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Financial Analysis Financial Analysis

Financial Analysis - PowerPoint Presentation

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Uploaded On 2018-01-06

Financial Analysis - PPT Presentation

Project Financing and Loans Project Finance is long term financing of infrastructure and industrial projects based on projected cash flows of the project rather than balance sheet of the project sponsor ID: 620612

debt project rate financial project debt financial rate cost net service return model cash quality internal performance coverage degradation

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Slide1

Financial AnalysisSlide2
Slide3

Project Financing and Loans

Project Finance is long term financing of infrastructure and industrial projects based on projected cash flows of the project rather than balance sheet of the project sponsor.

The loans are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling, the process by which a firm constructs a financial representation of some, or all, aspects of the firm or given security.

The model is usually characterized by performing calculations, and makes recommendations based on that information. The model may also summarize particular events for the end user and provide direction regarding possible actions or alternatives.Slide4

Financial Indicators Used

in a Model

1. Debt Service Coverage ratio

2. Internal Rate of Return Slide5

Debt Service Coverage ratio

In corporate finance, it is the amount of cash flow available to meet annual interest and principal payments on debt, including sinking fund payments. In general, it is calculated by:

DSCR

=

Net Operating Income

Total Debt ServiceSlide6

Internal Rate of Return (IRR)

The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project.Slide7

Financial Model

Financial models essentially serve five purposes:

to demonstrate the size of the market opportunity

to explain the business model

to show the path to profitability

to quantify the investment requirement

to facilitate valuation of the business Slide8

Financial Analysis Outcome

Project investment is believed to be acceptable only if the internal rate of return (IRR) is more than the established minimum rate of return on capital cost.

This is normally in contrast with the net present value (NPV) of the project, which is a value indicator for the investment.

Average Debt Service Coverage Ratio (Average DSCR) represents the debt serviceability of the project over the life of debt period.

Higher values of this represent higher capacity to repay service debt; whereas Minimum DSCR represents the minimum debt serviceability of the project over the life of debt period.Slide9

Primary Aim of Project Developers

Securing low interest bank loan with no premium adders

Failures & Losses: 3 risk premium adders on the loan interestSlide10

Levelized cost of Energy (LCOE)

Material cost (Rs): Materials and process cost per unit area.

Device quality (kW): Efficiency of the materials.

Packaging/ Design Quality: Safety failures over time.

Manufacturing quality: Reliability failure over time (under-performance, >1%/year degradation).

Material quality: Durability/ Degradation loss over time (better-performance, <1%/year degradation).

LCOE = Net Cost/ kWh

Safety, Reliability & Durability

Performance

Net Cost/ kW

hSlide11

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