Project Finance Modelling

Debt sizing, sculpting, and returns modelling for infrastructure, energy and property projects.

Project finance runs on a different logic to corporate finance. Lenders are not looking at your balance sheet, they are looking at what the asset itself can generate, and structuring debt around it. That means a project finance model has to do things a standard three-statement model does not: size debt against cash flow, sculpt repayments around a target coverage ratio, and prove the numbers hold across the life of the asset rather than just next year.

I spent 20 years in institutional banking, including assessing project finance models from the lender's side of the credit committee. I know what a model has to demonstrate before a senior lender will move, and where these models usually fail.

WHAT A PROJECT FINANCE MODEL HAS TO DO

  • Debt sizing and sculpting. Solving for the maximum debt an asset can support against a target Debt Service Coverage Ratio, typically 1.2x to 1.4x depending on sector and risk profile, with repayments shaped to the cash flow profile rather than straight-lined.

  • Sources and uses schedules across the construction and operating phases, with drawdown logic matched to the construction programme.

  • CFADS build-ups. Cash Flow Available for Debt Service, and the waterfall beneath it: operating costs, debt service, reserve accounts, distributions.

  • Gearing analysis alongside DSCR and LLCR testing, since lenders bind on whichever constraint is tightest and it is rarely the one you expect.

  • Equity returns analysis. Project IRR and equity IRR, payback, and distribution timing for sponsors, sitting alongside the lender-facing debt model.

  • Scenario testing across construction delays, cost overruns and revenue downside cases, because every term sheet will ask what happens if this does not go to plan.

WHAT IS A DEBT SCULPTING MODEL

A debt sculpting model sizes and shapes project debt so that the repayment profile tracks the asset's available cash flow at a constant target coverage ratio, rather than repaying a fixed amount each period.

It matters for two reasons. A sculpted profile supports meaningfully more debt than a straight-line profile against the same cash flows. And sculpting creates a circular reference between the debt balance, the interest charge and the cash available to service it. Resolving that circularity cleanly, without a fragile iterative calculation that breaks under a downside case, is most of the technical work in a project finance model.

WHEN CLIENTS COME TO ME

  • Taking an infrastructure, energy or property development project to financial close and needing a bankable model

  • Working out, as a sponsor, how much debt a project can realistically support before approaching lenders

  • A lender has asked for an independent model, or wants an existing one reviewed against their own assumptions

  • Bidding for a PPP, concession or similar and needing a model that supports the financial submission

FREQUENTLY ASKED QUESTIONS

What DSCR do Australian lenders require for project finance?

Most senior project finance debt in the Australian market is sized to a minimum DSCR between 1.20x and 1.40x. Contracted revenue with a strong counterparty sits at the lower end. Merchant or volume-exposed revenue sits at the higher end, and often carries a tighter distribution lock-up test as well.

How is a project finance model different from a three-way financial model?

A three-way financial model is a fully integrated P&L, cash flow statement, and balance sheet that reconciles in every forecast period. It forecasts a business. A project finance model forecasts a single asset, sizes non-recourse debt against that asset's own cash flows, and is structured around the coverage ratios a lender will test rather than around corporate financial statements.

Can you review a project finance model rather than build one?

Yes. Lenders frequently require an independent review before financial close. See financial model review and audit.

How long does a project finance model take to build?

It depends on the number of revenue streams, the complexity of the debt structure and the phasing of construction. Scope, cost and timeline are confirmed after a discovery call, not before.

RELATED SERVICES

This is a specialist discipline. It draws on the same three-statement logic as any financial model, but sizing and sculpting debt around a coverage ratio, and working through the circularity that creates, is its own skill. It is a large part of why I built Wiseworth around infrastructure and energy as a core sector from day one.