First of Kind, Financing Advanced Bioenergy Pt 3: Dealing with Deal Breakers
by Tim Sklar (Biofuels Digest) …In Part 3 titled “Quantifying Risk Using Robust Financial Models”, insights are presented as to the how financial modeling can be used in quantifying risk and identifying “Deal Breakers”. In the sub-section titled “The Anatomy of a Model”, a detailed description is given of the computational framework used in the financial model. Another sub-section describes how to use this model.
Also presented are mathematical formula used in the model for calculating measures of financial viability. Finally, a case study is presented for typical but hypothetical bio-refinery project. The data used is in tabular form, showing input assumptions used for optimistic, most likely and pessimistic scenarios. Also presented in tabular form is a set of key measures of financial viability that were actually calculated by the model for each of the three scenarios.
Major findings are then presented and the “known-unknowns” that could become “Deal Breakers” are identified. The Deal Breakers that are highlighted are those that will require specific risk mitigation efforts. Part 3 does not include a sub-section on how this can be done, as it is varies from project to project and is beyond the scope of this article.
Quantifying Risks Using Robust Financial Models …
The Anatomy of a Model For Evaluating The Financial Viability of Advanced Bio-refinery Projects …
The Anatomical Description Using The Model …
- Creating Input-Basic Input Variables Used …
- Validation of Information & Assumption …
- Developing Optimistic, Most Likely and Pessimistic Scenarios …
- Running the Model Cockpit …
- Basic Calculations Performed …
Revenue, Direct Cost & Gross Margin Projections …
Sources and Uses of Funds and Loan Amortization Schedules …
Fixed Operating Cost, D&A and Loan Amortization Schedules …
Projections of Earnings and Cash Flows …
Projected Balance Sheets …
Evaluating Impact on Project Financial Viability …
Key Factors Requiring Further Analysis of Risk Mitigation Alternatives… READ MORE Part 1 Part 2
Related posts:
- First of Kind: Financing Advanced Biorefineries, Part II
- “First of Kind” – the Financing of Advanced Bio-Refineries, Part I
- Biofuels Digest Publishes 5-part Series on the New Rules for Financing Bioenergy
- Waiting for Godot: The Financing of Commercial Scale Advanced Biofuels
- The Name is Bond, part II: Financiers Find Biofuels Financing Options in Bond Market
