Drawing on nearly thirty years of real-world experience, Penny Lynch's second edition of her highly-successful workbook provides a detailed description of how to plan and build a pre-financial close Project Finance cash flow model. Providing sufficient theory to give the context for each modelling topic, it focuses on detailed practical methods. Topics covered include treatment of flexible timing assumptions, inflation, multiple currencies, circular calculations, debt and equity calculations, cover factors and IRRs and the use of the model to produce alternative base case scenarios and sensitivity cases. The workbook concludes with a series of exercises which work through the process of building a model from a set of illustrative data.
Financial Modelling for Project Finance, 2nd edition is accompanied by supporting spreadsheets illustrating the methods explained and providing an example solution to the exercises.
This second edition has been completely revised and updated and now reflects revisions to methods and techniques developed by the author during the time since the original edition was published, as well as new topics developed in response to market changes. Reflecting the emphasis on PFI deals in the project finance field, for example, a new section on optimisation covers the theory and practice of optimising revenues and/or funding structures to meet specific constraints such as cover factor and IRR requirements, whilst targetting outcomes such as lowest achievable NPV of project revenues. The spreadsheets accompanying the workbook have been re-written to reflect the methods and principles in the new edition, and to include the new topics. Where relevant the new edition also describes processes for both 2003 and 2007 versions of Excel.
After working for more than a decade with the project finance teams of two leading banks in the city of London, and for another eighteen years as an independent consultant, Penny Lynch has been involved in the use of spreadsheets for cash flow modelling since its inception in the early 1980s.
Nearly thirty years of subsequent real-world modelling experience has been steadily formalised into a well-defined philosophy and methodology as Penny has concurrently developed and presented a series of international training programs for leading funders, consultants and sponsors. She is ideally placed to understand the practical issues at the heart of project finance modelling, and the practical process of communicating them to new and experienced modellers alike.