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.
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 whatThe model behind every infrastructure and energy financing: the lender’s case for how much can be lent against a contract, the sponsor’s case for the equity return after the waterfall, and the document both sign. Built and audited by project finance teams at banks, infrastructure funds, developers and the model auditors they hire, at the frequency the debt actually operates, and read line by line at financial close.
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| 1 | Assumptions | ||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Blue cells only. $ millions; semi-annual periods, C1 to C4 construction and O1 to O40 operations. The project is invented. | ||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |
| 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 | ||||||||||||||||||||||||||||||||||||||||||||
| 8 | Debt tenor from commercial operation (half-years) | # | 30 | ||||||||||||||||||||||||||||||||||||||||||||
| 9 | Operating periods (half-years) | # | 40 | ||||||||||||||||||||||||||||||||||||||||||||
| 11 | Construction budget | ||||||||||||||||||||||||||||||||||||||||||||||
| 12 | Construction cost, excluding financing ($1.2m per MW) | $m | 240.0 | ||||||||||||||||||||||||||||||||||||||||||||
| 13 | Draw profile, share of cost per construction period | % | 15.0% | 30.0% | 35.0% | 20.0% | |||||||||||||||||||||||||||||||||||||||||
| 14 | Arrangement fee, % of debt | % | 2.0% | ||||||||||||||||||||||||||||||||||||||||||||
| 15 | Commitment fee on undrawn debt, % a year | % | 1.0% | ||||||||||||||||||||||||||||||||||||||||||||
| 17 | Senior debt | ||||||||||||||||||||||||||||||||||||||||||||||
| 18 | All-in interest rate, % a year | % | 6.0% | ||||||||||||||||||||||||||||||||||||||||||||
| 19 | Sculpting DSCR | x | 1.4x | ||||||||||||||||||||||||||||||||||||||||||||
| 20 | Distribution lock-up DSCR | x | 1.1x | ||||||||||||||||||||||||||||||||||||||||||||
| 21 | Debt service reserve, periods of forward service | # | 1 | ||||||||||||||||||||||||||||||||||||||||||||
| 23 | Revenue | ||||||||||||||||||||||||||||||||||||||||||||||
| 24 | Capacity (MW) | MW | 200.0 | ||||||||||||||||||||||||||||||||||||||||||||
| 25 | Hours in a half-year (thousands) | k hrs | 4.38 | ||||||||||||||||||||||||||||||||||||||||||||
| 26 | Net capacity factor | % | 35.0% | ||||||||||||||||||||||||||||||||||||||||||||
| 27 | Availability | % | 95.0% | ||||||||||||||||||||||||||||||||||||||||||||
| 28 | Contracted tariff ($m per GWh; 0.07 is $70/MWh) | $m/GWh | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||
| 29 | Indexation, % a year | % | 2.0% | ||||||||||||||||||||||||||||||||||||||||||||
| 30 | Revenue sensitivity (1.00 = base case; 0.90 = a 10% shortfall) | x | 1.00 | ||||||||||||||||||||||||||||||||||||||||||||
| 32 | Operating costs and tax | ||||||||||||||||||||||||||||||||||||||||||||||
| 33 | Fixed operations and maintenance per half-year, at O1 prices | $m | 4.0 | ||||||||||||||||||||||||||||||||||||||||||||
| 34 | Variable cost ($m per GWh) | $m/GWh | - | ||||||||||||||||||||||||||||||||||||||||||||
| 35 | Major maintenance, each event | $m | 20.0 | ||||||||||||||||||||||||||||||||||||||||||||
| 36 | Major maintenance calendar (1 in the period it falls) | # | 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 | |
| 37 | Maintenance reserve: periods to fund each event over | # | 10 | ||||||||||||||||||||||||||||||||||||||||||||
| 38 | Corporate tax rate | % | 25.0% |
Click any cell. The inspector names the line, the schedule it belongs to and what kind of cell it is; blue on cream is an input, black a calculation, green a value from another sheet. Scroll sideways to see every year.
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Project finance model: the workbook
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What the base case says
- Senior debt supported
- $216.9m
- Gearing
- 81.5%
- Minimum DSCR
- 1.4x
- LLCR at commercial operation
- 1.4x
- Project IRR
- 10.4%
- Equity IRR
- 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 contracted single-asset project on semi-annual periods: two years of construction funded by debt drawn pro rata and equity, then twenty years of operation under an indexed tariff, with the debt repaid over the first fifteen.
The senior debt is sculpted to a target DSCR and sized as the present value of the sculpted service, in closed form. Interest is charged on opening balances and the balance closes to zero at maturity as an identity, which the Checks sheet holds.
A full waterfall every period: debt service, the debt service reserve topped to forward service, the maintenance reserve funded against a calendar, and a lock-up test that traps cash when coverage falls below the threshold and releases it when it recovers.
A revenue sensitivity on the Assumptions sheet shows what the lender underwrote: the debt is sized on the base case and coverage is tested on the downside.
Seats: Investment banking, Private equity.
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 the target DSCR is really pricing.
- What sculpting does to the repayment profile, and why it is closed-form here and circular in most models.
- Where the circularity practitioners fight comes from (the tax shield feeding CFADS) and what breaking 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, because debt service, reserve accounts and lock-up tests operate at that frequency and an annual model averages away the periods where coverage is tightest. Annual rates are halved; indexation compounds at the annual rate.
- Tax is charged on EBITDA less straight-line depreciation of the construction cost, before interest. Deducting interest, or depreciating capitalised interest, would make CFADS depend on the debt that CFADS sizes, which is the circularity practitioners resolve by iteration; taxing before financing breaks it and understates the shield, which is conservative for the lender. A tax-loss carry-forward is not modelled.
- Debt is drawn pro rata to the construction draw profile; interest during construction, fees and the initial debt service reserve are funded by equity, so the loan is exactly the amount the sculpt supports.
- CFADS is EBITDA less tax. Major maintenance is paid from the maintenance reserve, which is funded below debt service; any shortfall in the reserve is paid from cash before equity sees it.
- The debt service reserve holds one period of forward service and is released as service falls away; the maintenance reserve’s residual is released at the end of the concession. There is no terminal value: a concession asset reverts.
- LLCR discounts the remaining CFADS inside the tenor at the loan rate and divides by the opening balance; PLCR does the same over the whole project life.
Build it yourself
The starter workbook
The Debt sheet has been cleared below its flags: the sculpted service, the loan it supports, interest, principal and the closing balance. Build the sculpt so that the Construction draws, the Waterfall and the Returns come back to life. The Checks sheet tells you when the balance closes to zero at maturity and coverage sits on the target in every 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.
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. The loop practitioners fight arises when the interest shield feeds CFADS, and this model taxes the project before financing to keep it out.
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 operate semi-annually or quarterly in the documents, and coverage is a per-period test. An annual model reports an average that no lender will accept, because the covenant is tested on the individual periods.
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 inspect: the whole workbook is on this page. A free account chooses one worked model to keep, and downloads every starter workbook. L3VLUP Pro ($25/month) downloads the whole library and opens every model’s formulas in the inspector.