Project finance model
Sculpted debt, reserves, lock-up, coverage ratios. Size a project loan by sculpting to a coverage target, run the reserve accounts and the lock-up through a full waterfall, and say what the equity earns on the base case and the downside.
Built in: Investment banking, Private equity
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: project finance model.Updated 30 September 2026
Who builds it, and for whatUsed in infrastructure and energy financings: lenders use it to size the debt a contracted project can support, and sponsors use it to estimate the equity return after the cash flow waterfall. Project finance teams at banks, infrastructure funds and developers build models like this at the frequency the debt operates, and model auditors review them before financial close.
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| 1 | Assumptions | |||||||||||||||||||||||||||||||||||||||||||||||
| 2 | $m unless stated. Half-year periods: C1 to C4 construction, O1 to O40 operations. | |||||||||||||||||||||||||||||||||||||||||||||||
| 4 | Period | Unit | C1 | C2 | C3 | C4 | O1 | O2 | O3 | O4 | O5 | O6 | O7 | O8 | O9 | O10 | O11 | O12 | O13 | O14 | O15 | O16 | O17 | O18 | O19 | O20 | O21 | O22 | O23 | O24 | O25 | O26 | O27 | O28 | O29 | O30 | O31 | O32 | O33 | O34 | O35 | O36 | O37 | O38 | O39 | O40 | Notes | |
| 5 | Timing | |||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Period number | # | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | ||
| 7 | Construction periods | half-years | 4 | C1 to C4 (two years) | ||||||||||||||||||||||||||||||||||||||||||||
| 8 | Debt tenor | half-years | 30 | From commercial operation: O1 to O30 (fifteen years) | ||||||||||||||||||||||||||||||||||||||||||||
| 9 | Operating periods | half-years | 40 | O1 to O40 (twenty years) | ||||||||||||||||||||||||||||||||||||||||||||
| 11 | Construction budget | |||||||||||||||||||||||||||||||||||||||||||||||
| 12 | Construction cost, excluding financing | $m | 240.0 | $1.2m per MW of capacity; nominal, not indexed | ||||||||||||||||||||||||||||||||||||||||||||
| 13 | Construction draw profile | % | 15.0% | 30.0% | 35.0% | 20.0% | Share of construction cost drawn in each of C1 to C4 | |||||||||||||||||||||||||||||||||||||||||
| 14 | Arrangement fee | % | 2.0% | % of debt supported; paid in C1 | ||||||||||||||||||||||||||||||||||||||||||||
| 15 | Commitment fee, annual | % | 1.0% | On undrawn debt; halved for each half-year | ||||||||||||||||||||||||||||||||||||||||||||
| 17 | Senior debt | |||||||||||||||||||||||||||||||||||||||||||||||
| 18 | All-in interest rate, annual | % | 6.0% | Halved for each half-year, not compounded | ||||||||||||||||||||||||||||||||||||||||||||
| 19 | Target DSCR | x | 1.4x | Debt sculpting: debt service = base-case CFADS / target DSCR | ||||||||||||||||||||||||||||||||||||||||||||
| 20 | Lock-up DSCR | x | 1.1x | Distributions stop in any period with DSCR below this | ||||||||||||||||||||||||||||||||||||||||||||
| 21 | DSRA requirement | periods | 1 | Debt service reserve account (DSRA): periods of forward debt service | ||||||||||||||||||||||||||||||||||||||||||||
| 23 | Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
| 24 | Capacity | MW | 200.0 | |||||||||||||||||||||||||||||||||||||||||||||
| 25 | Hours per half-year | '000 hours | 4.38 | 8,760 hours a year / 2 = 4,380 | ||||||||||||||||||||||||||||||||||||||||||||
| 26 | Net capacity factor | % | 35.0% | |||||||||||||||||||||||||||||||||||||||||||||
| 27 | Availability | % | 95.0% | |||||||||||||||||||||||||||||||||||||||||||||
| 28 | Contracted tariff, O1 prices | $m/GWh | 0.07 | 0.07 $m/GWh = $70/MWh | ||||||||||||||||||||||||||||||||||||||||||||
| 29 | Indexation, annual | % | 2.0% | Applied to tariff and O&M; compounds by half-year from O1 | ||||||||||||||||||||||||||||||||||||||||||||
| 30 | Revenue sensitivity factor | x | 1.00 | 1.00 = base case; 0.90 = 10% revenue shortfall | ||||||||||||||||||||||||||||||||||||||||||||
| 32 | Operating costs and tax | |||||||||||||||||||||||||||||||||||||||||||||||
| 33 | Fixed O&M per half-year, O1 prices | $m | 4.0 | Operations and maintenance (O&M); indexed from O1 | ||||||||||||||||||||||||||||||||||||||||||||
| 34 | Variable O&M, O1 prices | $m/GWh | - | 0.002 $m/GWh = $2/MWh; indexed from O1 | ||||||||||||||||||||||||||||||||||||||||||||
| 35 | Major maintenance cost per event | $m | 20.0 | Nominal; not indexed | ||||||||||||||||||||||||||||||||||||||||||||
| 36 | Major maintenance calendar | flag | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 = event in that period (O10, O20, O30) | |
| 37 | Maintenance reserve funding period | half-years | 10 | Funding per operating period = event cost / this number | ||||||||||||||||||||||||||||||||||||||||||||
| 38 | Corporate tax rate | % | 25.0% | |||||||||||||||||||||||||||||||||||||||||||||
Select a cell to see its row, its schedule and the type of cell. Font colours: blue for inputs, black for formulas, green for links to other sheets. Scroll sideways to see every period.
Download
Project finance model: the workbook
Excel workbook with working formulas, no macros and no external links. Work with it above first; it is the same model as the preview.
What the base case says
- Senior debt supported
- $216.9m
- Gearing
- 81.5%
- Minimum DSCR, sensitivity case
- 1.4x
- LLCR at commercial operation
- 1.4x
- Project IRR, annual
- 10.4%
- Equity IRR, annual
- 11.6%
Read from the workbook as served, every input at its default. Periods: C1, C2, C3, C4, O1, O2, O3, O4, O5, O6, O7, O8, O9, O10, O11, O12, O13, O14, O15, O16, O17, O18, O19, O20, O21, O22, O23, O24, O25, O26, O27, O28, O29, O30, O31, O32, O33, O34, O35, O36, O37, O38, O39, O40. The figures are invented and move with whatever you type in.
What this model is
A project finance model for a single contracted wind farm: two years of construction funded by senior debt and sponsor equity, then twenty years of operation under an indexed tariff, with the debt repaid over the first fifteen.
Senior debt is sculpted to a target debt service coverage ratio (DSCR) and sized as the present value of the sculpted debt service. Each period runs through a cash flow waterfall: debt service, the debt service reserve, the maintenance reserve, then distributions to equity subject to a lock-up test.
Uses: learning debt sculpting and reserve mechanics, and testing how a revenue shortfall affects coverage, lock-up and equity returns when the debt is sized on the base case.
Seats: Investment banking, Private equity.
Careers that do this work: infrastructure & real assets, debt capital markets, private credit.
How the schedules connect
Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.
Construction funding
Draws, interest during construction, fees, equity
Assumptions, rows 6–9 · Assumptions, rows 12–15 · Construction, rows 6–10 · Construction, rows 13–20 · Construction, rows 23–25 · Construction, row 28
CFADS
Cash flow available for debt service
Assumptions, rows 24–30 · Assumptions, rows 33–38 · Operations, rows 6–11 · Operations, rows 14–18 · Operations, rows 21–25
Debt sculpting
Service shaped to CFADS at a target DSCR
Assumptions, rows 18–21 · Debt, rows 6–9 · Debt, rows 12–17
Coverage ratios
DSCR, LLCR and PLCR
Debt, rows 20–25 · Returns, rows 23–27
Reserve accounts
Debt service reserve and maintenance reserve
Assumptions, row 36 · Waterfall, rows 11–14 · Waterfall, rows 17–23
Distribution waterfall
Debt service, reserves, lock-up, equity
Waterfall, rows 6–8 · Waterfall, rows 26–32
Project and equity returns
Gearing, project IRR, equity IRR and multiple
Returns, rows 6–7 · Returns, rows 10–13 · Returns, rows 16–20
What you should be able to explain
- Why the debt is sized to coverage rather than to a multiple, and what margin of safety the target DSCR provides.
- What sculpting does to the repayment profile, and how this model avoids a circular reference.
- Where the usual circularity comes from (the interest tax shield feeding CFADS) and what removing it costs.
- What the two reserve accounts and the lock-up test do to equity’s early cash, and why they exist.
- How DSCR, LLCR and PLCR answer different questions about the same cash flows.
What a reviewer looks for
- An annual model, which averages away the half-years where coverage is tightest.
- A lock-up modelled as a note rather than a switch, so the equity return counts cash the lenders would have trapped.
- Reserve accounts omitted, overstating early distributions where the equity IRR is most sensitive.
- Sizing the debt on a case that already includes the tax shield of the debt being sized, without saying it is iterative.
- Interest during construction computed on the closing balance, or capitalised into the tax base that sizes the debt.
Conventions this workbook uses
Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.
- Periods are half-years. C1 to C4 are the four construction periods (two years); O1 to O40 are the forty operating periods (twenty years). Commercial operation starts in O1, and the debt is repaid over O1 to O30 (fifteen years).
- Interest rates and fees are annual and are halved for each half-year (simple, not compounded). Indexation is annual and compounds by half-year from O1: the factor in operating period n is (1 + rate)^((n - 1) / 2), so tariff and O&M inputs are at O1 prices. Major maintenance and construction cost are nominal and not indexed.
- IRRs are calculated on half-year cash flows and annualised as (1 + half-year IRR)^2 - 1. Project IRR is unlevered: CFADS less construction cost, before financing. Equity IRR is levered: sponsor equity funded against distributions received.
- CFADS (cash flow available for debt service) is EBITDA less tax. Tax is charged on EBITDA less straight-line tax depreciation of the construction cost, with no deduction for interest. This avoids a circular reference between CFADS and debt size and understates the tax shield, which is conservative for lenders. Tax losses are not carried forward.
- Debt service in each tenor period is base-case CFADS divided by the target DSCR; debt supported is the present value of that schedule at the half-year interest rate. Debt is drawn pro rata to the construction draw profile. Interest during construction, fees and the initial debt service reserve are funded by equity.
- The debt service reserve account (DSRA) holds the next period’s debt service and is released as debt service ends. The maintenance reserve account (MRA) is funded after debt service and pays major maintenance; any shortfall is paid from cash. The MRA balance is released in O40.
- Distributions are made only when the period’s DSCR is at or above the lock-up DSCR, or after the debt is repaid. Otherwise cash is trapped and released in the next period that passes. There is no terminal value.
- LLCR is the present value of CFADS to the end of the debt tenor, at the half-year interest rate, divided by the opening debt balance. PLCR does the same to the end of operations.
Build it yourself
The starter workbook
The Debt sheet has been cleared below the flag row: sculpted debt service, debt supported, interest, principal and the closing balance. Build the sculpt so that the Construction, Waterfall and Returns sheets calculate again. The Checks sheet shows when the balance closes to zero in O30 and the base-case DSCR equals the target in every tenor period.
Blanks: Debt sculpting. Free with any account. Compare with the worked model when you are done: download above.
The path around this model
Understand it, drill it, read the build, then apply it to a real company.
Build · Lab · ~12 min
DSCR Sculpting
Sculpt debt service to CFADS at a target DSCR, size the loan as its present value, split a payment into interest and principal, and explain why a level repayment profile fails a project lender.
Read · Guide · 12 min
Project Finance Modelling: Cash Flow Waterfalls, DSCR Sizing and the Debt Sculpt
Read · Guide · 11 min
Credit and Covenant Modelling: What a Lender Actually Tests
Read · Guide · 10 min
Scenario and Sensitivity Architecture: Building a Model That Can Be Stress-Tested
Apply · Skill
Model Audit
Find the errors in a financial model before someone senior does.
Vocabulary: DSCR (Debt Service Coverage Ratio), CFADS (Cash Flow Available for Debt Service), Debt Sculpting, LLCR (Loan Life Coverage Ratio), Debt Service Reserve Account (DSRA), Distribution Lock-Up, Covenant.
Questions about this model
Why is the sculpt not circular here?
Because the three things that make it circular are held apart. Debt service is base-case CFADS over the target DSCR, so it depends only on operations; the loan is the present value of that service at the loan rate; and interest is charged on opening balances, so principal in each period is service less interest and the balance closes to zero at maturity as an identity. A circular reference arises when the interest tax shield feeds CFADS; this model taxes the project before financing to avoid it.
What does the revenue sensitivity show?
What the lender underwrote. Set it below one and the debt stays where the base case sized it, coverage falls below the target, and when it falls below the lock-up threshold the waterfall traps cash instead of distributing it. That is the risk lenders are paid for and the reason the equity case is not the base case.
Why are periods half-years?
Because debt service, reserve funding and the lock-up test commonly operate semi-annually or quarterly in the finance documents, and coverage is tested period by period. An annual model reports an average, which can hide the periods where coverage is tightest.
What is the difference between LLCR and PLCR?
LLCR discounts the CFADS remaining inside the loan tenor at the loan rate and divides by the balance outstanding, so it asks whether the loan can be repaid from what the tenor has left. PLCR does the same over the whole project life, so it credits the tail after maturity. The gap between them is the value of the tail, which is why a longer tail supports more debt on the same DSCR.
What does it cost?
Nothing to preview: the whole workbook is on this page, and a free account works with it online, every formula included. Every starter workbook downloads with a free account. L3VLUP Plus ($4.99/month) keeps one worked model each billing month, yours for good, and L3VLUP Pro ($25/month) keeps every one.
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