Sources and Uses Models for Project Finance

Sources and Uses Models for Project Finance

A project-finance sources-and-uses schedule is the bridge between the construction budget and the capital structure. Every dollar of EPC cost, development cost, financing fee, reserve, contingency and interest during construction should reconcile to an identified funding source.

The technical framework referenced in Sources and Uses Models for Project Finance includes IFC Project Finance in Developing Countries and World Bank Project Finance Key Concepts.

How Project Finance Sources And Uses Model Works

The lender will focus on when each use is paid, which source funds it, whether equity is contributed first or pro rata, and what happens when the project exceeds budget. The sources-and-uses schedule should therefore tie directly to drawdowns, equity commitments and completion support.

For project finance sources and uses model, the model is part of the financing documentation rather than a presentation tool. Every major ratio, drawdown, reserve, repayment and distribution assumption should be capable of reconciliation to the term sheet and eventually to the finance documents.

The model supporting Sources and Uses Models for Project Finance should also show how a delay or downside changes lender protections. A covenant is only useful if the spreadsheet can calculate it consistently at the required testing dates.

What to Test Before Execution in Sources and Uses Models for Project Finance

• 1. EPC cost.
• 2. development cost.
• 3. financing fees.
• 4. interest during construction.
• 5. reserve funding.
• 6. contingency.
• 7. equity and debt timing.

Documents to Prepare for Sources and Uses Models for Project Finance

For project finance sources and uses model, the first document set should be sufficient to let a banker, adviser or credit committee reproduce the central financing assumptions rather than rely on verbal explanations.

• project budget.
• EPC payment schedule.
• financing fee schedule.
• equity commitment.
• debt draw schedule.
• reserve requirements.
• cost-overrun support.

How the Model Supports the Credit Agreement for Sources and Uses Models for Project Finance

For Sources and Uses Models for Project Finance, each covenant and funding condition should have a visible model input, calculation or test. The model should produce the same economic answer a lender expects from the loan-document definitions, including cash waterfalls, reserve movements and distribution restrictions.

Common Failure Modes in Sources and Uses Models for Project Finance

• Using hard-coded outputs in Sources and Uses Models for Project Finance instead of formula-driven calculations that can be audited.
• Calculating covenant ratios for project finance sources and uses model differently from the financing-document definitions.
• Omitting liquidity consequences when a condition precedent delays a draw in Sources and Uses Models for Project Finance.
• Running sensitivities for project finance sources and uses model without showing the effect on debt service, reserves and distributions.

FAQ About Project Finance Sources And Uses Model — Sources and Uses Models for Project Finance

Who uses project finance sources and uses model after financial close?

The borrower, agent, lenders and advisers may all rely on outputs from Sources and Uses Models for Project Finance for covenant testing, drawdowns, distributions, reserve calculations and amendments.

Should project finance sources and uses model include downside cases?

Yes. Sources and Uses Models for Project Finance should make lender sensitivities reproducible and show the effect on debt service, reserves, liquidity and covenant headroom.

Why do conditions precedent matter in project finance sources and uses model?

Conditions precedent determine whether scheduled financing is actually available. Sources and Uses Models for Project Finance should therefore reflect the liquidity consequence of delayed or failed funding conditions.