Lesson 1Tax assumptions: corporate tax, VAT treatment, withholding, tax holiday and loss carryforward rulesThis section sets tax assumptions for corporate income tax, VAT, withholding taxes, tax holidays, and loss carryforwards, showing how they affect project cash flows, equity returns, and lender covenant calculations. Accurate tax modelling is essential for realistic return projections.
Corporate income tax base and ratesVAT on capex and operating costsWithholding tax on interest and dividendsTax holidays and incentive regimesLoss carryforward and minimum tax rulesLesson 2Debt financing assumptions: tenor, interest rate indexing, margin, grace period, amortisation profileThis section sets debt assumptions, including tenor, interest rate base, margins, fees, grace periods, and amortisation profile, and shows how these choices affect DSCR, LLCR, and equity returns in the model. Proper debt structuring ensures alignment with lender requirements.
Debt sizing approach and leverage limitsInterest rate base, margins, and feesGrace periods and sculpted amortisationCash sweep and prepayment mechanicsRefinancing and repricing scenariosLesson 3Construction schedule and milestones: mobilisation, EPC durations, commissioningThis section defines the construction schedule, from notice to proceed to mechanical completion and commercial operation, and shows how to model milestones, S-curves, and time-phased capex and interest during construction. Timing is critical for accurate IDC and cash flow projections.
Key EPC milestones and definitionsTime-phased capex and S-curve profilesLinking schedule to IDC calculationsMilestone payments and retentionCOD tests and delay scenariosLesson 4Inflation, discount rate selection (WACC), and real vs nominal modelling conventionsThis section explains how to model inflation, select nominal or real discount rates, and apply WACC consistently, so valuation, tariffs, and debt metrics remain coherent across the project finance model timeline. Consistent conventions prevent errors in long-term forecasts.
Building inflation index curvesReal vs nominal cash flow conventionsDeriving pre-tax and post-tax WACCCountry risk and risk-free rate inputsInflation pass-through in tariffsLesson 5Defining plant technical assumptions: nameplate, losses, degradation, and availabilityThis section defines key technical parameters for a 50 MW solar PV plant, including DC and AC nameplate capacity, system losses, degradation, and availability, ensuring realistic energy yield and performance projections. These assumptions drive the entire model's output.
DC and AC nameplate sizing choicesSystem loss categories and benchmarksModule and inverter degradation curvesScheduled and forced outage assumptionsNet capacity and net output definitionLesson 6Equity structure and timing: sponsor equity, bridge loans, reserves and DSRA sizingThis section defines equity structure and timing, including sponsor equity, bridge financing, reserve accounts, and DSRA sizing, and explains how equity injections interact with debt drawdowns and distributions. Balancing equity and debt is key to optimal capital structure.
Sponsor equity commitments and tranchesEquity bridge loans and repaymentFunding waterfall and drawdown timingDSRA sizing methods and fundingMaintenance and other reserve accountsLesson 7Capital expenditure breakdown: PV modules, inverters, mounting, civil, grid connection, contingenciesThis section breaks down EPC and owner’s capital costs into detailed categories, including modules, inverters, mounting, civil works, grid connection, soft costs, and contingencies, and explains how to structure them in the model. Detailed breakdowns enhance accuracy and auditability.
PV modules and inverter cost assumptionsMounting structures and tracker costsCivil works and balance of plant itemsGrid connection and substation costsDevelopment fees and owner’s costsContingency and price escalation setupLesson 8Operating cost assumptions: fixed O&M, variable O&M, insurance, land lease, and escalationThis section sets operating cost assumptions, including fixed and variable O&M, insurance, land lease, and other recurring costs, and explains how to model indexation, step changes, and performance-linked fees. Opex modelling impacts long-term profitability significantly.
Fixed O&M scope and cost driversVariable O&M and performance feesInsurance coverage and premium settingLand lease and right-of-way costsIndexation formulas and step changesLesson 9Project life, asset depreciation methods, residual value assumptionsThis section defines project life, depreciation methods, and residual value, explaining how technical life, PPA term, and accounting rules interact and how they influence taxes, valuation, and refinancing options. These elements affect the model's terminal value and overall returns.
Technical life vs PPA and debt tenorTax and accounting depreciation methodsComponent replacement and major overhaulsResidual value and terminal cash flowsImpact on tax shield and valuationLesson 10Capacity factor calculation: axis tilt, tracking, and irradiance inputsThis section shows how to calculate capacity factor using irradiance data, tilt and azimuth, tracking configuration, and system losses, and how to translate hourly or monthly profiles into annual net generation. Accurate capacity factors are foundational for revenue estimation.
Solar resource data sources and qualityFixed tilt and azimuth optimisationSingle-axis and dual-axis tracking gainsLosses from shading, soiling, and clippingConverting irradiance to net generation
