What are the fundamentals of project finance modelling?

Project finance modelling involves calculating whether the cash flows generated by the project will be sufficient to service the debt and generate an attractive risk-adjusted return for both equity and debt investors. The model generates results on the return on investment, gross margin, internal rate of return, net present value, debt service coverage ratio, loan life coverage ratio and other indicators as requested.

The project finance model is also well placed to “stress test” projects and to assess how the expected returns change under certain risk scenarios.

The SAVi project finance model is unique in that it builds in environmental, social and economic risks that are usually ignored in traditional financial analyses. Moreover, it also builds in the costs of externalities and shows why externalities today can turn into direct project risks in the future.