The role of financial models in infrastructure projects (Rickard Wärnelid presentation)

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Rickard Wärnelid presents 'The role of financial models in infrastructure projects' at the Alternative funding for transport infrastructure conference in Sydney on 26 & 27 March 2014

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The role of financial models in infrastructure projects (Rickard Wärnelid presentation)

  1. 1. From technical feasibility to completion The role of financial models in infrastructure projects Alternative Funding for Transport Infrastructure 26 March 2014
  2. 2. 2 1. Desired state Agenda
  3. 3. 3 Cash flow forecasting/ treasury Operational performance Traffic modelling (revenue) What do we mean by a ‘financial model’? Strategy model CapEx OpEx FM services Bids and transactions Debt covenants Equity analysis Tax Technical feasibility
  4. 4. 4 Financial modelling is a team effort Project CFO Bankers & advisors Engineers External Cash flow forecasting (detailed) Strategy model Tax & accounting Greenfield bids Refinancing Valuations Debt covenants Equity analysis Technical feasibility OpEx CapEx Patronage modelling Government FM services JV partners
  5. 5. 5 A financial modelling ecosystem is a community of financial models in conjunction with their defined flows of data and purposes interacting as a system. In bad examples, also known as a whole lot of messy spreadsheets. What is a financial modelling ecosystem?
  6. 6. 6 =-IF(Debt.Bond1.Flag=1, J$434*IF(AND(J$434=1,K$434=0), I924+SUM(J920:J922), IF(AND(Debt.Bond1.Term*P- (J$11- 1)=0),(I924+SUM(J920:J922))/ (Debt.Bond1.Term*P-(J$11-1)+1), (I924+SUM(J920:J922))/( VLOOKUP($B919,Table.Depreciation,4)*P ))),J$368*IF(AND(J$368=1,K$368=0),I924+SUM(J920:J922),IF( AND((Debt.Bank1.Term+Debt.Bank3.Term)*P-(J$11-1) =0),(I924+SUM(J920:J922))/ ((Debt.Bank1.Term+Debt.Bank3.Term)*P-(J$11-1)+1),(I924 +SUM(J920:J922))/(VLOOKUP($B919,Table.Depreciation,4)*P)))) Would you bet AUD 3 billion that this is correct? Balancing functionality vs. complexity
  7. 7. 7 Typical timeline of developments Bankers Engineers Government SPV CFO Structuring Financing Feasibility Economics VFM Agreement
  8. 8. 8 Identify (upfront) all stakeholder requirements Clearly define the ‘owner’ of each model Accept that there is not one perfect solution – compromises required Identify interfaces (data, users and outputs) between layers Standardise methodology across all layers Sufficient (but not excessive) flexibility for analysis Be realistic about the lifetime of a model and be prepared to turn off Include consistency checks between layers Define and document information flows Goal: Consistent and robust analysis across all aspects of a project for all stakeholders Challenges in developing an ecosystem
  9. 9. 9 Recommended timing for ‘clean-ups’ 2013 2014 2015 2016 2017 2018 2019 2020 Bid Operations start Start of construction Operational stability Refinancing
  10. 10. 10 Engineers Agreement between government, engineers, developers and investors GovernmentInvestors Developers
  11. 11. 11 Evaluation of alternative funding cases Alternative funding scenarios require input from a wide range of areas ILLUSTRATIVE BankCash Tax Equity Funding case Accounting Government Technology
  12. 12. 12 A structured approach to case analysis
  13. 13. 13 Getting buy-in through transparency

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