Advanced Financial Modeling for Renewable Energy - ( US )

Course Objective

In an online environment, you will build a financial model suitable for advanced analysis of tax equity flip structures for wind and solar projects.This course will provide step-by-step instructions on how to size tax equity investment, back-leverage loan, and how to estimate the sponsor's equity return.By the end of this course, you will be able to build complex, real-life project finance models to analyze tax equity flip structures.

What This Course is About?

Course Objective

What This Course is About?

Project finance models are used to assess the risk-reward of lending to and investing in an infrastructure project. The project's debt capacity, valuation and financial feasibility depend on expected future cash flows generated by the project and a financial model is built to analyze this. In the tax equity flip structures, there is additional complexity related to the IRS tax rules that have to be reflected in the financial model. On top of that, we have to be able to correctly size the back-leverage debt in the downside scenario, taking into account and reflecting the tax equity's seniority in the financial model.In this course, we will model a complex tax equity flip structure for wind and solar projects in excel.

You will learn about:

How renewable projects are financed;
How to create best practice macro’s and Excel VBA codes to break circularities;
How to size debt based on multiple covenants for wind and solar projects;
how to create best practice macro’s and VBA codes to break circularities
How to model the allocations of tax benefits between tax equity and sponsor, including modeling the capital accounts, DRO, Qualifies Income Offset provisions, and outside basis;
How to size tax equity investment in a yield-based flip;
Optimize the model to achieve the requirements of lender, sponsor and tax equity investor;
Gain insights into the financial model development process, step-by-step – for a renewable energy model;

This is the same comprehensive financial training used to prepare analysts and managers at top financial institutions and infrastructure funds.

How Does It Work?

The course length is over 14 hours.First, we will review how renewable energy projects get financed, so we understand all the essential components of project finance transaction.Then, we will go over the case study and review modeling methods to improve our productivity in excel. We will then dive into building our advanced financial model. We will model the tax benefits allocation and cash distributions before adjustments between partners, which will give us the correct cash flow to the parties.Next, we will size a preliminary back-leverage loan and model the construction funding. Once we have the construction funding, we will work on the adjustments that have to be made to the tax benefits allocated to the tax equity partner. We will implement the IRS requirements in the financial model (capital accounts, DRO, Qualified Income Offset, outside basis). This will allow us to size the tax equity's investment correctly.We will then finalize the calculations of the cash flow available for the distributions to the sponsor. We will have to incorporate the DSCR lock-up and default covenants, and debt service reserve account into the calculations of the sponsor's cash flow to get to the sponsor's IRR.Next, we will work on scenario analysis to find a tax equity transaction structure that could enhance the value of the project for the sponsor and the tax equity partner.And, finally, we will work on modeling the partners' equity return when the sponsor exercises his buyout option. For those, who are interested in the accounting side of the tax equity transaction, we will also include the discussion and modeling of the HLBV accounting.

Is This Course For You?

Yes, if you need to build, review or analyse project finance models for wind and solar projects in the United States.Typical students include analysts, managers, senior managers, associate directors, financial advisors, financiers and CFOs from project companies, investment banks, private equity and infrastructure funds.

Course Prerequisites

Note that this is an advanced financial modeling course, and it is expected that you know how to model the project finance models for renewable energy projects. Most of our students take our other course "Project Finance Modeling for Renewable Energy" before taking the advanced course.

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What's inside

Learning objectives

How to model the allocations of tax benefits between tax equity and sponsor, including the capital accounts, dro, qualifies income offset, and outside basis;
How to size tax equity investment in a yield-based flip;
Optimize the model to achieve the requirements of lender, sponsor and tax equity investor;
How to size debt based on multiple covenants for wind and solar projects;
How to create best practice macro’s and excel vba codes to break circularities;

How renewable projects are financed;
Gain insights into the financial model development process, step-by-step – for a renewable energy model;
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How to model the allocations of tax benefits between tax equity and sponsor, including the capital accounts, dro, qualifies income offset, and outside basis;
How to size tax equity investment in a yield-based flip;
Optimize the model to achieve the requirements of lender, sponsor and tax equity investor;
How to size debt based on multiple covenants for wind and solar projects;
How to create best practice macro’s and excel vba codes to break circularities;
How renewable projects are financed;
Gain insights into the financial model development process, step-by-step – for a renewable energy model;
Show more
Show less

Syllabus

Introduction to the course

Introduction to the Course

Case Study Review

Welcome to the Excel refresher lessons. In this section, we will briefly go over the modeling methods and Excel formulas that we will be using often in this course. We strongly recommend that you revi

Excel Refresher Lessons

Calculation in Blocks

Paste Forward Link

Daisy Chains

Placeholders

Excel Shortcut Keys

Understanding Anchoring

Understanding Date Functions

Understanding IF Functions

Understanding LOOK UP Functions

Understanding MIN MAX Functions

Understanding SUMIF Function

Financing of the Wind and Solar Projects

Debt sizing

Project Finance Basics

The Need for SPV in Project Finance Structures

SPV in the United States

Tax Efficiency

Modeling Tax Credits

Construction Funding

Initial Model Review

PTC before Inflation Reduction Act

PTC after Inflation Reduction Act

Modeling PTC

Understanding ITC before Inflation Reduction Act

ITC after Inflation Reduction Act

Modeling ITC

Tax Equity Flip and Modeling Allocations

Special Allocation in US Partnerships

Understanding Tax Equity Flip Structure

Allocation of Tax and Cash Benefits in Tax Equity Flip Structure

Modeling Project's Tax and Cash Benefits

Modeling the Flip - Introduction

Modeling the Flip - Lesson

Modeling Tax and Cash Benefits Allocations to the Tax Equity Partner - Intro

Modeling Tax and Cash Benefits Allocations to the Tax Equity Partner - Lesson

Modeling Tax and Cash Benefits Allocations to the Sponsor

Modeling Benefits Allocations Before Adjustments - Intro

Modeling Benefits Allocations Before Adjustments - Lesson

Sizing Back Leverage Loan

Modeling Loan Flags

Modeling Debt Service

Sizing Construction Loan

Modeling Construction Costs

Modeling Sources and Uses of Funds

Modeling Financing Fees

Linking Financing Fees to Project Costs

Modeling PP&E & Paid-In Capital at SPV

Modeling Back-Leverage Loan's Repayment and Interest Payment

Capital Accounts

Economic Effect in Special Allocations

Modeling Partners' Capital Account

Modeling Capital Account for the Tax Equity Partner

Modeling the Sponsor's Capital Account

Deficit Restoration Obligation & Qualified Income Offset

Understanding DRO & QIO

Numerical Example of the DRO & QIO

DRO & QIO Quiz

Modeling the Tax Equity's DRO

Modeling the Tax Equity Partner's Reallocations

Modeling the Sponsor's DRO

Modeling the Sponsor's Reallocations

Modeling Income Reallocation to the Tax Equity Partner's

Partners' Taxable Income After Reallocations

Outside Basis

Understanding Outside Basis

Numerical Example of Outside Basis

Modeling Tax Equity Partner's Outside Basis

Modeling Tax Equity Partner's Suspended Losses

Modeling 731a Gain for Tax Equity Partner

Modeling 731a Gain for Tax Equity Partner - Continued

Modeling Sponsor's Suspended Losses

Modeling 731a Gain for Sponsor

Modeling 754 Step-Up Depreciation

Modeling 754 Step-Up Depreciation - Continued

Tax Losses and Tax Credits After Adjustments

Modeling Adjusted Income (Loss) for Partners

Modeling Tax Equity Partner's Adjusted Tax Credits

Modeling Sponsor's Adjusted Tax Credits

Tax Equity Investment Sizing

Modeling Tax Equity IRR

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Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Advanced Financial Modeling for Renewable Energy - ( US ) with these activities:

Review Project Finance Basics

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Solidify your understanding of project finance principles to better grasp the advanced concepts in this course.

Browse courses on Project Finance

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Review the fundamental principles of project finance.
Study key project finance terminology.
Practice basic project finance calculations.

Review: Project Finance for Renewable Energy

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Gain a broader understanding of project finance principles and their application to renewable energy projects.

View Alter Ego on Amazon

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Obtain a copy of the book.
Read the chapters relevant to wind and solar project finance.
Take notes on key concepts and examples.

Excel VBA Macro Practice

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Sharpen your Excel VBA skills to efficiently handle circularity issues in financial models.

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Find online resources for Excel VBA macros.
Practice writing macros to break circular references.
Test your macros on sample financial models.

Four other activities

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Document Tax Equity Concepts

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Deepen your understanding of tax equity by creating clear and concise documentation of key concepts.

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Research tax equity concepts like capital accounts and DRO.
Write explanations of each concept in your own words.
Create diagrams to illustrate the concepts.

Build a Simplified Tax Equity Model

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Apply your knowledge by building a simplified financial model that incorporates tax equity flip structures.

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Outline the structure of the model.
Implement the tax equity flip logic.
Test the model with different scenarios.

Review: Renewable Energy Finance

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Expand your knowledge of renewable energy finance and gain insights into industry best practices.

View Alter Ego on Amazon

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Obtain a copy of the book.
Read the chapters relevant to financial modeling and tax equity.
Compare the book's approach to the course's methods.

Answer Questions in Online Forums

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Reinforce your understanding by helping other students with their questions and challenges.

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Find online forums related to financial modeling.
Monitor the forums for questions about tax equity.
Provide helpful and accurate answers.

Career center

Learners who complete Advanced Financial Modeling for Renewable Energy - ( US ) will develop knowledge and skills that may be useful to these careers:

Reading list

We've selected one books that we think will supplement your learning. Use these to develop background knowledge, enrich your coursework, and gain a deeper understanding of the topics covered in Advanced Financial Modeling for Renewable Energy - ( US ).

Alter Ego

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Provides a comprehensive overview of project finance in the renewable energy sector. It covers key aspects such as risk assessment, financial modeling, and deal structuring. It is particularly useful for understanding the nuances of financing wind and solar projects, which are the focus of this course. This book serves as a valuable reference for both beginners and experienced professionals in the field.

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