Financial Modelling in the Power Sector

This brand new course will teach you:

• To illustrate best practice in model design and implementation
• To identify the major modelling issues in
         o The construction and financing of power generation plants
         o The operation of a power plant
         o The analysis of a standalone power plant project
• To develop and implement various worksheets of the model
• Best practice modelling techniques for use throughout the different stages of the model
• The use of functions and features within both excel and VBA for optimising the analysis of the power project used within the course

Scroll down for agenda or book onto this course.

Case Study

The case study that is used throughout the course is a power generation modelling file.  The excel file captures the development, financing and operations of a gas-fired power plant.  However, the case simply serves as a practical platform to illustrate a wider-range of specific implementations.  During the case, the modelling implications of wider range of power sector business contexts will be considered:

• Renewables as well as fossil fuel inputs
• Merchant power as well as IPPs
• Power transmission as well as generation
• Power distribution as well as generation

As outlined in the course details, the case will be developed in multiple practical sessions:

• The planning and design of the model, and the setup 
  o The identification of the model's objectives
  o The functionality that the model requires
  o How the model is designed to achieve its designated objectives - the model is a means-to-an-end, not an end in itself
  o laying out worksheets and creating flags
  o i.e. the implementation of the items listed in first session
• Planning and implementing the construction phase worksheet
• Planning and implementing the operational phase of the plant
• Implementing financing worksheets
• Planning and implementing the Analysis Worksheet, to process sensitivity, scenarios and break-even

Getting to Grips with Model Design

• Different analytical purposes - different methods of modelling implementation
  o Valuation and feasibility models
  o Finance structuring models
  o Issues with merchant power models
• Designing the Analysis Worksheet
• Determining the functionality of the model
• Structuring how inputs will be accessed and controlled
• The importance of the logic flow through the model
• The layout of the worksheets within the workbook
• The layout of the individual worksheets

Case Study

• Introduction to the case on which the practical course will be based
• Implementation of the design

Practical Session

• The creation and formatting of the worksheets
• Setting up timelines and flags

Construction Phase Dynamics

• Identifying (and explaining) the elements the model needs to capture
  o Cost overruns
  o Delays
  o Variation orders
  o Staged payments
  o Maintenance and refurbishment cycle
  o Liquidated damages
  o Performance bonds
  o Retentions
  o Multiple currencies
  o The financing structure
  o Multiple tranche drawdowns
  o Interest during construction
  o Standby financings

Practical Session

• Implementing the construction worksheet

Generation, Revenue and Operating Costs

• Identifying (and explaining) the elements the model needs to capture
  o Rated capacity and internal works power
  o Plant load factor
  o Planned outages
  o Unscheduled outages
  o The heat rate
  o Degradation
  o Thermal efficiency of fuel
  o Carbon content of fuel
  o Various other operating costs

Practical Session

• Implementing the model to Free Cash Flow stage

Financing Issues

• Identifying (and explaining) the elements the model needs to capture
  o Annuity style amortisation
  o Straightline amortisation
  o Sculpted amortisation
  o Cash sweeps
  o Loan life cover ratio
  o Annual debt service cover ratio
  o Cashflow lockups

Practical Session

• Implementing several different styles of financing worksheet

Analysis – Key Concepts

• Identifying (and explaining) the elements the model needs to capture
  o Sensitivity analysis - e.g. for heat rate, cost overrun, delays, outages etc
  o Breakeven analysis
  o Scenario analysis

Practical Session

• Implementing an Analysis Worksheet

Common Errors and Pitfalls in Models

• Valuation Models, the modelling of
  o Inflation
  o The risk free rate
  o The discount rate
  o The time horizons
  o The modelling of capex
  o The implementation of IRR calculations
  o The implementation of NPV calculations
• Volatility models, the modelling of
  o The different types of operating costs
  o Capital allowances
  o Deferred tax
  o Depreciation

Applying the Finishing Touches to the Model

• Dealing with circular references
• Inserting the Status Worksheet
• Inserting the Summary Worksheet
• Reconciling the various elements in the financial statements
• Setting up worksheet controls and error warnings
• A walk-through of the completed model

Practical Session

• Finishing touches to the model

Packed with all the brand new theories and also highly practical, this course will give you the ability to identify the problem areas and avoid the common pitfalls inherent in modelling in the power sector. This course will cover both the merchant power markets and the IPP markets. All power generation technologies will be touched upon including the renewable energies and you will leave with a thorough understanding as to how the modelling techniques learned can be relevant to all the different platforms.