Project finance models
For projects that are in the development phase, GPFAC has developed a proprietary modeling approach that has gained broad acceptance from developers, project participants, lenders, and international rating agencies. There is no standard methodology for building financial models in the project finance business and the most common approach is to take an existing model and adapt that to the project at hand. The problem is that most project finance models are complex and highly customized to meet the specific needs of an individual project. Adpating such a model and re-customizing it to fit a different project leads to extraordinariy complexity. As a result, these models often are over 10 MB in size, difficult to understand, and slow to respond.
GPFAC has developed a Base Financial Model as the starting point for all project finance transactions. Information specific to a project (assumptions, construction financing, EBITDA, etc.) is developed for each project and this information feeds the chassis which contains built-in financial statements. GPFAC offers a 2-day workshop to train clients in this approach.
With this approach, GPFAC can rapidly generate a sophisticated financial model for any project finance transaction that is consistent with the loan documents. These models meet prevailing audit standards, while remaining commercially acceptable to key project constituents.
What differentiates GPFAC project finance models are the following factors:
- Modeling performed by project finance professionals, not Excel programmers;
- The approach is to customize only project-specific information;
- A built-in chassis takes care of the financial statements;
- Low risk of mistakes through built-in checks;
- Models pass all audit standards;
- Models are of a manageable size; and
- Are well documented and easy-to-use
Asset management models
GPFAC does not, in general, recommend that the Base Financial Model used to close a project finance transaction also be used to monitor a project during operations for several reasons:
- Closing models rarely reflect actual costs because of change orders and Force Majeure events;
- Monitoring models do not need construction financing or loan repayment calculations; and
- Monitoring models focus on 'actuals' versus 'budget' for the near term.
GPFAC will work with clients and lenders to develop an easier-to-use monitoring model that meets their reporting needs and also checks compliance with covenants in the loan documents.