of the project.

The financial model is a crucial component of any project investment that companies may intend to develop using debt financing. By analyzing technical, economic, financial, and fiscal variables, the sponsors’ idea is carefully scrutinized to ascertain whether it is viable from an economic and financial standpoint.

The financial model helps us understand:

  • The nature of future cash flows
  • The degree of certainty that can be attributed to these future cash flows
  • The capacity of  the project to repay capital and provide a return to the providers of       that capital (debt & capital)
  • It is also a major tool in “pricing the deal” and “negotiating off the financial model”

This is just a very basic introduction to project finance, you can check out this link for an overview of project finance https://www.dropbox.com/s/4cukyn2kd7yokbn/ProjectFinanceOverview.pdf

Here is a sample of a complex Project Finance: Model:https://www.dropbox.com/s/m9ixke09nr6w9pv/Project-Finance-example.xlsm?dl=0

And if you like to try your hands on project finance model, here is a simple toll road case study and the accompanying Workbook to try your hands on

Case:            https://www.dropbox.com/s/w4vl7n6mnb3icev/Financial_Modelling_Test_Instructions.pdf Workbook: https://www.dropbox.com/s/o3x3tusygc2w2mm/FinMod%20Test.xlsx

I have built the model to this cases study, please use the contact form to reach me if you need any assistance or to request for the completed model.

 

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Simple DCF Analysis

What Is DCF Analysis

You can download a sample of a DCF Analysis from this link http://www.dropbox.com/s/jzlyl7gbem1e3pt/Simple%20DCF%20Analysis..xlsm

The Discounted Cash Flow (DCF) Analysis is one of the most common valuation methods. It is predicated on the theory that the value of an enterprise or asset  is the sum of the expected future cashflows discounted at an appropriate rate (cost of capital).

The DCF Analysis :

  • Derives the inherent value of the enterprise/ asset
  • By determining the Net Present Value(NPV) of the future cashflows( i.e. future cash receipts and outflows) generated by the enterprise or asset to all providers of capital (i.e. the unlevered free cashflows/”Unlevered FCF”)
  • Using the Weighted Average Cost of Capital (“WACC”) as a discount rate to reflect the  time value of money and riskiness of cashflows
  • As of a specific valuation date.

The DCF analysis is provides a theoretical framework for deriving the intrinsic value of an enterprise or asset.

Information Required for a DCF Analysis

  1. Historical Financial Statements
  2. Projected Financial Statements
  3. Cost Capital Assumptions
  4. Terminal Value Assumptions

Key Steps to in DCF Analysis

  1. Information Gathering
  2. Forecasts
  3. Terminal Year Normalisation
  4. Terminal Value Calculation
  5. Determination of WACC
  6. Calculation of Enterprise Value
  7. Calculation of Enterprise Value, Adjustments and Equity Value

DCF Matrix Enterprise Valuation

Over the next few weeks, we’ll go through a case study and develop a simple DCF analysis by going through the 7 steps stated above.

You can download a sample of a DCF Analysis from this link http://www.dropbox.com/s/jzlyl7gbem1e3pt/Simple%20DCF%20Analysis..xlsm

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‘You’ve got to find what you love,’ Jobs says

‘You’ve got to find what you love,’ Jobs says

This is a prepared text of the Commencement address delivered by Steve Jobs, CEO of Apple Computer and of Pixar Animation Studios, on June 12, 2005.

I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college.  Truth be told, this is the closest I’ve ever gotten to a college graduation.  Today I want to tell you three stories from my life. That’s it. No big deal. Just three stories.

The first story is about connecting the dots.

I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?

It started before I was born.  My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption.  She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife.  Except that when I popped out they decided at the last minute that they really wanted a girl.  So my parents, who were on a waiting list, got a call in the middle of the night asking: “We have an unexpected baby boy; do you want him?”  They said: “Of course.”  My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school.  She refused to sign the final adoption papers.  She only relented a few months later when my parents promised that I would someday go to college.

And 17 years later I did go to college.  But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents’ savings were being spent on my college tuition.  After six months, I couldn’t see the value in it.  I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out.  And here I was spending all of the money my parents had saved their entire life.  So I decided to drop out and trust that it would all work out OK.  It was pretty scary at the time, but looking back it was one of the best decisions I ever made.  The minute I dropped out I could stop taking the required classes that didn’t interest me, and begin dropping in on the ones that looked interesting.

It wasn’t all romantic.  I didn’t have a dorm room, so I slept on the floor in friends’ rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple.  I loved it.  And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on.  Let me give you one example:

Reed College at that time offered perhaps the best calligraphy instruction in the country.  Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed.  Because I had dropped out and didn’t have to take the normal classes, I decided to take a calligraphy class to learn how to do this.  I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great.  It was beautiful, historical, artistically subtle in a way that science can’t capture, and I found it fascinating.

None of this had even a hope of any practical application in my life.  But ten years later, when we were designing the first Macintosh computer, it all came back to me.  And we designed it all into the Mac.  It was the first computer with beautiful typography.  If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts.  And since Windows just copied the Mac, it’s likely that no personal computer would have them.  If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do.  Of course it was impossible to connect the dots looking forward when I was in college.  But it was very, very clear looking backwards ten years later.

Again, you can’t connect the dots looking forward; you can only connect them looking backwards.  So you have to trust that the dots will somehow connect in your future.  You have to trust in something — your gut, destiny, life, karma, whatever.  This approach has never let me down, and it has made all the difference in my life.

My second story is about love and loss.

I was lucky — I found what I loved to do early in life.  Woz and I started Apple in my parents garage when I was 20.  We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees.  We had just released our finest creation — the Macintosh — a year earlier, and I had just turned 30.  And then I got fired.  How can you get fired from a company you started?  Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well.  But then our visions of the future began to diverge and eventually we had a falling out.  When we did, our Board of Directors sided with him.  So at 30 I was out.  And very publicly out.  What had been the focus of my entire adult life was gone, and it was devastating.

I really didn’t know what to do for a few months.  I felt that I had let the previous generation of entrepreneurs down – that I had dropped the baton as it was being passed to me.  I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly.  I was a very public failure, and I even thought about running away from the valley.  But something slowly began to dawn on me — I still loved what I did.  The turn of events at Apple had not changed that one bit.  I had been rejected, but I was still in love.  And so I decided to start over.

I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me.  The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything.  It freed me to enter one of the most creative periods of my life.

During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife.  Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world.  In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple’s current renaissance.  And Laurene and I have a wonderful family together.

I’m pretty sure none of this would have happened if I hadn’t been fired from Apple.  It was awful tasting medicine, but I guess the patient needed it.  Sometimes life hits you in the head with a brick.  Don’t lose faith.  I’m convinced that the only thing that kept me going was that I loved what I did.  You’ve got to find what you love.  And that is as true for your work as it is for your lovers.  Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work.  And the only way to do great work is to love what you do.  If you haven’t found it yet, keep looking. Don’t settle.  As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on.  So keep looking until you find it.  Don’t settle.

My third story is about death.

When I was 17, I read a quote that went something like: “If you live each day as if it was your last, someday you’ll most certainly be right.”  It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: “If today were the last day of my life, would I want to do what I am about to do today?”  And whenever the answer has been “No” for too many days in a row, I know I need to change something.

Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life.  Because almost everything — all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.  You are already naked.  There is no reason not to follow your heart.

About a year ago I was diagnosed with cancer.  I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas.  I didn’t even know what a pancreas was.  The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months.  My doctor advised me to go home and get my affairs in order, which is doctor’s code for prepare to die.  It means to try to tell your kids everything you thought you’d have the next 10 years to tell them in just a few months.  It means to make sure everything is buttoned up so that it will be as easy as possible for your family.  It means to say your goodbyes.

I lived with that diagnosis all day.  Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor.  I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery.  I had the surgery and I’m fine now.

This was the closest I’ve been to facing death, and I hope it’s the closest I get for a few more decades.  Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:

No one wants to die.  Even people who want to go to heaven don’t want to die to get there.  And yet death is the destination we all share.  No one has ever escaped it.  And that is as it should be, because Death is very likely the single best invention of Life.  It is Life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away.  Sorry to be so dramatic, but it is quite true.

Your time is limited, so don’t waste it living someone else’s life.  Don’t be trapped by dogma — which is living with the results of other people’s thinking.  Don’t let the noise of others’ opinions drown out your own inner voice.  And most important, have the courage to follow your heart and intuition.  They somehow already know what you truly want to become.  Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation.  It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch.  This was in the late 1960’s, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras.  It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue.  It was the mid-1970s, and I was your age.  On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous.  Beneath it were the words: “Stay Hungry. Stay Foolish.”  It was their farewell message as they signed off.  Stay Hungry. Stay Foolish.  And I have always wished that for myself.  And now, as you graduate to begin anew, I wish that for you.

Stay Hungry.  Stay Foolish.

Thank you all very much.

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Financial Modeling Overview

Hi guys,

This video gives a short overview of financial modeling.

https://www.dropbox.com/s/tvdtg64o3cwwofc/FMS1FinancialModelingOverview.mp4

Click on the link to download the video.

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How to Combine Excel and Love

McCann Helsinki might have done the impossible: Turned Excel into a vehicle for romance. An interesting campaign for client Area Business Travel Agent wanted to speak straight to the cost-driven corporate account in charge of deciding how employees would travel. Using Excel — which might be an accountant’s only weakness — the agency made a ‘love story’ that communicated the importance of an employee’s travel well-being and distributed it to accountants via a personalized Web site.

Check this out: http://creativity-online.com/work/area-spreadsheet-the-love/26864

It makes you wonder how far can Excel go.

EXCEL can be Romantic

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I Love Excel

I really do love Excel. In fact it is seems it’s becoming an addiction.  My mind is endlessly fixated on finding new ways to work with Excel and every shout of eureka comes with a new challenge concocted somewhere in mind.

It’s like I’m in an endless loop, a never ending circular reference. My work does not offer much help either as I spend most of my day “making love” to Excel from sun-up till sun-down. And as they say; Acceptance and admittance of a problem is the first step to recovery. I admit my addiction. But the truth is I DON’T WANT TO BE CURED.

Let me take you back to how it all started, I remember so clearly. It was sometime in 2003 as an undergrad. I was on holiday with my older cousin, an Estate Management Consultant. I remember seeing him so confused as he looks into his cathode ray tube monitor. In curiosity, I moved closer. The screen was filled with numbers in small boxes and on the top right corner of the screen was a beautiful pie chart. Then the most amazing thing happened, he changed a number in a cell and the shape of the pie chart changed, he hit another button the shape shifted again, he fidgeted with some icons on the screen and the pie chart changed into a bar chart. I asked what he was doing; “I am carrying out a financial analysis and valuation of a project for my company” he replied.

That was how it all started. Every day during my vacation I would play around with numbers, cells, functions and formulas for hours, and when I found out what F1 does, it became my genie in the lamp. Afterwards saw me through the waters of self-education – delving into the deeps, skiing the surface and exploring shore to shore of Excel.

I printed out almost all the help topics and took it back to school with me. During school sessions, I would peer over the pages with so much passion, working on memorizing as much as possible; hoping to put to practice all I have read when I get back home and during the holidays. That’s how it went for the next two years – dating Microsoft Excel.

Fast forwarding to year 2006, my first job position was that of an accounting officer. I was responsible for bookkeeping of sales and inventory. Shockingly, it was done manually with pen and paper. Being a “lazy person” – wanting to do more with less – by nature, I wanted an easy way out of the drudgeries. I just hated the monthly reconciliation stuff. So one day, it happened that I failed to turn in one of my monthly reconciliation at the time my boss needed and asked for it. I had the boldness to tell him I was developing and excel workbook that would make it easier and reduce the pen and paper “wahala”. He was excited and he liked it. Of-course I was so full of shit, I knew excel could do it but I was not sure how to go about it and I didn’t even know google, moreover internet was a luxury then.  About a week later with the help of F1 I had a functional inventory workbook made up of just basic operands (+,-,/,*), I think AVERAGE was the only Excel function I had used.

Day after day I would spend hours improving it; always thinking of ways to make my work easier – evolutionary development you may say. Before long, I extend it to sales and then purchasing. I became the in-house Microsoft Excel Consultant. I was always seeking out where I could apply my basic Excel skills

About a year later, I found myself in banking, for about a year, I didn’t see much need for excel, but yearning to know more about excel never waned. Then came the turning point in my quest for “Excel-knowledge”, I meet Google. Everyday after work I would think up a problem, google it up and save as much references I could on them, practice and recreate them.

Then came 2008, at the height of the stock market boom, my office responsible for managing various dividend and IPO accounts, it was a crazy time, but it was the time for the “Excel” in me to shine through.  I became a “data analysis guru” ; not that I was one, but like they say “in the land of the blind a one-eyed man is the king”. With the help of Excel I was able to stop a lot fraud.

2008, 2009: I started experimenting with Macros, as usual the lazy me always seeking ways to make it my job easier. I started developing bits of VBA. I would record a series of steps get my VBA sources and tweak it up to make it dynamic. I’ll google-up references and adapt them to make them suitable. The highlight of 2009 was when I developed an automated Fixed Asset Register with forms and interface. It had it all, you could create asset classes, automated depreciation, accumulated depreciation, disposal etc.

2010:  It was the year of Financial Modeling. By some chance, while googling I came about these words. They have become my Mantra since then.  With the help of the internet I kept learning more about financial modeling and also got some books on financial modeling. Highlight of 2010, I automated most of tasks and reports.

2011 : I got to put my financial modeling skills to use. My Dad was involved in some Project Finance consulting and I helped with developing the models for the projects. Looking back they were basic and rudimentary, but they paved the way into my world of financial modeling. The highlight 2011, I developed Credit Analysis Workbook. I had noticed that a lot of the banks marketers especially in my branch had problems analyzing their credit requests, my intention was for it to be a first level analysis tool to help the understand the business. It did vertical and horizontal analysis, the ratio, it had a very dashboard for charts. I also developed a VBA application for ATM reconciliation, it remains the most complicated VBA application I’ve ever built. It was able to identify unique transactions in rows of hundreds of thousands of data. At that time ATM reconciliation for a major “pain in the backside” for the staff.

2012- to date: Was the Corporate finance year filled with financial modeling, valuation, budgets, forecasting, probability distributions, Monte Carlo and yaddaa yaddaa. I am not so much into writing long and complicated formulas any more, VBA is almost a thing of the past except occasionally when I need it for data analysis, I am now a novice in VBA, but I still have my friend in Google.

So there you have it my journey with Excel. Its been fun so far and I’m not ready to part ways with her.

You may wonder what this site is about, I am not sure my self, I guess I just want to share some of what I know although It’s not much. I also hope it would be a platform for Nigerians to share our thoughts and ideas and help others; Like others before us did.

Please share your Excel journey let’s read how it all started.

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