Project finance and infrastructure models
Project finance lends against one asset’s cash flows rather than against a company, so the model is the deal: the construction budget and its funding, the revenue the contract allows, the cash available for debt service, debt sized and repaid to keep coverage above what the lenders require, the reserves that protect them, and what is left for equity. Infrastructure comes in two broad kinds. Revenue-based projects such as a wind farm carry volume risk, so their debt is sculpted to the cash flow and protected by reserves and a lock-up. Availability-based PPPs are paid for keeping a hospital, school or road available, so their risk is performance, their debt is often an annuity, and the model’s job is to price the bid.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: project finance.Updated 2 October 2026
The models
Advanced · ~60 min
Project finance model
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.
Inspect the workbookAdvanced · ~50 min
PPP availability payment model
Build an availability-based unitary charge with indexation and deductions, repay the debt as an annuity, smooth lifecycle costs through a reserve, solve the charge that delivers the target equity IRR, and say whether the lenders’ cover and the authority’s value-for-money test pass.
Inspect the workbookHow to work through it
Start with the DSCR sculpting lab, which sizes the same loan by hand two ways, sculpted and level. Then open the wind farm model to see sculpting, the debt service reserve and the lock-up working over twenty years. The PPP model takes the other half of infrastructure: switch its performance case and watch deductions pass the contractor’s cap and reach equity, then read the value-for-money test the authority runs on the same numbers. Each model has a starter workbook that leaves one schedule for you to build.
The mechanics they share
Each schedule is one reusable calculation, explained on its own page with the rows it occupies in every model that uses it.
Project finance schedules
Construction funding
Draws, interest during construction, fees, equity
Project finance schedules
CFADS
Cash flow available for debt service
Project finance schedules
Debt sculpting
Service shaped to CFADS at a target DSCR
Project finance schedules
Coverage ratios
DSCR, LLCR and PLCR
Project finance schedules
Reserve accounts
Debt service reserve and maintenance reserve
Project finance schedules
Distribution waterfall
Debt service, reserves, lock-up, equity
Project finance schedules
Project and equity returns
Gearing, project IRR, equity IRR and multiple
Project finance schedules
Unitary charge and deductions
The availability payment, its indexation and the deductions
Project finance schedules
Annuity repayment
Level debt service: interest falls, principal rises
Project finance schedules
Pricing a PPP bid
The unitary charge that gives the target equity IRR
Project finance schedules
Value for money
PPP payments against the public sector comparator
Practise first
DSCR Sculpting · 12 min
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.
IRR by Eye · 3 min
Say the IRR for any multiple and hold before the interviewer finishes the sentence, and the multiple for any IRR.
Where this work is done
Long-dated, cash-yielding assets. Different maths, much longer horizons.
Price and place bonds and loans. Closest thing in banking to a markets seat with banking hours.
Lend to the same companies PE buys. Downside-focused: you get paid back or you do not.
Read
- Project Finance Modelling: Cash Flow Waterfalls, DSCR Sizing and the Debt Sculpt · How project finance models differ from corporate ones: the non-recourse SPV, construction and operations phases, the cash waterfall, and sculpting to a DSCR.
- Credit and Covenant Modelling: What a Lender Actually Tests · Modelling from the lender side: sizing debt against leverage and coverage tests, building the covenant schedule, and the downside case that sets headroom.
- Scenario and Sensitivity Architecture: Building a Model That Can Be Stress-Tested · How to build scenario switching into a model properly: the INDEX and CHOOSE toggle, a scenario input block, and why base case minus ten percent says nothing.
- Financial Modelling Best Practices: The Conventions That Make a Model Auditable · The formatting, structure and formula conventions that separate a bank-grade model from a spreadsheet nobody else can open, and the anti-patterns to avoid.
The vocabulary
Questions
What is the difference between project finance and corporate finance?
Corporate lending looks at a company’s whole balance sheet and lends against its earnings, usually as a multiple of EBITDA. Project finance lends to a company that owns one asset and nothing else, without recourse to its sponsors, so the only security is that asset’s cash flow. The debt is sized on coverage of debt service in every period, not on a multiple, and the contracts that fix revenue and cost are what the lenders underwrite.
What is the difference between an availability PPP and a revenue project?
A revenue project, such as a wind farm or a toll road, earns from what it sells or how much it is used, so it carries volume or price risk and its debt is sculpted to the cash it expects. An availability PPP is paid by a public authority for the asset being available and performing, whether or not it is used, so its risks are construction and performance and its debt is often a level annuity.
Which numbers do project finance interviews test?
CFADS and the DSCR, how sculpting sizes debt and why it is not circular when written well, LLCR against DSCR, what a debt service reserve and a lock-up do to equity, and for PPP roles the unitary charge, deductions and pass-down, and how a bid is priced to a target equity IRR. The DSCR lab drills the sizing, and each model page lists the mistakes a reviewer looks for.