project finance interview case study

30 Project Financial Analyst Interview Questions and Answers

Common Project Financial Analyst interview questions, how to answer them, and example answers from a certified career coach.

In the world of project management, a Project Financial Analyst plays an integral role in ensuring that projects stay within budget and generate desired profits. Armed with solid financial acumen and strong analytical skills, you’re now ready to ace that all-important interview for this pivotal position.

However, interviews can be daunting, particularly when they involve technical jargon and complex concepts. Fear not, we’ve got you covered. This article will delve into some of the most frequently asked questions during a Project Financial Analyst interview, providing useful insights and suggested responses to help you make your best impression. Let’s demystify the process together – one question at a time.

1. Can you describe a project where you had to analyze financial data and make recommendations?

As a Project Financial Analyst, you’re expected to not only dissect complex financial data but also use this information to make recommendations that will positively impact the company’s bottom line. Interviewers, therefore, ask this question to understand your skills in financial analysis, strategic thinking, and decision-making. They want to hear about your real-world experience turning raw data into strategic suggestions.

Example: “In one project, I was tasked with analyzing the financial viability of a potential new product line.

I started by gathering and scrutinizing data on costs, projected revenues, market trends, and competitor analysis. Using advanced Excel functions and financial modeling techniques, I identified key metrics and performed sensitivity analysis.

The insights from my analysis showed that while the product had strong revenue potential, it also carried significant risk due to high upfront costs and aggressive competition in the market.

Based on these findings, I recommended pursuing a more differentiated strategy to mitigate competitive threats and negotiating better terms with suppliers to reduce initial costs. This approach helped balance potential returns with associated risks, leading to an informed strategic decision.”

2. How have you ensured accuracy when preparing financial reports in the past?

Accuracy and attention to detail are critical when dealing with financial data. A minor error can potentially result in significant losses or decision-making based on inaccurate information. Therefore, interviewers ask this question to assess your ability to maintain precision and your methods for ensuring that the financial reports you prepare are free from mistakes.

Example: “To ensure accuracy in financial reporting, I always adhere to established accounting standards and principles. This includes double-checking all data inputs for errors and inconsistencies.

I also use automated software tools for calculations and reconciliations to minimize manual errors. Regular internal audits are another method I employ to maintain accuracy.

Lastly, continuous learning is key. Keeping up-to-date with changes in financial regulations helps me avoid inaccuracies due to outdated practices.”

3. Can you provide an example of a time you used financial analysis to influence a project’s direction?

Your ability to leverage financial analysis to guide project direction is a key skill that interviewers want to evaluate. Financial analysis is not just about crunching numbers, but also about interpreting these numbers and deriving actionable insights. This question is a way for the interviewer to assess your analytical skills, your decision-making ability, and your capacity to effectively communicate your findings to influence the course of a project.

Example: “In one project, we were developing a new product line. Initial cost projections exceeded our budget and threatened the feasibility of the project. I conducted a thorough financial analysis, identifying areas where costs could be reduced without compromising quality.

I presented my findings to the team, highlighting potential savings from alternative suppliers and production methods. This influenced the project’s direction as it shifted focus towards cost-efficiency. The project eventually launched under budget, validating the importance of detailed financial analysis in decision-making processes.”

4. What methods do you use to assess project profitability?

Employers want to see that you have a systematic approach to analyzing the financial aspects of a project. They want to know that you’re capable of making critical decisions based on your financial findings, which can directly impact the project’s profitability and the company’s bottom line. The methods you use to assess project profitability can reveal your financial acumen, analytical skills, and understanding of the business.

Example: “To assess project profitability, I primarily use two methods: Net Present Value (NPV) and Return on Investment (ROI).

The NPV method helps in understanding the profitability of a project by comparing the present value of cash inflows with the present value of cash outflows. If the NPV is positive, it indicates that the project’s estimated profits exceed its costs, making it a viable option.

On the other hand, ROI measures the gain or loss generated on an investment relative to the amount of money invested. It provides a percentage that can easily be compared across different projects for decision-making purposes.

Both these methods provide valuable insights into the potential profitability of a project and help make informed decisions.”

5. What experience do you have with project budgeting and forecasting?

Employers want to ensure that you have the necessary experience and skills to anticipate costs, manage resources, and keep the project within the set budget. The ability to accurately forecast and budget is key to the financial health of a project, making it a critical skill for a Project Financial Analyst. Hence, this question is posed to understand your proficiency in these areas.

Example: “I have a strong background in project budgeting and forecasting, having worked on numerous projects in my career. I’ve developed financial models to predict project costs, analyzed variances between actuals and forecasts, and made recommendations for adjustments.

In one instance, I was able to identify potential cost overruns early in the project lifecycle, which allowed us to take corrective action and keep the project within budget. This not only saved money but also ensured the project was delivered on time.

My experience with various financial software tools has further enhanced my ability to provide accurate forecasts and manage budgets effectively.”

6. How do you handle discrepancies or inconsistencies in financial data?

The heart of your role as a Project Financial Analyst is to ensure financial accuracy and integrity. When inconsistencies pop up, as they inevitably do, hiring managers want to know that you have the analytical skills to identify the issue and the problem-solving ability to correct it. This question also gives insight into your attention to detail and your commitment to maintaining financial accuracy.

Example: “When I identify discrepancies in financial data, my initial step is to verify the information from its source. It could be a simple clerical error or a misunderstanding of the data input process.

If the inconsistency persists after verification, I would then perform a more detailed analysis using statistical techniques and financial models. This helps me understand the nature and cause of the discrepancy.

In case it’s an issue beyond my expertise, I collaborate with other departments like IT or Audit for further investigation. Transparency and communication are key in these situations.

Ultimately, any significant findings will be documented and reported to management, along with suggestions for preventive measures to avoid such inconsistencies in future.”

7. How would you handle a situation where a project is running over budget?

Money is the lifeblood of any project, and as a project financial analyst, your role is to ensure that every penny is accounted for and used efficiently. Therefore, the interviewer wants to understand your problem-solving skills in situations where the budget is not being adhered to. They want to know how you’ll react, what steps you’ll take to identify the problem, and how you’ll work to rectify the situation and prevent it from happening again.

Example: “In such a situation, I would first conduct a thorough analysis of the project’s financials to identify where and why we are exceeding budget. This could involve reviewing labor costs, material expenses, or unexpected contingencies.

Once identified, I’d prioritize these overruns based on their impact and feasibility for reduction. For instance, if labor costs are high due to overtime, perhaps we can redistribute tasks or hire temporary help.

Then, I would communicate with stakeholders about the issue and propose solutions. Transparency is key in managing expectations and maintaining trust.

Lastly, it’s important to learn from this experience by updating our forecasting models and risk management strategies to avoid similar issues in future projects.”

8. What financial software applications are you most proficient in using?

Financial software applications are integral to the work of a Project Financial Analyst. They help with budgeting, forecasting, performance tracking, and reporting. Therefore, your proficiency in these tools is a major indicator of your ability to handle the financial management tasks associated with the role. This question is a way for hiring managers to gauge your familiarity with these tools and your overall technical competence.

Example: “I am proficient in several financial software applications. My expertise lies primarily with Oracle and SAP, both of which I’ve used extensively for project budgeting, cost tracking, and financial reporting.

I’m also skilled in using Microsoft Excel for data analysis and visualization. This includes advanced functions like pivot tables, VLOOKUPs, and macros.

In addition to these, I have experience with QuickBooks for managing accounts payable and receivable, payroll, and other general accounting tasks.

Overall, my proficiency in these tools enables me to provide accurate financial tracking and insightful analyses.”

9. What strategies do you use to communicate complex financial information to non-financial team members?

In the midst of a project’s hustle and bustle, your ability to distill complex financial information into clear, actionable insights is crucial. Project teams are typically composed of individuals with diverse areas of expertise, all working towards a common goal. However, not everyone on the team will have a financial background. This question is designed to assess your communication skills and your ability to translate intricate financial data into a language that everyone on the team can understand, thereby facilitating informed decision-making.

Example: “I use simple language and analogies to explain complex financial concepts. It’s important to understand the audience’s knowledge level and tailor my communication accordingly. I also utilize visual aids like charts, graphs, or infographics that can help make data more digestible.

Moreover, I focus on key points and their relevance to the project at hand. By linking financial information with practical implications, it becomes easier for non-financial team members to grasp its importance.

Regular training sessions are another strategy I employ. These provide a platform for individuals to ask questions and gain a better understanding of financial aspects related to their work.”

10. How do you balance the financial needs of a project with the operational needs?

Striking a balance between financial and operational needs is a critical skill for a Project Financial Analyst. It demands a deep understanding of the importance of both variables in project success. Interviewers want to see that you are adept at making informed decisions that take into consideration the cost-effectiveness of a project while ensuring it meets its operational objectives. This question helps them gauge your ability to think analytically, make strategic decisions, and manage resources effectively.

Example: “Balancing the financial and operational needs of a project requires strategic planning and constant monitoring. It is essential to start with a robust budget that aligns with the project’s objectives. Regular tracking of expenses against this budget can highlight any potential issues early.

To manage operational needs, it’s crucial to understand the project’s scope thoroughly. This includes knowing the resources required at each stage and ensuring their availability without compromising on quality or timelines.

The key lies in finding an optimal balance between cost efficiency and operational effectiveness. This often involves making informed trade-offs based on real-time data and prioritizing tasks that add maximum value to the project. Effective communication with all stakeholders also plays a vital role in maintaining this balance.”

11. Can you describe a time when your financial analysis led to significant cost savings in a project?

The heart of a Project Financial Analyst’s job is to ensure that the financial aspects of a project are in line and optimized. The question is designed to assess your practical understanding of cost management, and your ability to apply analytical skills to generate cost savings. Essentially, the interviewer wants to gauge if you can think critically, analyze data, and apply your knowledge to positively impact the bottom line of the project.

Example: “In one instance, I was tasked with analyzing the financial viability of a major project that had been experiencing budget overruns. My analysis identified several areas where costs were significantly higher than industry benchmarks.

One key finding was an inflated procurement cost due to a lack of competitive bidding. By initiating a more transparent and competitive bidding process, we managed to reduce these costs by 20%.

Another area was operational inefficiencies leading to high overheads. Implementing lean management techniques resulted in a 15% reduction in overhead costs.

Overall, my financial analysis led to savings of nearly $1 million on this project, highlighting the value of detailed financial scrutiny in project management.”

12. What measures do you take to ensure compliance with financial regulations and standards?

Mastering the intricacies of financial regulations and standards is a must-have skill in a Project Financial Analyst’s toolkit. Employers need assurance that you’re not just familiar with these regulations, but you also have strategies in place to ensure compliance. Your ability to navigate these rules helps the company avoid potential penalties and maintain a positive reputation in the market.

Example: “I ensure compliance with financial regulations and standards by staying updated on the latest changes in laws, policies, and procedures. I regularly attend training sessions and workshops to enhance my knowledge.

In terms of practical application, I use robust financial management systems that have built-in checks and balances. These systems help maintain accuracy and prevent errors or fraud.

Moreover, I conduct regular audits and reviews of financial data. This not only ensures compliance but also helps identify areas for improvement.

Finally, transparency is key. I believe in clear communication with all stakeholders about our financial practices and any regulatory requirements we need to meet.”

13. How have you used financial modeling in your previous roles?

In the role of a Project Financial Analyst, one of your key responsibilities will be to create and interpret financial models. These models are used to predict a project’s financial performance and guide strategic decision-making. By asking this question, hiring managers are trying to gauge your experience and proficiency in creating, using, and analyzing these models, as well as your ability to apply them to real-world situations.

Example: “In the realm of project finance, I have utilized financial modeling to forecast future performance and make strategic decisions. This involved developing comprehensive models that incorporated various scenarios and sensitivity analyses.

For instance, in a renewable energy project, I created a model incorporating capital expenditure, operational costs, revenue projections, and financing structure. It helped us understand the potential return on investment under different scenarios which was crucial for decision-making.

Moreover, I’ve used these models for risk assessment by identifying key drivers that could impact the project’s profitability. This enabled us to develop mitigation strategies proactively.

Overall, financial modeling has been an essential tool in my toolkit for effective project financial management.”

14. Can you explain a situation where you had to make a tough financial decision that was unpopular but necessary for a project?

As a financial analyst, you’re often the one who has to make the hard calls when it comes to budgeting and spending on a project. This question is designed to assess your ability to make those tough decisions, even when they might not be well-received. It’s about demonstrating your financial acumen, your judgement, and your ability to communicate and defend your decisions effectively.

Example: “In a previous project, we were significantly over budget due to unforeseen complications. After thorough analysis, I identified that the only viable solution was to cut costs in certain areas which could potentially affect the quality of our output.

This decision wasn’t popular among the team as it meant compromising on some features initially planned. However, I explained the financial implications and potential risks if we continued overspending.

We eventually agreed on a revised plan, focusing on core functionalities while postponing less critical features. It was a tough call, but it ensured the project’s financial health without jeopardizing its overall success.”

15. How do you determine the financial risks involved in a project and what steps do you take to mitigate them?

Assessing and mitigating risks is a critical part of any financial role. In project-based roles, where budgets and timelines are closely intertwined, understanding how to balance the financial risks with the potential rewards is especially important. This question is designed to see if you’re comfortable with this balancing act, and if you have strategies in place to ensure that your projects stay on track financially.

Example: “To determine financial risks in a project, I conduct a thorough risk assessment that includes identifying potential risks, analyzing their impact and probability, and prioritizing them. This process involves scrutinizing every aspect of the project – from market conditions to resource availability.

Mitigation strategies depend on the nature of the risk. For instance, for risks related to cost overruns, we could implement strict budget controls or contingency planning. If the risk is due to fluctuating exchange rates, hedging might be an option. It’s crucial to monitor these risks continuously throughout the project lifecycle, adjusting mitigation strategies as necessary.”

16. What is your approach to project cost control and monitoring?

Maintaining control over a project’s finances is vital for a project’s success. By asking this question, recruiters want to ensure that you not only understand the importance of budget management, but also have a strategic approach to monitor and control costs. This includes skills such as forecasting, risk assessment, and an ability to make data-driven adjustments as needed. It’s all about ensuring that the project stays financially viable while still meeting its objectives.

Example: “My approach to project cost control and monitoring involves a blend of proactive planning, continuous tracking, and regular reporting.

In the initial stages, I ensure accurate budget development by understanding project scope and potential risks. This helps in setting realistic financial expectations.

Throughout the project, I track actual costs against the budget using financial management tools. This allows me to identify any variances promptly and take corrective action if necessary.

Regular reporting is key to keeping stakeholders informed about the project’s financial status. It also aids in making data-driven decisions for future projects.

Overall, my objective is to maximize efficiency while ensuring that the project stays within its allocated budget.”

17. How do you handle financial reporting deadlines and pressure?

This question is asked because the role of a Project Financial Analyst often involves handling a high volume of work under tight deadlines. It’s important to demonstrate your ability to manage stress, prioritize tasks, and remain detail-oriented even when the pressure is on. It’s a chance to show your potential employer how you maintain your cool and ensure accuracy in a fast-paced environment.

Example: “I handle financial reporting deadlines by prioritizing tasks and planning ahead. I use project management tools to track progress and ensure all requirements are met in a timely manner.

Under pressure, I stay focused and maintain accuracy in my work. I believe that clear communication with the team is key during these times. By sharing updates and potential challenges, we can collectively find solutions and meet our goals.

In terms of handling pressure, I practice stress management techniques such as taking short breaks or deep breathing exercises. This helps me keep a clear mind and deliver quality results despite tight deadlines.”

18. Can you describe your experience with variance analysis and how it has influenced project outcomes?

Financial vigilance is key in project management. Variance analysis is a fundamental tool that helps in understanding the financial performance of your project and any deviations from the budget. By asking this question, prospective employers are keen to understand your proficiency in variance analysis, and how you have used it to influence decision-making and project outcomes. They want to see if you can identify, analyze, and adapt to financial discrepancies in real-time to ensure the project stays on track.

Example: “In my experience, variance analysis is a vital tool for effective project management. It allows us to identify discrepancies between planned and actual outcomes, thus enabling corrective actions.

I’ve used it extensively in financial forecasting and budgeting processes. For instance, on one project we noted significant variances in our labor costs. Upon analysis, we discovered inefficiencies in resource allocation which were promptly addressed.

This not only brought the project back on track financially but also improved overall operational efficiency. Thus, variance analysis has been instrumental in steering projects towards successful completion within budget constraints.”

19. What is your process for conducting a project post-mortem from a financial perspective?

This question digs into your analytical skills and understanding of financial project management. Post-project analysis is a critical component of financial management, as it provides insights into the financial efficiency of the project. By asking this question, the interviewer wants to understand how you evaluate the financial performance of a project, learn from any discrepancies, and use this information to improve future projects.

Example: “A project post-mortem from a financial perspective involves evaluating the budgetary performance of the project. This process begins with comparing actual costs against the initial budget to identify any variances and their causes.

Next, I analyze the return on investment (ROI) to understand if the project was financially successful or not. It’s also important to review the cost-benefit analysis to see if the benefits realized were worth the costs incurred.

Then, I assess how effectively resources were utilized and whether there were any inefficiencies that led to unnecessary expenditures.

Lastly, I compile these findings into a report with recommendations for future projects. This helps in improving financial planning and management in subsequent projects.”

20. How do you balance the need for financial rigor with the realities of a project’s timeline?

Being able to find the balance between fiscal responsibility and time efficiency is a key part of being a successful Project Financial Analyst. Employers want to ensure that you have the ability to maintain strict financial control, while also understanding that projects have deadlines that need to be met. They want to know that you can make sound financial decisions without letting the timeline of the project suffer.

Example: “Balancing financial rigor with project timelines involves a mix of proactive planning and flexible adaptation.

In the initial stages, it’s crucial to develop a detailed budget and timeline, ensuring costs align with project milestones. Regular monitoring helps identify any deviations early on.

However, projects often encounter unforeseen challenges that can impact both finances and timelines. In such cases, I believe in maintaining a level of flexibility within the framework of financial discipline. This could mean reallocating resources or adjusting certain aspects of the project to keep it on track financially without compromising the timeline.

Communication is also key – keeping all stakeholders informed about any changes ensures transparency and builds trust. It’s about finding the right balance between sticking to the plan and adapting when necessary.”

21. What strategies do you use to ensure that project stakeholders understand the financial implications of their decisions?

In the realm of project finance, it’s essential to remember that not everyone speaks the same financial language. As an analyst, your role isn’t just to crunch numbers, but to translate them into understandable information for stakeholders. This question is designed to test your ability to communicate complex economic concepts to non-financial experts, helping them make informed decisions that positively impact the project’s financial health.

Example: “To ensure stakeholders understand the financial implications of their decisions, I use clear and concise communication. This involves translating complex financial data into layman’s terms that are easily understandable.

I also utilize visual aids such as graphs, charts, and presentations to illustrate the potential outcomes of various scenarios.

Moreover, I encourage active participation in discussions about project finances. By asking questions and seeking clarification, stakeholders can gain a deeper understanding of the financial aspects involved.

Lastly, I provide regular updates on financial status and progress, ensuring transparency and keeping everyone informed.”

22. Can you discuss your experience with capital budgeting techniques?

This question is designed to assess your ability to plan, evaluate, and control investments. The hiring manager wants to know if you have the necessary skills to analyze a project’s profitability and make recommendations that align with the company’s financial goals. Your response will provide insight into your understanding of concepts like net present value (NPV), internal rate of return (IRR), and payback period, which are all critical in capital budgeting decisions.

Example: “In my experience, capital budgeting techniques are crucial for making strategic investment decisions. I’ve frequently used methods like Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period.

With NPV, I assess the profitability of a project by calculating the present value of cash inflows and outflows. If the NPV is positive, it indicates that the project will generate profit in terms of present value.

The IRR method helps me determine the break-even point of a project. It’s the discount rate at which the NPV becomes zero. A higher IRR usually means a more profitable project.

Finally, the Payback Period helps gauge how quickly an investment can be recovered. This is particularly useful when liquidity is a concern.

These techniques have been instrumental in helping me make informed financial decisions on projects.”

23. How have you used key performance indicators (KPIs) to monitor a project’s financial health?

Utilizing KPIs to monitor financial health is vital in any project. It gives you a snapshot of where you stand and helps you make informed decisions. This question, therefore, is a way for the interviewer to gauge your understanding of financial metrics, your analytical skills and your ability to use data in managing a project’s budget. Your response will give them an insight into your financial acumen and decision-making process.

Example: “In my experience, KPIs are crucial for monitoring a project’s financial health. They provide quantifiable metrics that can be used to assess progress and performance.

One way I’ve utilized KPIs is by tracking actual expenditure against budgeted costs. This helps identify any discrepancies early on and allows for timely corrective measures.

Another important KPI is the return on investment (ROI). It evaluates the profitability of a project and aids in decision-making processes.

I’ve also monitored cash flow forecasts as a KPI. It ensures sufficient funds are available at each stage of the project, preventing delays or disruptions due to lack of finances.

Overall, using these KPIs has allowed me to keep a close eye on a project’s financial status and make informed decisions to ensure its success.”

24. What methods do you use for cost allocation in a project?

Financial acumen is a key part of project management, and hiring managers want to ensure that you can effectively manage and allocate resources. By asking this question, they aim to gauge your understanding of cost allocation strategies and your ability to apply them in a real-world setting. This could involve knowledge of direct and indirect costs, understanding of activity-based costing, or experience with other cost allocation methods.

Example: “In cost allocation, I typically use the Direct Allocation method for direct costs that can be easily traced to a specific project. For indirect costs, I employ the Step-Down Method which allocates costs from supportive departments to operational ones iteratively until all costs are allocated.

Moreover, I leverage Activity-Based Costing (ABC) for more complex projects. This approach assigns overhead costs based on the activities driving these costs, providing a more accurate picture of resource usage.

I also utilize software tools and Excel for tracking and allocating costs effectively. It’s crucial to review and update allocations regularly to ensure they reflect current operations and project requirements.”

25. Can you describe a time when you had to negotiate project finances with suppliers or contractors?

Money matters, particularly when it comes to project management. As a project financial analyst, your role involves a lot of negotiation with suppliers and contractors to ensure that the project gets done within budget. This question is designed to test your negotiation skills, financial acumen, and your ability to manage relationships with external parties. It also helps the interviewer to understand how you make decisions that could impact the financial success of a project.

Example: “In a previous project, we had a supplier who increased their prices midway through the contract. I initiated a meeting to discuss this change and understand their perspective. After evaluating their reasons, I presented our budget constraints and emphasized the importance of maintaining our agreed-upon costs.

We reached a compromise where they maintained the original pricing for the current project, but we would consider a slight increase for future contracts. This negotiation not only preserved our relationship with the supplier but also kept the project within budget. It was a challenging situation that required diplomacy and financial acumen.”

26. How do you ensure that your financial projections align with the strategic goals of a project?

Navigating the complex world of financial project analysis calls for a nuanced understanding of the strategic objectives behind each project. When employers ask this question, they’re looking to gauge whether you have the ability to think beyond the numbers and align your financial forecasts with the larger goals of the project. This is an essential skill in ensuring the financial viability and success of any project.

Example: “To ensure financial projections align with strategic goals, I start by understanding the project’s objectives and key performance indicators. This helps to define the financial metrics that are most relevant.

I then develop a detailed financial model, incorporating variables such as costs, revenues, and risks. Regular reviews of these projections against actual results allow for adjustments as needed.

Communication is also crucial. By maintaining an open dialogue with project managers and stakeholders, I can better understand their expectations and make necessary changes to the financial plan.

In essence, it’s about blending accurate data analysis with effective communication and flexibility to keep financial projections in line with strategic project goals.”

27. Can you discuss an instance where you identified a financial issue before it became a major problem for the project?

This question is aimed at understanding your proactive nature and your ability to identify and mitigate potential risks in the financial landscape of a project. It demonstrates your analytical skills, foresight, and ability to take appropriate action in time to avert a crisis. This is vital in the role of a Project Financial Analyst, where you’re often the front line defense against financial discrepancies that could derail a project’s success.

Example: “In one project, I noticed discrepancies in our projected and actual expenses during a routine financial review. Our material costs were consistently exceeding the budget.

I immediately alerted the team and we discovered that a key supplier had increased prices without prior notice. We renegotiated terms with them to mitigate further losses and also sought alternative suppliers for future needs.

This proactive approach prevented significant cost overruns and ensured the project remained financially viable.”

28. How do you handle financial data confidentiality in your role?

Confidentiality is the cornerstone of any financial role. As a Project Financial Analyst, you’ll likely deal with sensitive data that, if mishandled, could lead to significant consequences for the company. Therefore, employers want to know that you are trustworthy and have concrete strategies for safeguarding confidential information.

Example: “In my role, maintaining financial data confidentiality is paramount. I adhere strictly to the company’s policies and guidelines regarding data protection. This includes only accessing information necessary for my tasks, not sharing sensitive information with unauthorized individuals, and ensuring secure storage and disposal of documents.

I also understand the importance of using encrypted systems and secure networks when dealing with financial data. Regular password updates and two-factor authentication are practices I follow diligently.

Moreover, I stay updated on any changes in legal regulations related to financial data handling to ensure compliance at all times. Breaches can have serious implications, so it’s crucial to be vigilant and proactive in preventing them.”

29. Can you describe your experience with financial audits in relation to projects?

The essence of a financial analyst’s role is to ensure the financial health of projects. Part of this role involves navigating financial audits. The ability to handle audits shows that you understand the financial landscape of a project, you’re able to maintain accurate records, interpret financial data, and can ensure compliance with financial regulations. This question tests your experience in those areas and your ability to mitigate risk.

Example: “In my experience with financial audits, I have been responsible for preparing and presenting detailed reports on project expenditures. This involves ensuring all costs are accurately recorded and allocated to the correct budget lines.

I’ve also liaised with auditors by providing necessary documentation and clarifications. My focus has always been on maintaining transparency and compliance with financial regulations.

Through these experiences, I’ve developed a keen eye for discrepancies, which helps in identifying potential issues before they escalate. Understanding the importance of accuracy and timely reporting is crucial in this role.

Overall, my audit experiences have strengthened my skills in financial management, particularly in relation to project budgets.”

30. What is your approach to continuous improvement in the area of project financial management?

The focus here is on your capacity for growth and development in the realm of project financial management. The financial landscape is always changing, with new software, procedures, and best practices emerging regularly. Employers want to know that you’re not just going to rest on your laurels, but are proactive about staying up-to-date and always looking for ways to improve efficiency and accuracy in your work.

Example: “My approach to continuous improvement in project financial management is threefold.

First, I believe in utilizing the latest technology and software for accurate tracking and analysis of financial data. This allows for real-time monitoring and adjustments as needed.

Next, I focus on regular training and updates on best practices and regulations in financial management. This ensures that my skills and knowledge are always up-to-date.

Lastly, I advocate for open communication within the team. By fostering a culture of transparency and collaboration, we can identify any issues early and work together to find solutions.”

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I won’t mix words: Most Project Finance training is terrible .

Whether you’re looking at paid courses, in-person training, or free resources, most training uses two equally useless approaches: 

Wrong Approach #1: Convoluted Models – Complex models can be nice, but when you’re  completing case studies in an interview setting , no one will ask you for a 5,000-row Excel model with built-in VBA and macros. And when you’re on the job, shorter, simpler models are more useful if you need a quick reference or formulas you can re-purpose for your current task.

Wrong Approach #2: “Barely Project Finance” Financial Modeling – On the other end of the spectrum, some of this training is so simple and generic that it’s a stretch to call it “Project Finance.” You can project the cash flows for  almost any asset , but you need a lot more than simple cash flows linked to energy production to call it a “Project Finance model.”

The correct approach – the one our course uses – is  based on real-life case studies given in interviews .

We don’t teach 5,000-row Excel models that require 30 hours to understand; we teach what you need to know to complete case studies.

That means the models in this course are in the “intermediate zone,” with each one taking up 50 to 300 rows in Excel (the “on the job” case studies go beyond this since they are intentionally more complex).

It’s enough to learn the core concepts and finish in a few hours, but not so much that you get lost in a pile of minutiae under some broken wind turbines.

We created this course by gathering dozens of case study examples from students who had been through interviews at Infrastructure Private Equity firms and Project Finance groups and synthesizing the best parts of their cases.

Our approach focuses on the  3 most important points in Project Finance Modeling:

1) Cash Flow Projections – You need to know how to move from  energy production or traffic levels to  revenue and expenses and how items such as depreciation, loan fees, and interest factor into an asset’s cash flows.

If you get your units wrong, your offshore wind farm might morph into a nuclear plant and have a meltdown or two – and you won’t be able to blame it on Homer Simpson!

2) Debt Sizing and Sculpting – Project Finance is fundamentally different from corporate finance because of this focus on  sculpting the Debt to match the asset’s future cash flows. And you must know how to set up debt sizing and sculpting with standard Excel formulas, Goal Seek, simple VBA code, and circular reference switches.

3) Investment Recommendations – Finally, you need to understand  how to put together all the pieces to make an investment recommendation. You must be able to read the numbers in the different cases, assess the risk factors, and say “Yes” or “No” to a deal.

No other training on the market  puts together all the pieces quite like this because they’re too busy teaching confusing models that require a Ph.D. to understand.

This course has 8  case studies ranging from 30 minutes to 4 hours, so you can pick your ideal learning path based on how much time you have.

Through these case studies, you’ll learn to:

• Project cash flows for different types of infrastructure assets, ranging from renewables to fossil fuels to nuclear to toll roads and airports.
• Understand timelines and flags in infrastructure models and how they factor into debt refinancing, sculpting, and sizing.
• Build the key drivers for infrastructure assets, including the links between energy production under different contract types and revenue (and, for transportation, the links between GDP, inflation, and growth rates).
• Calculate the key metrics for infrastructure assets for both the equity investors and the lenders, including the equity IRR and cash-on-cash multiple, the Debt Service Coverage Ratio (DSCR), the Loan Life Coverage Ratio (LLCR), the Project Life Coverage Ratio (PLCR), and the Levelized Cost of Energy (LCOE).
• Sculpt and size Debt properly based on minimum DSCR and LLCR targets – with standard Excel formulas, Goal Seek, simple VBA code, or circular calculations.
• Handle multiple tranches of Debt, such as one tranche with a “merchant tail” and fixed amortization or two tranches that are both sculpted and sized based on the asset’s cash flows.
• Build in reserve accounts, such as the Debt Service Reserve Account (DSRA), Major Maintenance Reserve Account (MMRA), and Decommissioning Reserve, and analyze their impact on the cash flows.
• Model construction periods in development deals, including tricks to avoid the circular references created by the interest during construction (IDC) and the loan commitment fees.
• Use VBA to avoid circular references, size and sculpt Debt properly, build sensitivity tables, and back-solve for key assumptions such as the proper PPA rates in different scenarios.
• Make investment recommendations based on the deal’s expected returns and the key risk factors.

If you want to answer interview questions, complete case studies with ease, and leap up the ladder once you start working, this is the course for you.

Brian DeChesare Founder, Breaking Into Wall Street

Here’s What You’ll Get When You Sign Up for This Project Finance & Infrastructure Modeling Course:

Acquisition Case Studies ("Brownfield" Deals)

WHY IT’S IMPORTANT: This training gets you up to speed  quickly with cash flow projections and debt modeling for assets like toll roads and power plants, which are the bread-and-butter of infrastructure.

This training is based on  2 case studies – one for a toll road in Spain and one for a natural gas power plant in the U.S.

You’ll learn how to project revenue, expenses, and cash flow for each one, including nuances around downtime for maintenance and repairs and possible net operating losses (NOLs).

You’ll also learn how to sculpt and size the Debt using simple Goal Seek functions as well as a macro written in VBA – and how to handle an acquisition scenario with two tranches of Debt and a “merchant tail” on one.

Finally, you’ll use the IRR and credit metric output to make an investment recommendation in each case and determine whether the asking prices are appropriate.

Development Case Studies ("Greenfield" Deals)

WHY IT’S IMPORTANT: These lessons walk you through the construction and operations of renewable assets (solar and wind farms) and explain how to evaluate deals and make investment recommendations.

In these lessons, you’ll complete a  solar plant development model and an  offshore wind farm model .

You’ll start by learning how to model the  construction period for renewable assets, including the debt and equity draws, the interest during construction (IDC), the loan commitment fees, and more.

Then, you’ll learn how to refinance the construction loan into permanent loans, and you’ll forecast the revenue and expenses based on the asset’s energy production, degradation, seasonality, and “uncertainty” (e.g., P50 vs. P70 vs. P90).

Each model treats the Debt a bit differently, so you’ll learn how to size and sculpt it to match the asset’s cash flows based on targets such as a minimum DSCR or LLCR – and you’ll learn how to model multiple Debt tranches in a single deal based on these overall constraints.

Finally, you’ll answer case study questions, set up sensitivities, and recommend investing based on the potential returns and risk factors.

Debt Sculpting, Sizing, and VBA (Mini-Course)

WHY IT’S IMPORTANT: This mini-course is perfect if you want to learn  the concepts in Project Finance without completing the detailed case studies. Think of it as your “interview crash course.”

This set of lessons walks you through the fundamental concepts using simplified models: The Debt Service Coverage Ratio (DSCR), the Loan Life Coverage Ratio (LLCR), and how to size and sculpt Debt based on both of them, including VBA and Goal Seek to remove circular references.

The training also covers cash flow sweeps, Debt sizing/sculpting with variable dates and maturities, quarterly models, and how to size and sculpt two Debt tranches with different terms.

The final lessons explain the link between the Construction Loan and Permanent Loans in a Project Finance model and how to avoid circular references in the development period using simple VBA code.

Detailed Quarterly Solar Development Case Study

WHY IT’S IMPORTANT: These lessons walk you through a more complex “on the job” case study for a solar plant development in Australia, with a full quarterly model and support for reserve accounts.

In these lessons, you’ll complete a  quarterly model for a real solar plant in Queensland, Australia, and make an investment recommendation for the equity investors and the lenders.

You’ll start by setting up the  upfront and pro-rata equity and debt draws to cover the construction costs, and you’ll forecast the revenue and operating expenses based on annual vs. quarterly payments and production incentive payments.

Then, you’ll sculpt and size the Senior Debt based on a minimum targeted LLCR in each operating case, with full support for downside scenarios such as availability reductions, construction contingencies, and operating expense overruns.

You’ll also learn how the  reserve accounts , such as the Debt Service Reserve Account (DSRA), Major Maintenance Reserve Account (MMRA), and Decommissioning Reserve, work in an infrastructure model, and how they affect the cash flow to equity and dividends (including a “Cash Trap” setup based on a minimum DSCR and Funded Reserves).

The final lessons walk you through the Levelized Cost of Energy (LCOE) calculation, sensitivity tables, and a full investment recommendation in both Word and PowerPoint format.

Airport Acquisition and Expansion Case Study

WHY IT’S IMPORTANT: These lessons walk you through an “on the job” case study for the acquisition and expansion of the Singapore Changi International Airport, including support for a full 3-statement model.

In this case study, you’ll build a  full 3-statement buyout model for the Singapore International Airport and evaluate the initial deal and its S$10 billion Terminal 5 construction project.

This model blends elements of traditional leveraged buyout models, such as scheduled debt repayments and cash flow sweeps, with infrastructure-specific features, such as Construction Loans and Equity Draws, DSCR-constrained Dividends, and growth rates that depend directly on GDP and inflation numbers.

It also includes some more advanced debt features, such as “grace periods” and variable repayment schedules that change based on the year number.

The final lessons walk you through the IRR and cash-on-cash multiple calculations and how to evaluate the credit risk to the lenders in the deal; you’ll also get the full case answers and a presentation with our recommended changes to the deal.

Nuclear Plant Development Case Study

WHY IT’S IMPORTANT: This training delves into the nuances around assets with extremely long construction timelines and operating lives and explains how the financing methods and investment analysis differ.

You’ll build a detailed development and operational model based on the Shin Hanul nuclear power plant in South Korea in this module (estimated construction cost of nearly $9 billion USD), and you’ll use this model to recommend the electricity rates used in the power purchase agreement (PPA).

This model includes additional complexities around the development process, such as multiple phases and Preferred Stock that is not refinanced; the operational period also includes a cash flow sweep, DSCR-limited Dividends, and a reserve account for multi-year decommissioning.

It also includes support for a cash flow sweep, interest income from the reserve accounts, and hybrid financing that behaves more like debt or equity, depending on the period.

The final lessons walk you through the returns calculations, the Levelized Cost of Energy (LCOE), and the VBA code to automate the process of back-solving for the recommended PPA rates. Finally, you’ll get the case study answers and a full investment recommendation presentation.

Lithium Mining Development Case Study

WHY IT’S IMPORTANT: This training gives you a crash course on models for natural-resource assets and goes into far more depth on how to use VBA and macros to drive models.

You’ll build a  detailed development and operational model for the Thacker Pass project in Nevada in this module (estimated $5 billion USD construction cost), and you’ll use this model to recommend for or against investing in the deal.

The case study goes into mining-specific nuances around the revenue, expenses, and cash flow, including offtake vs. spot prices, mineral grades, strip ratios, price hedging, and accelerated depreciation.

It also features the most advanced Debt Schedule in the entire course, with sizing and sculpting driven by a set of VBA macros and support for features like the DSRA, Cash Trap, and Cash Flow Sweep.

The final lessons walk you through the returns calculations and how to create sensitivity tables using custom VBA code that is fully integrated with the other macros. You’ll also get the full case study answers and an investment recommendation presentation, including proposed changes to the deal structure.

Certification Quiz

WHY IT’S IMPORTANT: This end-of-course certification quiz lets you test your knowledge and prove it to employers.

This quiz consists of 25 challenging questions that are based on the case studies in the course.

If you pass the quiz with a 90% score (no restrictions on time or the number of attempts), you’ll gain our Certificate in Project Finance Modeling, which you can add to your LinkedIn profile and present in interviews.

Plus… This Course Comes With The Following Valuable Tools To Accelerate Your Learning:

…and Our Legendary, 90-Day No-Questions-Asked Money-Back Guarantee

Take a full 90 days to review the Project Finance & Infrastructure Modeling course and make certain it’s everything we promise.

You do not have to finish everything in that time – think of it as your “trial period” or “evaluation time.”

If you aren’t satisfied for any reason, simply ask for your money back, and we’ll issue a prompt refund – no questions asked.

Plus Expert Support from Experienced Finance Professionals

Just moments after you enroll, you’ll gain Instant Access to the  Project Finance & Infrastructure Modeling course.

But that’s not the best part.

The best part is expert support for a full 5 years after purchase!

If there’s anything that you don’t understand, just go to the “Question/Comment” area below each lesson and ask your question there.

These comments are monitored and responded to by our expert support team – every one of whom has personal experience working on deals at finance firms.

That ensures that you’ll get responses from people with deep experience in the field – not a clueless high school temp clutching the “Help Desk” manual.

This personalized, expert support is one of the things that sets Breaking Into Wall Street apart and gets you to your goals faster.

You can often learn just as much from reading other students’ questions and our responses as you will from the lessons themselves!

Our 1-on-1 coaching rate is $200+ per hour. But when you invest in the Project Finance & Infrastructure Modeling course, personal support is included for FREE .

NOTE: There are some limitations to these support services. For example, we cannot complete models, case studies, or homework assignments for you.

We also cannot provide play-by-play support with an earpiece during interviews.

Finally, we cannot answer questions about topics not covered in these courses, such as sales & trading interview questions.

We’re happy to answer career-related, qualitative, and technical questions that are related to the course materials.

What’s Your Investment In This Project Finance & Infrastructure Modeling Course?

To put this in context, let’s look at your Return on Investment in this course…

The pay for Project Finance jobs varies, but it’s safe to say that even entry-level Associates will earn  at least $150,000 USD per year, if not more than that at larger firms and groups – and the pay is even higher at infrastructure private equity firms.

And as you progress, your total compensation gets higher and higher; Principals can earn into the mid-six-figure range, and Partners in infrastructure private equity can earn $750K to $1 million+ annually, depending on the fund size and overall performance.

And each one had to start in an entry-level role to get their foot in the door – just like you today.

We  could sell the 8 core components of this course for $97 each, for a total of $776, but since this course is new, we’re offering an “early-bird deal” and discounting it to  just $247 .

Compared with your potential upside – jobs that pay well into the six-figure range – your investment in the course is nominal.

By investing just $247 in this course, you’re greatly improving your chances of landing a job that pays upwards of $150,000 in Year 1 – that’s more than a 600x return on investment!

Even if this training only helps you win an internship , that’s still at least $10,000 USD at any reputable firm, for a 40x ROI.

There is no other way to get this level of training… this level of on-demand support… this level of testing and case study practice… and this level of access to a community of thousands of peers…

…at ANY price!

So yes, you have to invest in yourself to gain access to this specialized infrastructure modeling training, but it will be one of the smartest, highest-return investments you ever make – we guarantee it!

We’ve bent over backward to deliver the best, most comprehensive program on the market that gives you everything you need to land a great job and start a long-term career in infrastructure investing.

To date, over 56,763+ people have invested in BIWS training and gone on to secure lucrative jobs in the industry. I want you to be next, and I want to make this a “no-brainer” decision for you.

click here to get project finance & infrastructure modeling Just 1 Payment of $247 (100% Unconditional Money-Back Guarantee)

You’re Also 100% Protected By Our Unique 90-Day, No-Questions-Asked, Money-Back Guarantee

Since I want to make this a “no-brainer” decision for you, the Project Finance & Infrastructure Modeling course comes with the same iron-clad guarantee that we offer on everything:

You have 90 days to evaluate the course material and see if it’s right for you.

If you decide at any point during those 90 days that the Project Finance & Infrastructure Modeling  course doesn’t meet your expectations, simply request a refund.

We perform for you, or you get your money back – that’s how it always should be.

Here’s What Will Happen Within a Few Short Moments of You Joining the Project Finance & Infrastructure Modeling Course:

The minute you join, you’ll have access to the complete  Project Finance & Infrastructure Modeling course, including 169 separate videos, full written notes, transcripts and captions, “Before and After” Excel files for each lesson, and 8 case studies based on different energy, transportation, and mining assets.

And the best part: We’ll be here to guide you every step of the way because your enrollment comes with a full 5 years of expert support. If there’s something you don’t understand, just go to the “Question/Comment” area below each lesson and ask your question, and we’ll respond with a detailed answer.

On top of that, you’ll also get access to free updates over time as we continue to improve the course.

Decision and Action Time

Of course, there are other options for learning this material.

For example, you could complete a course on this topic from another provider, buy a generic course on a random e-learning site for $10 or $20… or download some long and convoluted Project Finance models from another site.

These methods have their merits, but they won’t get you the same  results as this course because they’re designed for “generalist” audiences – not people currently interviewing for investment roles at infrastructure firms or project finance roles at banks.

So, if you want to master cash flow projections, debt sizing and sculpting, and returns analysis  as they are used in these industries and hit the ground running on Day 1 of your internship or full-time job, this training is your best option.

Yes, it is more of an investment than a book or an online course written by monkeys at the keyboard, but ask yourself about the value of your time and interview opportunities.

If you win a coveted interview spot at a top infrastructure investment firm, such as Brookfield, Global Infrastructure Partners, or Stonepeak, do you want to “wing it?”

Or do you want to ensure that you’ve prepared in the most comprehensive way possible?

If you’re serious about your future career in the finance industry, you should not even have to think about this one.

And if you have any doubts, it’s all backed by our no-questions-asked, no-hassle, 90-Day Money-Back Guarantee.

In fact, the ONLY risk is that you might apply for a job or walk into an interview without this course – and lose out to another candidate who has completed it.

The next move is up to you.

You can  hope that an investment firm or bank hires you without knowledge of these topics or the ability to complete case studies and make investment recommendations…

…or you can confidently tell them you’ve completed  the most targeted infrastructure and project finance training available , based on 8 case studies and authored by finance professionals who have collectively worked on dozens of deals.

I know you’ll make the right choice.

To YOUR success,

Brian DeChesare Breaking Into Wall Street Founder

P.S. Remember that you have NOTHING to lose and nearly unlimited upside – your future career in a high-paying industry – to gain. You have a full 90 days to evaluate the program and return it for a full refund if you’re not satisfied.

Of course, it’s much more likely that you’ll be writing in to thank me in the future – just like so many others have. Here’s what some of our BIWS students have said about their experiences:

"Thanks to the courses I bought on BIWS, I managed to get an offer in Project Finance in a top-ranked European bank."

"The courses have been with me since the beginning of my career. I was a sell-side research analyst, now working at an infrastructure investments company."

"With no background in IB, I won multiple offers in private equity as well as one offer from IB. I am currently working at a PE fund, and your case studies made the case studies in their interviews a cake walk."

"I actually have the access to material of a BIWS competitor - WSP - and your education style is way better in my opinion."

"I was in consulting at MBB and your course helped me land a job in private equity. It's still helping me get better at my job!"

"I have purchased the whole course available on your website, and I believe it has been one of the best investments I have made."

"Overall, the BIWS materials I've purchased have been a great supplement to my learning and efforts in securing a private equity/investment role in a major finance hub."

"The videos are hands-down the best resource for learning the technical aspects of finance because you can watch and do the models, watch the videos on how to articulate the concepts in an interview, then practice as much as you want."

Installment Plans Available (Pay in 4 Monthly Installments)

Get Instant Access to Project Finance Modeling

100% Unconditional Money-Back Guarantee

Case interviews: what finance concepts do I need to know?

Consultants use a wide range of financial concepts on their projects. Case interviews reflect real life examples and you will therefore come across financial concepts when you interview. These concepts range from fairly basic (E.g.: fixed costs) to more advanced (E.g.: return on investment).

The difficulty is that there is an endless list of financial concepts you could learn. But you do not have time to learn and master all of them and doing so should not be the objective of your preparation.

When you prepare for case interviews , you therefore need to ask yourself the following key question: What are the financial concepts I need to master to ace case interviews?

Click here to practise 1-on-1 with MBB ex-interviewers

The answer depends on the position you are applying for. In this blog post, we assume that you are interviewing for a general consultant, associate or manager role at a typical strategy firm (E.g.: McKinsey, BCG, Bain, etc). If you apply specifically to the financial services practice of the firms above, you will need to know more advanced financial concepts than we list below. But for general positions, here is the list of financial concepts you need to master:

• Fixed and variable costs

More advanced

• Return on investment
• Payback period

There is a very small chance that you might come across more exotic financial concepts in your case interviews. But in these cases you will not be expected to know the concept at hand. Instead, your interviewer will expect you to ask clarifying questions about the concept and will help you understand it.

There are three reasons why you do not need to know more financial concepts than the ones listed above:

• First, in our experience, these concepts will enable you to tackle 99% of the cases you will come across in your interviews
• Second, learning more concepts than this would be very time consuming. Instead you should use your time practicing on real case interviews
• Third, consultants themselves usually do not know more financial concepts than the ones we have listed. As a consequence if a more advanced concept is required for your case it is almost certain that your interviewer will help you understand it

Let us now define the concepts you need to know one by one.

We’ve already defined some basic financial concepts the video below. While McKinsey no longer uses the PST, these concepts are still useful to review.

Revenues, sales, or turnover (the three terms are synonyms) are the total amount of money that the company receives from customers by selling its products.

Let’s take an example. Imagine you work for an airline, such as British Airways. You sell plane tickets to your customers. The total amount of money you collect from customers in exchange for plane tickets (and any additional services you provide) is your company’s revenues.

There are two main ways you could be asked to calculate revenues for a company:

You might be given the number of products the company sold (the volume) and the average price of the products. From this, you can obtain revenues using the following formula: Revenues = Volume x Average Price.

Alternatively, you could be given the total sales in an industry (total market sales), and the share of the industry’s revenues represented by the company (the market share). The company’s sales would then be given by: Revenues = Total Market Sales x Market Share.

Either way, remember that revenues or sales are measured in terms of money (Dollar, Pound Sterling, Euro, etc.).

Costs, or expenses, are the total amount of money that the company pays to its various suppliers. In the case of the airline above, this will be the money that the company pays for fuel, leasing airplanes, the salaries of the crew, as well as expenses such as the cost of running their headquarters, their website, or even taxes and interest on loans.

As you can see, the term ‘costs’ covers many different items. Companies will be interested in tracking costs closely.

Fixed and variable costs: Businesses incur two types of costs. Variable costs are the costs that increase with higher sales or higher production. Fixed costs are the costs that would have to be paid regardless of how much is produced. In other words, variable costs change with the level of business activity, while fixed costs don’t.

Let’s imagine you are the CEO of a handbag manufacturer. The cost of the material you use to manufacture the bags is a variable cost: the more bags you produce, the more leather you will need. If one day you produce no handbag, then you don’t have to pay for any extra material. By contrast, the rent you pay for the store has to be paid every month, regardless of whether you sell or produce any bags that month.

As you may already appreciate, the distinction between fixed and variable costs is not always straightforward. For instance, labour costs can be either fixed or variable. As a CEO, your salary is a fixed cost as it will be paid independently of how many bags the company produces. However, during periods of peak production you might hire extra workers at your factory and their salary will therefore be a variable cost.

Even though these difficulties might arise, your interviewer will always allow you to determine easily from the context which cost is fixed and which is variable.

The most important relationship in business analysis is probably the following:

Profits = Revenues – Costs

Profits, also known as net income or net earnings, represents the money left to the owners or managers of the business after all expenses have been paid. Many questions in case interviews revolve around whether or not a company is profitable and what it should do to become more profitable.

Profits are always calculated over a certain period of time – either a quarter or a full year. If you are given fixed and variable costs, you would first have to calculate total costs over the period of time studied, before being able to calculate profits. For instance, in our handbag manufacturing example you would take all fixed costs for one year and add all variable costs for the production of that year to calculate total costs. Annual profits would then be given by subtracting total costs from annual revenues.

Given this definition of profits, there are two ways companies can increase their profits: increase revenues, or decrease costs. You can also see why it might not always be completely straightforward to compare the performance of two companies: one might have higher revenues but higher costs than the other.

4. Return on investment

Return on investment (ROI), or return on capital invested (ROCI), measures how much profits are generated by $100 invested in a given project or business. Let’s say you set up a lemonade stand with an initial investment of $1,000 to pay for a stand, a lemon press, etc. Let’s now assume that you sell $500 worth of lemonade throughout the year and that you incurred $400 in costs to make those sales (E.g.: lemons, sugar, electricity, etc). Your profit for the year is $100 and your return on investment is $100 / $1,000 = 10%.

The formula for return on investment is therefore given by:

Return on investment = Profits over given period / Initial investment

Returns on investment are expressed in percentages and calculated over a given period of time, usually one year. But nothing prevents you from calculating a daily or monthly return on investment. To do so, you just need to divide a day’s worth of profits or a month’s worth of profits by the initial investment. For a given project, profits made in a day are lower than profits made in a month or year, and the daily return on investment is therefore lower. In our example, assuming we make $100 / 365 = $0.27 of profits in a day, the daily return on investment is $0.27 / $1,000 = 0.027% which is lower than 10%.

Let’s focus on the initial investment part of the equation. In your case interviews , you will most likely have to calculate ROIs when a company is investing in a new project. Here, the initial investment will be the upfront expenses the company needs to make to start the business. For instance, if the company wants to start producing cars, building the car factory will be the main initial investment. Similarly, if the company wants to start a supermarket, the main initial investment will be the building, fridges and shelves to set up the supermarket (assuming it buys the building). Initial investments are typically only incurred once, at the beginning of the project.

Finally, there are two ways to increase ROIs: growing profits or decreasing the initial investment. Sometimes, the return on investment for a project will be negative. This indicates that profits are negative and that the project is losing money.

5. Payback period

Payback period measures how much time it takes to earn back your initial investment. In our lemonade stand example, it takes 10 years of profits at $100 per year to pay back the initial investment of $1,000. The payback period is 10 years.

The formula for payback period is therefore given by:

Payback period = Initial investment / Profits over a given period

Payback periods are usually expressed in years by dividing the initial investment by the profits per year . But notice that they can also be expressed in days or months too simply by dividing the initial investment by the profits per day or the profits per month .

Finally, notice that the payback period is simply the inverse of the return on investment. In our lemonade stand example, the yearly return on investment was 10%. To calculate the payback period we could have simply done 1 / 10% = 10 years. Again, in some cases the payback period will be negative which indicates negative profits and that the project is losing money.

Mock interviews

The best way to improve at case interviews is to practise interviewing out loud, and you can do that in three main ways:

• Interview yourself (out loud)
• Practise interviewing with friends or family
• Practise interviewing with ex-interviewers

Practising by yourself is a great way to get started, and can help you get more comfortable with the flow of a case interview. However, this type of practice won’t prepare you for realistic interview conditions. 

After getting some practice on your own, you should find someone who can do a mock interview with you, like a friend or family member.

We’d also recommend that you practise 1-1 with ex-interviewers from top consulting firms . This is the best way to replicate the conditions of a real case interview, and to get feedback from someone who understands the process extremely well.

Click here to book your mock case interview.

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Project Finance: Free Online Course

Learn the basics of a project finance transaction, key debt, and cash flow metrics, as well as return calculations and common scenarios used to support negotiations using a real case study. Includes FREE Excel template.

Get Certified in Project Finance Modeling

Table of Contents

What is Project Finance?

Before we begin – download the free excel template, video 1: introduction, video 2: project finance primer, video 3: course overview, video 4: timeline and process, video 5: timeline and process, part 2, video 6: construction and operations calculations, video 7: negotiations & optimizations, conclusion & next steps.

Welcome to Wall Street Prep’s free online course on Project Finance! 

Project finance refers to the funding of large, long term infrastructure projects such as toll roads, airports, renewable energy using a non-recourse financing structure, which means that debt lent to fund the project is paid back using the cash flows generated by the cash flows generated by the project.

Course objectives: We created this course to provide students and finance professionals pursuing a career in project finance with an understanding the role and interests of the typical participants project finance transaction, key debt and cash flow metrics such as CFADS , DSCR & LLCR, as well as equity return calculations. We hope you enjoy –  let’s begin!

Get the Free Project Finance Model Template

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This is the first part of a 7 part series, where you will learn about the basics of project finance analysis. Using Heathrow’s expansion of a third runway , we will walk through the basics of a project finance transaction, key debt, and cash flow metrics, as well as return calculations and common scenarios used to support negotiations.

In part 2, you’ll learn the basics of a typical project finance transaction, as well as key project finance jargon and terminology, such as SPV, PPP, CFADS, DSCR , EPV, EPC, DSRA, P90/P50.

In part 3, we introduce our project finance case study: Heathrow Airport’s expansion of a third runway.

The Ultimate Project Finance Modeling Package

Everything you need to build and interpret project finance models for a transaction. Learn project finance modeling, debt sizing mechanics, running upside/downside cases and more.

In part 4, you’ll learn about the typical project finance timeline and process. You’ll learn about the different characteristics of the project development, construction and operation phases of an infrastructure project.

In this lesson, you’ll continue on with the Heathrow Airport case study and learn about the capex , operations, debt and tax mechanics and calculations involved in a project finance transaction.

In part 6, you’ll learn about the cash flow waterfall and set the stage to determine cash flow available for debt service (CFADS), the Debt Service Coverage Ratio (DSCR), the Loan Life Coverage Ratio (LLCR), determine the all-important Project IRR .

In this final lesson, we will introduce the various interests of the stakeholders involved in a project finance transaction. You will learn about the typical contours of a project finance negotiation and the typical scenarios that a project finance model must accommodate to support these negotiations.

We hope you enjoyed the course and please provide feedback in the comment section below. To learn more about how to build a comprehensive bankable project finance model, consider enrolling in our complete Project Finance Modeling Certification Program.

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Project Finance Case Study – Dabhol Power Plant

This webpage puts together information of the Dabhol electric power plant case. The case is old, but it has a lot of project finance lessons. One lesson is the dangerous way students are taught at Harvard before they go to Wall Street.  Other issues relate to the danger of a high IRR and a high plant cost. The case includes philosophical issues related to legal structuring versus economic analysis; benchmarking of costs; the use of different types of financial models evaluation of the ability of off-takers to honour contracts.

Dabhol is also an interesting case for me because it was first launched as a breakthrough in electricity investment for India and arguably was an important cause of the downfall of Enron. The central issue in the case is whether risk analysis and valuation should have involved contract evaluation and insurance on PPA contracts or whether the ultimate affordability of the produced electricity to ultimate consumers should have been the focus of the analysis.

PDF File with Case Study of the Dabhol Plant Financed by Enron, GE, and Bectel in India in the Late 1990's

Dabhol Case Introduction

For the Dabhol case I have made an assignment rather than just putting some of my opinions on the website. The outcome of the Dahbol case study is well known in project finance (it is difficult not to call the project a dramatic failure). I am not interested in you just telling me what happened. I am interested in how you would have assessed the risks, the contract structure and other issues at the time the loan was made (a long time ago in the 1990’s). Even though the failure of the case is well known, I would like to know how you would have evaluated both positive and negative aspects of the project financing and how you would have considered nuances involving contract structure (in particular, the PPA pricing); benchmarking of costs, rate of return analysis, and off-taker assessment.

The case is about project finance risk analysis and contract structuring.  If you would like to review background in these subjects I have included power point slides that provide discussion of project finance and contracts. You can download these slides by pressing the buttons below.  In particular, you need to understand that project finance does not have history and as such benchmarking may be a good idea. You should also understand why a capacity or availability payment is present in some project finance transactions. You can review project finance issues by clicking on the button below to download power point slides.

Power Point Slides that Accompany the Video Lecture Series on The Theory of Project Finance

Enron Corporation was the main sponsor (owner or equity investor) and developer of the project. The plant was completed in 2001 and became a disaster at about the same time Enron collapsed. Maybe the Dabhol plant problems in India had something to do with the Enron fall.  You can see the Enron stock price data below in case you are young and don’t know story.

In most places in the world (especially in India), the kind of arrangement where the revenue contract (in this case the PPA contract) is negotiated without a bidding process are no longer acceptable. This does not make the Dabhol case obsolete, as the economics of the contracts and political risk associated with the contracts still must be assessed even if a bidding process is used.

Background Resources for Completing Questions Raised in the Case

You can find many of the resources on the website except for the Harvard Business School (HBS) write-up. (I am not allowed to put the HBS case itself on the website because of copyright issues. Somebody from HBS has sent me threatening e-mails about this). I have however, put some of the information from the case in screenshots below.

The basis for the case is the HBS Dabhol Case 1. The last exhibit in this case has numbers on the PPA agreement including the capacity charge.  (In fact, the PPA was changed after the case write-up, but the re-negotiated numbers are not available). For purposes of this assignment you should use numbers and structure from the data in the HBS Case 1 that is the last page of the case.

Other than the HBS case, resources that should help you completing the case and are available download in different sections include:

• Case from India with Financial Analysis of the off-taker (the buyer of power)
• Read PDF excel utility so you can download data from the PDF to an Excel File
• Database File on exchange rates with the India/US exchange rate
• Files for benchmarking that include EIA data and Lazard
• Other case write-ups that describe various aspects of the case

You can use the buttons I have added below to download and read the background materials. (I wrote a few comments about the Dabhol case a few years ago.  You are welcome to read these comments in my case studies preliminary manuscript. But please do not assume these comments are very good. I have not included my comments in the resources available for downloading below.)

Step by Step Instructions for the Dabhol Assignment

The assignment involves writing-up seven parts of the Dabhol project finance case.  There are seven parts of the assignment.  I would like you to write-up one or a couple of paragraphs on each section, something like a credit memo.  Do not worry about the length of this page — I have tried to put a lot of details in the sections so you can concentrate on the central learning issues.

Part 1: Write-up the Summary

Write a succinct summary of the case from a credit analysis perspective (e.g. what were unacceptable risks in the loan agreement and why was the project good or bad from the perspective of risk). Include a couple of sentences in your summary about the implications of the case in the context of general project finance theory.  You should probably write this up after you are finished with other parts of the assignment.

Part 2: Make a Diagram of the Contract Structure and Comment

The Dabhol project was named deal of the year for its contract structure before it imploded. In this section, I would like you to make a diagram of the structure of the contracts in the project financing — the entities and the contracts. Also, in a couple of paragraphs, discuss the general economic concepts of using a purchased power agreement with a capacity charge in an availability-based project. I am looking for a diagram that you can use to discuss risks of contracts not being honoured. I hope you can make it come alive with flows of where the money is coming from and where it is going.

I would also like you to comment on the diagram that is included in Exhibit 1 of the HBS study (shown in the screenshot below).  I hope you make a much better diagram that allows the reader immediately understand risks and mitigations associated with the different contracts.

Part 3: Write a Paragraph on Benchmarking of the Cost per Unit

Any project finance investment includes capital expenditures, operating costs, volumes produced and prices.  A lot of risk analysis depends whether the amounts for these capital expenditure, operating cost and revenue drivers are reasonable.  As project finance does not include financial history, you often need to do some detective work to evaluate unit costs for capital expenditures, operating costs and other items (e.g. capital expenditures per kW).  The cost and the capacity are at the top of the HBS case as shown in the screenshot below.

In this section, I would like you to do some cost benchmarking and compute unit costs of Dabhol. This is a bit difficult because of the age or the case, but you could start with an old HBS case that includes capital costs for different types of units. I have clipped a couple of sources in the screenshots below. Once you finished your benchmarking, comment on the reasonableness of the cost structure explain why you think the Dahbol costs are different from other plants. If you are really fancy, you could try also to benchmark the O&M cost.

I have included a photo of the plant that you can maybe use in benchmarking.  Tell me if you think there is something special about this plant that makes it different from other plants around the world.

Part 4: Compute the Project IRR from the PPA numbers in the HBS Case 1

In this part of the assignment I would like you to compute the project IRR (return on investment measure in project finance) from information given in the HBS case study on the PPA.  I would like you to think about the implications of different return measures.  Maybe as lenders you should not care much about the return. Maybe you think a high return is good. For example, S&P includes various criteria in developing credit ratios. One of the S&P criteria is the return on investment – a higher return on investment is associated with better credit quality.

I would like you to: (1) compute the project IRR from the PPA statistics at the bottom page of the HBS Case 1; (2) discuss the difference between project IRR, equity IRR and debt IRR; (3) comment on the level of the project IRR in the context of credit analysis; and, (4) comment on whether the IRR reflects the true returns to investors.

In computing the project IRR, you can use the step-by-step process below.  I do not want you to struggle too much with this.  I just want you to get a very general idea of what can go into the project IRR calculation and, most importantly, how to interpret the calculation.

Step 1 : Open the Read PDF Excel file (you can download it by pressing the button below)

Read PDF to Excel File that Allows you to Format Data After Copying from PDF File (Press Shift, Cntl, A)

Step 2: Copy the PPA data at the bottom of the HBS case study to a blank excel sheet (the first screenshot). The second screenshot below shows the messy raw data after you copy and paste it into excel.

Step 3 : Press SHIFT, CNTL, A sequence to get the menu to appear (it is essential that the Read PDF to Excel File is open and you see the SHIFT, CNTL A on the bottom status bar of excel). Then go to the Conversions and Adjustments Button and adjust the REPEAT ROW option.  These steps are illustrated in the screenshots below.  If you are having trouble, you can send me an e-mail to [email protected] . The menus that should appear are shown in the screen shots below.

When you have finished this process, there should be a second sheet in your file that is cleaned up.  The cleaned up sheet should look something like the screenshot below. Then you should add a couple of columns and you can make an analysis of the project IRR.

Step 4 : Insert a column for the construction period (assume a 1-year period) and enter the construction cost of $2.8 billion and the capacity of 2,000 MW for both units as quoted in the case.  I have illustrated a little excerpt from this below.

Step 5: Use the absurd assumption that the plant will run 8760 hours per year that is noted in the case (maybe the plant will get a sick day — have an outage of 24 hours in leap years). With this assumption, compute the volumes sold as the capacity multiplied by the hours to arrive at MWH. Assume also that the PPA applies to the entire 2,000 MW of the plant. Do all of your analysis in USD (not USD 000’s or USD millions).  In the case, the contract prices are in USD cents per kWh.  Convert these to USD per MWH through multiplying by 10. These few calculations are shown in the screenshot above.

Step 6: Assume that the contract structure is such that the fuel revenues in the PPA contract match fuel costs and the operating revenues in the PPA contract match the actual operating expenses. This means that the return is earned through multiplying the capacity charge in USD/MWH by the MWH.

Step 7: Compute the Project IRR on a pre-tax basis using the capital expenditures in the first year as the cash output and the combination of the capacity charge and the management fee multiplied by the volumes as the cash flow input.  Use the IRR function in excel. Now do the important part.

Part 5: Off-taker Analysis

If a project revenue depends on a PPA contract, then risk analysis of the project finance should include: (1) the incentive of the off-taker (the buyer of power) is to break the contract; and, (2) the financial ability of the off-taker to honour the contract are essential elements of project finance risk analysis. The Dabhol case was a classic case where evaluation of the off-taker was a crucial element of credit analysis.

To evaluate risks of the central PPA contract not being honoured, I would like you to compute the effects of the PPA on the prices charged by the off-taker in this section. My hope is for you to think past the fundamental legal structure of contracts and the SPV and examine the economics of the project.

You could get very sophisticated about calculating the effects of the PPA contractor on the off-taker the calculation, but for purposes of this assignment, assume that the revenues and therefore prices charged by the off-taker must be increased by the capacity charges and the operating costs.  This means you can make a pro-forma revenue calculation of the offtaker — MSEB — with and without the Dabhol plant. Once you have computed the pro-forma revenue increase, calculate the percent revenue increase that MSEB – the off-taker – must charge to its customers. Finally, as part of your write-up, comment on whether you think the percent increase in revenues will affect the non-technical losses, which is stolen electricity.

For the pro-forma calculation of the revenue increase and percent rate increase, you can use the India perspective case study that is available for download below. In this file you will find a couple of tables that show the revenue of MSEB before attempting to recover charges for the Dabhol plant. Tables that will be useful for this analysis are shown in the screenshot below the button. You can use the read pdf to excel conversion process for this just as you did for the PPA analysis file to do the analysis. Assume that the term Mus in the case study is the same as MWH.

PDF File with Dabhol Case Write-up from Indian Perspective Including Discussion of Finances of MSEB

To make your analysis of how much the capacity charge for Dabhol increases rates to MSEB customers, you should first convert the Rupiah to USD in the above table. This can be done by using the interest rate database file that is available for download. Once you have converted the numbers to USD, you can then use the 1998-1999 values to make a pro-forma rate calculation (Revenues in USD divided by MWH).  After that, make the same calculation, but add the capacity charges from the Dabhol plant to the revenues and compute the revenue per kWh after the plant is added.  Finally, compute the percent change in prices.

In making the calculation, you will need to convert the data in Rupiah to USD.  You can do this by using the file below or you can estimate the exchange rate using the graphs below. The graph can be downloaded by pressing the button below.

Interest Rate Database that Extracts Data from the FRED Database with Quick Updates and Flexible Graphs

Part 6: Risk Analysis

Given the contract structure, benchmarking, rate of return calculation and off-taker assessment, write a short credit analysis report. In the credit analysis report, use key credit issues where you write a question (e.g. this is the first large NGCC plant in India, what is the risk of capital cost over-runs).  Then you can answer how the risk is mitigated.  Alternatively, or in addition, you can make risk matrix where you organise risks (construction, operation, financial) and put the name of the risk in different rows. The columns can include the name of the risk, a description of the risk, mitigation of the risk, and the potential cash flow effect of unmitigated risk.

Part 7: Conclusion and Opinions

Find the article with the chronology of the project and write a sentence or two on the final resolution of the power plant. Comment on the comical jiberish (apparently taken seriously by students) that Harvard students are given before they go to Wall Street — in particular the statement that Enron was “Spreading the Privatization Gospel” made by Rebecca Mark, a Harvard Alumni who was behind the transaction. The first screenshot below is the amazing crap that Harvard students are given with the case.  The second screenshot is a picture of Rebecca Mark with and Indian official.

Given your analysis, write a couple of sentences about what happened to the project and the introductory quote in the HBS case about India “desperately needing” the kind of thinking taught at HBS .  Comment on what you think are the major errors that were made in the case.

Other Resources

I have included a few other articles and case studies that you can read. These articles may be amusing to read and provide some further background for the case.  I even understand that there is a Bollywood film about the Dabhol project modelled after the Godfather.

Comprehensive Article on the Dabhol Project from the Asia Times

Article on Political Pressure from the U.S. on India Related to the Dabhol Project

Article with Time Line for Dabhol Cronology with Description of Meeting between India PM and Dick Cheny

Article from the Infrastructure Journal Describing the Final Settlement Between Dabhol and the Indian Government

Article with Discussion of the Current Operations and Status of the Dabhol Power Plant After Sale by Enron

My Comments on Possible Answers:

My opinions about the case are probably biased and wrong.  But here they are. In terms of credit, this case demonstrates that no matter how many government guarantees, letters of comfort or other legal assurances you have, if the counterparty cannot afford to honour the contract, the project will have big problems.  Further if you have promises from OPIC and other insurances, they are not like a letter of credit where you can just go and collect the money as soon as a default occurs.  This is aggravated if there are published reports that can be used against you in arbitration.

Most importantly, the project reveals a fundamental question about project finance.  This question is whether having really good contracts is most important or whether it is more important to evaluate the economics of the project. I hope you think that both are important. The government of India was heavily criticized for not honouring contracts.  This was a valid complaint as private investment in the country dried up to an extent.  Enron and its banks were criticized for not evaluating the economics of the project and relying too much on the contract structure of the project.

I think the diagram in the case sucked.  First, there was a bizarre line from the SPV to the Bank to the Off-taker.  I would hope a better diagram would start with the PPA and have arrows pointing which way the money is flowing.  Second, each line should represent a contract.  Third, essential elements of the contracts should be highlighted.  For the PPA, contract I would put right in the diagram the required price increase to consumers.  I am in no way saying the diagram below is any better, but I hope it can be used to thing about risks.

The reason I included this question is to highlight a fundamental fact about project finance.  That is that there is no history — no historical trends from financial reports — in project finance.  No trends in EBITDA or ROIC to evaluate. No historic volatility in cash flows; no way to compare Debt/EBITDA ratios across different companies operating in the business. Project finance involves large capital investments  that must be maintained and produce not very exciting products such as roads, electricity, oil, prison buildings, hospitals, LNG plants etc.  The differentiation between projects generally comes down to cost structure and efficiency.

The second point about benchmarking is that it is very difficult to do on an objective apples-to-apples basis with real data. Maybe there are customs duties; maybe added transmission facilities must be built; maybe labour costs are different.  In the case of Dabhol, the cost of $2.8 billion relative to capacity of 2,000 MW or a cost per kW of USD 1,400 per kW is very high.  This is demonstrated in the table below.

While you may say the comparison with plants around the world is not appropriate; you could also say that comparison with other plants in India is not appropriate because other plants in India were charging high EPC profits and using the political risk premium excuse. The two tables below demonstrate premiums of the Enron plant compared with other plants.

In addition to benchmarking plant costs, the O&M costs should be benchmarked which in general is even more difficult.  The Dabhol fixed O&M costs appear surprisingly high.  This is demonstrated by comparing the cost per kW-year in the HBS case with current costs that are published by Lazard.  Costs in the case study were

In response to my question for this section, I was hoping for comments that the IRR was very high. I was also interested in statements that IRR does not measure the real profit because profit is made from O&M and EPC contracts. You could get even fancier and discuss upside IRR options from continuation of the PPA; use of the LNG terminal for additional business ventures; and, increasing the IRR from re-financing.

There is an issue in project finance that economic rents that are in the IRR amount to transfer of wealth from consumers of electricity in India to investors in the U.S.  A high IRR may be suggested to compensate for political risk; but it also increases political risk.

In project finance there is a basic rule. the project IRR must be higher than the cost of debt which is the debt IRR.

Now, some people have mentioned that the IRR as a statistic has flaws.  This is true.  There is the famous problem of multiple IRR’s when cash flows are positive, then negative, then positive.  There is the re-investment rate.  There is the theoretical problem of project ranking discussed by McKinsey that almost never happens. But the IRR still provides a good measure of growth in future cash flows.  The real problem with IRR is that: (1) it does not account for changing risk of the project; (2) it undervalues far-out cash flows when the IRR is high; and (3) it does not account for probabilities in staged investments.  You can find further discussion of this on another page of this site:

My hope in getting a response to this question is that you think about ways to evaluate risks of project counter parties in an objective manner.  The idea of the structuring diagram is to show that projects depend on revenues.  If there are no revenues, there is of course no money to pay O&M; no money to pay debt service; no money to pay taxes; and no money for equity.  When you perform risk analysis, the question is how to do it on an objective basis.  I think a good answer to this question would be to try and evaluate what will happen to the off-taker as a result of signing the PPA contract.  This is not an easy task as the MSEB, the off-taker may be able to sell more energy because of surpressed demand. But if the demand is not surpressed, then the following four things could happen that would increase rates:

• MSEB must pay the capacity payment of almost USD 600 Million
• MSEB must pay the fixed O&M payment of about USD 98 Million
• MSEB must pay the additional cost of Gas Fuel compared to Coal Fuel if the plant is forced to dispatch.  This could cost another approximately USD 300 Million

The next task is to see how much consumers are currently paying to MSEB.  This is a bit tricky because you want to find the time period before Dabhol had any effects on revenues and you need to find the number that is not distorted by subsidies. Finally, as the numbers are in Rupee and not in USD, you need an exchange rate adjustment.

Part 6: Risk Write-up

For this section I expected a write-up that ultimately (with hindsight), recognised that the off-taker risk was not really mitigated.  It was not even mitigated with the state guarantee.  For this you could walk through a scenario where MSEB cannot pay the PPA agreement and then political issues regarding whether three big American companies would not be paid.

In writing up the risk it can be good to state the risk as a question and then answer the question with potential mitigation. If the risk cannot be mitigated and it is a large risk, the loan may not be acceptable.

It may have been good to create a credit issue and then answer the question.  For example a question may have been phrased as follows:  MSEB will have difficulty paying the PPA contract.  In this scenario will the state government honour its guarantee.  The answer could then be your discussion about the recession etc.

Another question could relate to the World Bank report — The World Bank issued a report stating that the Dabhol plant is uneconomic. Does the World Bank report provide a means by which the government guarantees may not be honoured if MSEB defaults on the PPA contract.

I made a few comments about the issue of whether the plant was really economically viable and whether the whole thing made economic sense.  If the plant does not make sense should the bank lend money.

Review Concepts

In this final section I have included a couple of ideas that I think are important in project finance analysis.  I have listed a couple of bullet points and some ways that you may think about the issues.  I have also included references to my set of power point slides that describe project finance theory.

• The difference between the structure and analysis of availability projects and output projects — see slides 8-13.
• DSCR definition and use in project finance — see slides 67-74.
• Use of DSCR, LLCR and PLCR in different projects — see slides 75-84.
• IRR in project finance and why IRR is different from ROIC — see slides 89-94.

You can find some of these review concepts in the power point slides that are available for downloading in the button below.

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How to prepare for financial services case interviews

This article was written by Wasim Tahir , a former Oliver Wyman and BCG consultant who has worked in several financial institutions, including Credit Suisse, Lloyds Banking Group, and CDC Group (impact investing). Wasim has coached many candidates for case interviews with firms such as American Express, Capital One, and Credit Suisse.

Case interviews are a long-standing feature of the interview process at both financial institutions and consulting firms that serve financial services clients, like Oliver Wyman .

These employers use case interviews to assess candidates against the same dimensions as the world’s top management consulting firms. However, the content of the cases that they give is very different.

In this article, we explain these differences and provide some guidance on how to prepare.

What’s unique about financial services cases?

Financial services institutions and consulting firms like Oliver Wyman require candidates to demonstrate a solid understanding of the financial services industry. They assess this by using case interviews focused on financial services and by including questions about technical topics such as financial regulations, technology, and financial metrics.

Here are some examples of the kinds of questions you might be asked in a financial services case interview:

• What is the size of the market for credit cards in the UK?
• A leading online trading platform is looking to expand into new geographies. How would you decide which market to enter?
• A major bank is considering entering the cryptocurrency market. How would you evaluate the opportunity and risks involved?
• A bank is planning to launch a new credit card targeted at young professionals. How would you go about deciding the features of the card?
• A regional commercial bank has seen its profitability decline, despite stable revenue. How would you turn the situation around?
• A leading financial services company is looking to grow its personal loan business. How would you help it develop a customer acquisition strategy?

How should you prepare for a financial services case interview?

As a baseline, you should be able to excel in all the dimensions assessed in a case interview . The video lectures in CaseCoach’s Interview Prep Course cover all of these dimensions. The course also includes sample interviews, case material, and practice tools designed to support your preparation.

In addition, you should take the following measures to prepare for financial services interviews specifically:

• Form a helicopter view of how the financial system works in order to fulfill its key objective: intermediating capital.
• Learn about the role that different types of financial institutions and instruments play in the financial system (as shown in the illustration below).
• Understand the operating model of the type of financial institution you’re interviewing for. For example, the operating model of a lender – which will be different to that of a transaction bank or an investment bank – can be broken down into three key areas: underwriting, distribution and collections, and recoveries.
• Know the unique structure of financial statements and the metrics that financial institutions use to measure performance. These include key ratios such as Net Interest Margin and Tier 1 Equity.
• Be aware of the major economic, regulatory, and technological drivers that affect the industry.

Preparing for the assessment dimensions of the case interview and deepening your knowledge of the financial services industry should stand you in excellent stead for succeeding in a financial services case interview.

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Project Finance Modelling

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Easing complex transactions: project finance case studies, project finance is complex, which is a why a corporate trust partner with comprehensive capabilities is a critical piece of the puzzle..

Improving the country’s aging infrastructure is a top priority, and the $1 trillion Congress recently committed to infrastructure spending will likely kickstart a host of new building projects. At the same time, the American Society of Civil Engineers estimates that the United States needs to spend $4.5 trillion by 2025 to “fix” the country’s infrastructure.

What that means for stakeholders across the infrastructure industry is a growing pipeline of projects, along with the need for project finance expertise to help move projects forward. Bringing those projects to a successful close requires proven expertise, experience and strong communication processes, as well as an ability to work seamlessly with a number of parties and an ability to understand and navigate project finance risks.

As a leading global corporate trust provider , U.S. Bank has experience working on many complex transactions.

“We’ve seen many different approaches to these financings, and we have the ability to come to the table, apply our expertise from prior transactions in the documentation process, and help our clients reach the best outcome on how they’re going to put these complex financing packages together,” says Bob Kocher, managing director, U.S. Bank Global Corporate Trust.

That expertise was recently highlighted in two major project finance projects, where U.S. Bank served as a trustee in bond issuances in the capital stack of the Red River Diversion Project at the Minnesota/North Dakota border and the Central 70 Project in Colorado.

Red River Diversion project

In an infrastructure industry that is no stranger to large, complex projects, the Red River Diversion Project is a notable standout. The $3 billion project is more than a decade in the making, with numerous stakeholders and a mix of funding sources. It’s also a landmark public-private partnership (P3) project in the water infrastructure industry.  

The Red River Diversion project represents the first use of the U.S. Army Corps of Engineers’ P3 Pilot Program to reach financial close. The aim of the program is to improve collaboration between the public and private sectors, as well as develop a more efficient alternative financing model for future Corps infrastructure projects.  

The Red River Diversion project intends to provide permanent, reliable flood protection to the Fargo-Moorhead metropolitan area. The Red River serves as the state border for much of Minnesota and North Dakota and cuts through the center of Moorhead, Minnesota, and Fargo, North Dakota. Spring flooding in the Fargo-Moorhead metro has been a chronic problem for decades.  

The solution is the development of a 30-mile diversion channel. The Army Corps of Engineers is overseeing design and construction, with completion scheduled in 2027.  

The Red River Diversion project involved a number of intricate financing sources that were woven together, including developer equity, federal and state funding and $1.1 billion from local tax levies. The Metro Flood Diversion Authority worked with the U.S. Environmental Protection Agency to obtain one of the largest Water Infrastructure Finance Innovation Act (WIFIA) loans in the program’s history, at $569 million. In addition, project financing included $273 million in tax-exempt senior bonds issued through the Wisconsin-based Public Finance Authority.  

According to the Corps , the Red River Diversion P3 was an “innovative approach leading to significant gains in efficiency, productivity and resiliency” that saved the federal government $277 million and shortened the construction time by 10 years.  

As part of a competitive bid process, U.S. Bank was selected in April 2021 to serve as the bond trustee on the bonds issued by the Wisconsin Public Finance Authority, as well as filling additional roles as the account bank, collateral agent and dissemination agent.  

Once U.S. Bank was selected as trustee, it needed to get up to speed quickly with all documents, provide comments regarding duties and liability and communicate to all parties its views on how the transaction should work as it related to the daily activities of the trustee.  

“This trustee deal had a tremendous amount of document turnarounds as a result of the complexity of the transaction. It required attention to detail to ensure changes were consistent throughout all the documents,” says Angela Davis, relationship manager, Global Corporate Trust at U.S. Bank.  

Keeping communication and workflow on track is a testament to the U.S. Bank team’s diligence in tracking documents, as well as its proactive approach to the collection and distribution of project information and covenants.  

“Through our hands-on partnership and ability to work efficiently with other business lines inside of U.S. Bank, our client received everything they needed to keep this project moving forward,” says Davis.  

Collectively, the U.S. Bank team will serve as the operational and administrative end of the financing, following the documents, administering the movement of funds and making sure the money is moved from account to account properly. U.S. Bank will be responsible for the billing and collecting funds to pay holders of the bonds and senior notes through 2056.  

“P3 projects are the wave of the future, and U.S. Bank is at the forefront of that shift in how infrastructure projects are financed,” says Kocher.

“We can come to the table, apply our expertise from prior transactions in the documentation process, and help our clients reach the best outcome.” Bob Kocher, managing director, U.S. Bank

Central 70 project

Interstate 70, between I-25 and Chambers Road in Denver, is a key corridor that services nearly 1,200 businesses and provides an important regional connection to Denver International Airport. The  Central 70 Project  will reconstruct a 10-mile stretch of I-70, add one new Express Lane in each direction, remove the aging viaduct and create a four-acre park over a portion of the lowered interstate between Brighton and Colorado Boulevards.  

The Central 70 Project involves the refinancing of a 2017 Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, along with the financing of additional costs. As part of the refinancing, the U.S. Department of Transportation’s (DOT) Build America Bureau provided a new TIFIA direct loan with a reduced interest rate, allowing for additional loan principal increase to facilitate project completion.  

Besides TlFIA, the project is backed by the proceeds of tax-exempt private activity bond and taxable bond issuances, as well as contributions from the state DOT, the Colorado Bridge and Tunnel Enterprise, the High Performance Transportation Enterprise, and local and state entities .  The Series A bond issuance totaled $51,670,000 and the Series B bond issuance totaled $464,955,000.  

U.S. Bank served as bond trustee and acted in ancillary roles as the collateral agent and intercreditor agent, paying agent, registrar, transfer agent and dissemination agent. In addition, because bondholder approval was needed to issue the new debt in 2021, U.S. Bank stepped in and served as the tabulation agent for the existing investors.  

Key to a successful project finance deal is finding a partner with the expertise, resources and systems to streamline the process, such as tracking necessary compliance requirements and providing online reporting for the client. In addition, these complex deals often require a higher level of client relationship management.  

“There is a lot more client interaction than a typical municipal financing, because there is always something going on, whether it is requisitions being paid or the sponsor needing to post financials or updates that need to be disseminated to the market,” says Gretchen Middents, relationship manager, Global Corporate Trust at U.S. Bank. “So, it is a much more hands-on relationship as compared with other assignments that don’t have the same scope of documents and requirements.”  

In addition, working with a third-party trustee and agent to perform all project finance roles can produce numerous efficiencies, such as streamlining operations, coordinating workstreams from various parties and providing assistance for investors at every stage of the project lifecycle. Finding a partner with extensive experience servicing all debt vehicles can help guide decision-making with strategic insights and proactive solutions.  

“These projects are more of a team effort because of the complexity,” adds Middents, “and being able to rely on others within our organization is key to our success.”

U.S. Bank administers a variety of infrastructure asset types and has the dedicated expertise to assist investors at every stage of the project finance lifecycle. See our extensive suite of services for debt financing  here  or contact Lars Anderson at  [email protected]  or Alejandro Hoyos at  [email protected] .

Learn about U.S. Bank

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Disclosures.

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.

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Corporate Finance / Project Analysis Case Study?

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hey guys - so as part of an infrastructure IBD interview , I have to complete a project finance case study. it's pretty complicated and im not 100% sure how to approach it. just looking for some opinions.

the case study is basically asking to figure out how to finance the construction of a bridge, which is operational for 20 years.

the bridge has a construction cost of $800 million, spread out over 3 years from 2015 to 2018; operational costs of $7 million growing at a rate of 1.9%; a one time reward of $500 million paid upon completion; and revenues of $9 million growing at an annual rate of 2.5%. which pay off the operating costs and pay dividends.

I can finance it through a bank loan at 1.50% and a credit spread of 70 bps per annum, which prevents me from taking dividends. it also charges a commitment fee, which is an interest rate of 35% of the credit spread of the bank facility payable monthly on all undrawn amounts.

I can also finance it through bonds, with an upfront free of 200 bps , which pay 2.4% per annum and have a credit spread of 200 bps . During the construction period, they pay interest only. They must be fully amortized by the end of the operations.

I also have $50 million in equity that must be invested in the project.

how do I find the optimal amount of bank loan/optimal amount of bonds to issue to fund the project? I'm trying to build an excel model to calculate this and to maximize IRR . not looking for someone to solve it, just a general idea of how to approach it or some resources I could use. any ideas?

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