Client

The client is a large company building and operating project financed assets across a number of different renewable energy sources in a variety of jurisdictions.

Brief

The client already had considerable in-house modeling capabilities, with a long pedigree in build-own-operate projects, and is now largely now focused on renewables.

The client was looking to tackle three main modeling issues:

• Inefficiencies and inconsistencies between their different teams and their associated models;
• Risks associated with taking previous deal models and amending them on new deals; and
• Their deal models needing to be replaced with separate delivery models – e.g. the models used to deliver and subsequently manage each asset.

The client needed an integrated 3-way transaction model that could run a project finance transaction:

• from speculative, early-stage analysis, with efficient operational assumption entry;
• through comprehensive deal model creation and financial close;
• into monitoring of asset development and capital spend variance analysis; and
• through to fully operational, asset management mode.

The client understood the modular development capabilities provided by Modano and was keen to have their own suite of operational modules (wind, solar, etc.) that they could plug-and-play to perform consistent, scalable funding analysis.

Solution

The end solution was a rolling planning model with a single (monthly historical-forecast) time series that could support forecast-only analysis then roll straight into actuals for delivery.

The whole-of-life returns determine asset performance from deal commencement through to the end of projections, with a bridge each month to show the drivers of valuation changes.

As with all rolling Modano models, the historical data could be imported directly from the client accounting package.

The operational analysis was constructed into a suite of six comprehensive modules that covered the main project types and an open 'sandpit' operational module for other bespoke project types.

The financing analysis consisted of a library of 22 separate capital modules, covering senior, mezzanine, preference (debt and equity behaviour), as well as distinct build and operate debt tranches, and re-leveraging following asset revaluation on completion.

Much of the development process involved conversion of the client's range of existing static Excel templates into dynamic modular workbooks, rather than large amounts of scoping from scratch.

Modano Benefits

The end result was a highly efficient project finance modeling system, built on a systematic and scalable application of Excel.

The client's team can choose whether to customize their project finance models in a modular scalable environment or do things the same way they've always done them in Excel. In either case, substantial efficiency gains and risk reductions are achieved during both the deal and delivery stages.

The model suite was designed to dovetail with multiple processes of use in a multi-year setting, on a seamlessly integrated basis.

Update: Subsequent work has involved creating a range of different corporate tax modules to support modeling in a range of legal jurisdictions.