In my previous posts, I’ve talked about the importance of Sources and Uses of Funds Statement during construction phase and the visualization of the summary S&U during construction.

Download Free Excel Template for Summary Sources and Uses Chart in a Project Finance Model

In this post, I want to talk to you about another interesting statement and that is the Sources and Uses of Funds during operation. The Sources and Uses of Funds during operation is basically the reshuffling of the cash flow waterfall statement.

Download Free Excel Template and manual for a typical cashflow waterfall in a Project Finance Model

Cashflow waterfall communicates the priority of cash outflow items but the operational S&U breaks the ranking and focuses on how the revenues are used throughout the project life .

One thing that makes the operational S&U more interesting is to reflect costs and expenses on a per unit basis. to give you an example, in a power project where the output is the kilowatt hours of electricity produced then reflecting all cash outflows per MWh will give the information about the different components of the electricity tariff and this is an interesting piece of information especially when you are negotiating the project tariff.

Sources and Uses of Funds During operation in a project finance model

To add an operational Sources and Uses of funds in your project finance models, follow the below steps:

Step 1: You need to start with a cash flow waterfall. If you don’t have a cash flow waterfall in your model, check out my blog post and free template. For more on cash flow waterfall and access to a free template check here.

Typical Cash flow Waterfall in a Project Finance Model

Step 2: Separate cash inflows and outflows

Step 3: Group Cash outflows into couple of main items, for example: Opex, Debt Service, tax and Equity.

Step 4: Then depending on what you want to reflect, you can express it on a per unit basis of the project’s output or as a percentage of revenues .

Link to download the Excel workbook

That’s it for me for this week. I am curious to know how you can apply the same in your own project finance model. Until next time…

Hedieh

The Financial Model Detective