Course information & QA session – Renewable Energy Project Finance Modeling

Recorded session September 2020 with Haydn Palliser 

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Video Transcript 

Welcome everyone to today’s Renewable Energy Project Finance Modeling information session.

I’m really glad you’re here, and it’s nice to meet you. If you’ve got any questions throughout, please just jump in and use the chat function here on Zoom, and I’ll answer them as soon as I can.

I’ve also got some time at the end, where you can just ask any questions, so if you feel better just waiting, also feel free to do that. Okay, we’ll get into it, and I’ll keep this as brief as I can, trying to keep it at 15 minutes, so you can ask any questions you’d like to.

Before sort of diving into detail, I think it’s worthwhile just introducing ourselves. I think if you’re taking a Financial Modeling Training Course, you would love to know that the people actually leading the course, have experience and they know what they’re doing. And this is us on the screen, that’s me down there on the bottom left. And Dan, on the bottom right. And with Pivotal 180 courses, you’re being taught by Dan or me.

We’re not people who’ve just studied this academically, we’re also not people that have just a couple of years of experience. I’ve got a few more gray hairs than that. We have invested in, or advise on billions of dollars worth of transactions, over a number of decades, and all across the world. And we worked on all the major continents, with one exception of Antarctica, then if you have products in Antarctica, we’d love to help. And I said all course are led by Dan or myself.

Now, my introduction, being a Financial Advisor, in Project Finance for 15 years. Covering Renewable Energy, Infrastructure, Mining, and I’ve lived in New Zealand, Australia, Singapore, Abu Dhabi, Germany, the UK, and the U.S. So, a lot different countries. After working in Sydney, for a company called Navigator Project Finance, I then led polarity business in the Americas, and the Europe, Middle East, and Africa region, before I became a partner at Mazar. And I was co-head of Infrastructure Energy in the Americas. And I was also Head of Financial Modeling there for a period of time as well. So I’ve led valuations, transactions, financial modeling engagements. And as part of my job, I’ve trained over a thousand analysts all around the world. I’m also a lecturer at Yale University and an adjunct professor at Columbia.

Dan, same but different. He’s been in the Renewable Energy space for around 25 years. And he started his career at General Electric. Where he ultimately became the Head of the Renewable Energy Investments Team. And at the time they were the largest investor in Power Assets in the U.S. He then moved on to Goldman Sachs, where he was in the Special Situations Group. He led private equity investments in the Renewable Energy space, and he ultimately seeded a couple of very, very well known companies in the U.S. One, which was San Edison upon which he was on the board of. Well before things went astray with San Edison. After that, Dan raised his own fund, about a billion dollars in 2009, which is no easy feat. And during that time actually, Dan found this real passion for teaching. And Dan is also an adjunct professor at Columbia and a lecture at Yale, and we actually met each other at Columbia, now co-teach there.

So we both have a lot of real world experience, but we really have a true passion for teaching. That’s taken years to develop what we’ve actually developed. And we really do truly care about how people assimilate information. And so that’s really, a little bit about us.

So why take our courses?

Look first and foremost, you may wish to distinguish just yourself from others in your team or distinguish your whole team from others in the market. And a lot of people will come into the courses to improve their best practice, modern skills. And we really try and focus on what the concepts are, that are important to the transaction. And best practice models are of course, very important to project financing. A good financial model is a way to impress your colleagues or maybe a counter party in a transaction. So you don’t wanna have a nice information pack and a terrible ugly looking model. You need both your model and the accompanying documentation to be slick and professionally presented.

It’s also a chance to consolidate your understanding of how legal documents that are tied together with the model and how to structure and size and advance them. Look, if you’re just looking to get a job in the sector, financial modeling is a critical component of both the interview and a large part of your job when you start. So this course will help you absolutely ace the interview. And the first few years on the job. And job interviews also contain questions around the commercial legal aspects of a deal. So you need to be able to speak concretely about deal structures and the documents required.

It’s also a chance just to take a step back, sometimes we spend our whole life involved in transactions or in a particular sector, and we never have a chance just to step back and say, hey, why am I doing this stuff? How does this tie together with what Josephine over there does every day? So it’s a way sometimes to just connect the different pieces of a transaction gain that broader understanding and make you ultimately a stronger Project Finance Professional.

And so who attends our courses? Well, number one is the students. Clearly people looking to get a job in a sector that MBA students or fresh graduates out of undergrad. But by far the two biggest cohorts start, first of all with what we call the first to fourth year analysts and associates. And when I say that, I really mean people in their first five years of financial modeling or transactions. And the type of things we teach on the course are directly applicable to their roles. The things we do in our course is probably what they’re gonna be doing the next day in their role. So it’s very, very applicable to what they actually do.

We also get a lot of what are called, mid-career career changes or MBA students. Perhaps you’re an engineer you’ve been dealing with construction contracts for the last five or six years, or you’ve been working on a bond trading desk, and you wanna transfer the skills you already have into a project finance skill sets. You need to understand how to build these really complex financial models and how all these legal documents tie together. Those concepts could be new, but you already have a pretty good basic understanding of finance. So those first five year analysts and associates and mid-career career changes are the biggest cohort.

But we also have a lot of more senior participants. Particularly people in, say business development roles who don’t have to get so involved with all the details of the project finance transaction. But they wanna understand it a little bit more. Otherwise it could be people who maybe have less of a project finance background, but they’re responsible for either running a financial modeling team who reports to them. So they make decisions off the financial models. And they have to ask the right questions. You know, what questions do you ask in order to check that the analyst has done their work properly? Or just to evaluate their work as a whole. So you don’t do this work every day, but you have to review it. And again it’s a chance to step back and to see the big picture.

And what I’d say, the more senior participants, but not necessarily more senior, also include government employees. Perhaps you’re a government employee and you negotiate against the private sector. You have to evaluate an independent power producers bed to build a solar power plant or a wind project and connect to your grid. Well, to do that, you need to pay that back calculate the economics of the private sector. You need to understand how the private sector thinks and this cause is focused on a developer or a Equity Investor developing and owning a project. It’s a good way to step into their shoes and understand how they think about a transaction.

Right so what do we do? Of course we build a project finance model from scratch as a Project Finance Modeling Course. But Dan and I firmly believe that you can’t learn modeling, if you don’t understand the broader transaction. It’s not just about modeling. You need to learn how things tie together. What are the risks? How they mitigate it. How do the contracts deal with risk? And what are the important parts of the model? We’re not just modeling coders.

Many of the other trainers in project finance are exactly that, they’re just modeling coders. They don’t cover the documents, the risks, you know, how to forecast wind, and build the world’s best financial models like we do. So outside of building the best project finance models, you learn the project finance concepts and contracts. What are those different contracts and how do they tie together? You know how to size debt and how to structure the repayments and to model the output covenants in the deal. How to calculate things like generation curtailment and degradation. Know how to forecast wind, and you importantly learn about the different probabilities. You may have heard of things like P50 and P99. What are those and how do they work? and how they’re relevant. Operational calculations. I build up the revenues and the costs, etc. Know how to create scenarios and sensitivities calculate tax and depreciation. Learn how to build three way financial statements, your cashflow, waterfall, your income statement, and your balance sheet. Calculate investor returns for different types of investors. The debt service reserve account. Outputs for a model.

A financial model is only as good as how it’s presented. And you learn how to optimize a transaction to achieve a certain target return. And to do that, we also have an introduction to VBA. So you can learn the basic macro as required in typical project finance model. And for those of you who are in the U.S we also have an introduction to tax equity. Really crazy, weird structure for those not in the U S but critical to anybody working in the U S and it is worth saying that we have a Tax Equity course. Which is about the same length and duration as our renewable course for anyone in the U S, that’s a highly recommended course after having completed this particular course.

So we have a number of different ways we teach the course as well.

First there’s online self-paced learning, and basically you can buy one of these courses online. And that includes our Renewable Energy Project Finance, Project Finance and Infrastructure, and our Tax Equity class. You can buy them online. It’s $800 per person, there are some discounts, including a 50% discount for students. There’s around 20 hours of content, and you have 12 months access to this course. And you can just learn at your own pace. There’s videos explaining concepts. There’s XL downloads, and there’s complete model walk through line by line, through the whole model from start to finish. And if you don’t finish this course, and there’s around 20 hours of content. It probably takes most participants around 50 hours to complete the whole thing. Then you can extend the license after, for a hundred dollars a year after the 12 months. And we are always adding new information and new things to this course or continue to do so over time.

In addition to that, we have sort of a premium product, which we call the live streamed courses. And this is an extension of our public courses, which were the in-person courses. And so, again, here, you can just buy a course and it’s open to people from other organizations. So it’s a great chance to network and meet others. And it used to be a three day in-person class, but we now run this as nine sessions. Each session is two and a half hours long. The reason for that is, people can’t sit in front of a computer for eight hours and learn, it’s just too hard. So it’s two and a half hours with a 10 minute break in between. So you can really focus on what you need to learn. And there’s a couple of good things about this session. One is if for you can’t make one particular session. Well then we record the session and that’s uploaded to our online platform. So you can go back and review that class. And if you buy the livestream course, you also get full access to an online self-pace class. And the way we sort of run this, with nine, two and a half hour sessions, is they’re spread typically over three weeks. And there’s homework provided in between each class and the homeworks there, because everyone learns at a different pace, We provide homework in between classes and the homework’s there either for you to review concepts, so you can either watch a recording, or we may recommend a particular lesson on the online self-paced platform that you can review before the next class, or it’s to dive deeper into topics. things that we just don’t have time to review in the live stream class.

And the biggest benefit of the live stream class outside of that networking opportunity is you can ask any question you want. What that means is we cover a lot of topics that are not contained in the online course. So for example, someone might ask us about, how do you deal with this particular risk in a hydropower project or the biomass project. And, you know, of course we want to be very responsive. So we might dive a little bit deeper into those topics. So just covers things that we would never have a chance to cover in the online course. When you do the livestream class, you also can submit your homework and we’ll provide detailed feedback on your model. So it’s an additional benefit. And the exact time and date we run this course do vary a little bit, and one of the biggest benefits now is livestream courses. We can run them across different time zones, so we can run it across a time zone that covers the Americas and Europe. We can cover time zone that cover all across Asia and Australia and New Zealand as well. So we try and be as flexible as we can with these courses, such that we can reach out to as many people as possible.

What’s the biggest benefit of livestream classes? Well, first of all they’re live, so you can ask whatever question you’d like to ask. Second, we provide feedback on your model. A lot of people also like the fact that it’s more scheduled out rather than the self-paced learning. So, you know, forcing you to actually achieve certain milestones. And finally, there’s obviously a networking component to it as well. You can meet other people and talk to those people, right.

Tailored courses are our most premium products. And we always think that context is an wonderful thing. It’s a great way for students to retain information. Just because, if you’re doing something that’s similar to the work you do every day. Let’s say you only do solar projects. Well, let’s just discuss solar. Lets discuss solar projects in Ghana, because that’s where you spend most of your time. That context is really helpful. And we can tailor courses to anything, you know, Biomeds in Ganra, hydro project in Vietnam. In the past we’ve tailored projects to, you know, hydropower in Malawi, including the local taxes. We’ve tailored course is for government organizations that need to negotiate against the private sector. And given our experience that Dan and I collectively have, we can also tailor things sort of to a much wider variety of topics, such as corporate governance or asset management or whatever topic is important to you. And these classes can be run virtually. So like the live stream courses, and we use Zoom for that. So there’s, you know, Q&A boards, we share our screen. We can see each other, but we can also run these in-person to the extent that we’re permitted to as well. Everyone who joins the tailored courses also gets free access to the online self-paced learning. And of course we have homework just like the livestream classes. Now, again, typically these are run over two and a half hour sessions. But we’re entirely flexible based on your organization’s needs.

Now one final sort of way that these courses can work, We’re having a lot of interest in this right now is sort of combining online self-paced learning with live stream. So, for example, an organization may buy 10 licenses for an online course, but they want to  ensure that people are hitting certain milestones and maybe there’s also some aspect they wanna dive deeper into. So a way this may work is they buy an online self-paced class. And then instead of having nine sessions, they may say, have three sessions. One is introduction and to set up the timetable for when people should finish work. Number two might be to review people’s progress so far and to dive deeper into a particular concept. And maybe three is an entirely tailored session designed to maybe model out a term sheet from a particular client. Or to consider, say, adding battery storage to a portfolio of solar assets. So entirely flexible is the key out of all of this.

Okay. So any questions? I’d love to hear any questions, I saw a couple pop up and I left most of those until the end of the session. So I’ll answer those ones first.

So question one. The live sessions, how frequently do they occur and which is the week?

They’re all two and a half hours long, and typically they’re twice per week. But depending on the need of the people, we may vary that a little bit. How we share the week is, typically Tuesday, Thursday, but again, for these sessions, what happens, we normally pull together people. Once we have that group of people together, we arrange the dates that work best for everyone. And look, if you miss one session, well, there’s a recorded session available to you as well.

Second,  question, is there a way to transition from the online course to the live stream course? Absolutely so, if we go back here, let’s say you start the online self-paced learning, and that goes, you know, three months into it, you think look, I wanted a live stream course. I’m just not managing myself or look, I just think I’m better in this live stream environment. You can absolutely do that. You can simply transfer it to the live stream course and you’ll get a full credit for the online course. So easy, way, to do.

On the online course  Right, for this next question, I’m actually gonna jump in and do a quick demonstration of the online platform. So let me just change my screens here. So here’s our online platform. So in the course play here, and on the left hand side, you can see that there’s a number of different chapters, these chapters are the broader topics within which we have individual lessons that cover sub topics, such as what is project finance? How investment structures work, etcetera, etcetera. And these lessons could be a white screen video like you see here, but I can just press, play and watch with a full transcript underneath. It could also be useful download, or it could be a model walkthrough, which is a complete step by step of how to build the model. And for example, if I open up “Term loans” and I skim through these topics. Now we typically recommend most people should just start from the beginning and go to the end. But let’s say, look, you know how certain bits of these work. You can just come down here, click on, say this video And quickly skim the transcript to say, look, is there anything here that I don’t know, that I should want to go back and have a look at? Or perhaps you’ve watched the video and you think, look, I wanted to understand this thing about, let’s say liquidity. So I can copy that and go up into my video and press play. In the previous lesson And now I have my subtitles up because I clicked here and enabled English subtitles. And we are looking to add additional language subtitles later. But if I expand this out and I copy in here, “liquidity”, for example, it takes me to the point of the subtitles with “liquidity”. I can simply click on this and it will bring me to that point in that video. So I can quickly go back and review what this liquidity thing is. so to speak.

Now, in addition to the individual lessons, there’s also discussion forum. For example, under “generation and grid”, we can see, let’s say for example, “random sampling”, Here’s a video.

You’re buying gear. And on the right hand side here, there is a discussion forum. And the discussion forum here is, got a question from Leigh on the Use of Normal Distribution curve. Leigh’s posted a question and Dan has responded to this particular question beneath and now everyone can see this, all of these questions unless the person posting the question, hides it for whatever reason, they just don’t want their name to be apparent.

Okay, so the question that had been posted, made me dive into the online platform was, can you see, do you have access to what others are posting your discussion session? Yes, you do, but you can make it private if you’d like to.

Next question’s what level of details does the course go into tax accounts and tax basis? Class a and class B both partners. How has that discussed or set up?

I think this question relates to tax equity as an, how far do we go into sort of the tax equity aspect of it. Now in this course, we introduce the concepts of things like disproportionate allocations, back leverage the reason for tax equity, the main tax credits, tax losses, etcetera. But we don’t go into tax capital accounts and tax basis. So if you’d like to learn more about tax equity and all of these capital accounts, like 731 a gains, or 734 step-ups or sponsored buyout options. Then you can join our Tax Equity course. That goes into full detail of all of those capital accounts. Very exciting topic. Is there any overlap between the Tax Equity course and The Renewables course? There is, but very minor, you know, The Renewables course’s really a precursor or a prerequisite for Tax Equity. Unless you’re already really familiar. If you don’t know how to do debt-sizing, if you don’t know how to do tax losses, if you can’t calculate maker’s appreciation or the different tax credits, then you’re not ready for the Tax Equity course. I highly recommend this course First. The only overlap really is a little recap on some of the most basic concepts of tax equity, but there is very little overlap between the two courses.

Next question, do the live courses ever take place on Saturdays and Sundays?

Not typically, but if there were a request for it and other people were willing, then we could certainly look into it.

These are good question, keep coming. Okay, so do you focus only on Renewable Energy as a whole? Or do you at any point dive into specifics? Such as wind energy, solar or do you focus on renewable energy as a whole?

well, this course is really primarily we focus on wind and solar. And the model, for all intents and purposes could be used for wind solar or hydro. Operationally they’re, pretty simple from a financial modeling sense or pretty similar, I mean. And we do go into specifics of each of those, of wind and solar, the live stream courses, or the tailor courses can go into any particular technology you’d like to go into. There’s no issue there, but the primary focus is wind and solar. So if you’re in wind or solar, this course is equally good for both of you.

And another question, is the course designed solely for people who work in the field or for anyone else interested in renewables?

Look, first of all, there’s no prerequisites. If you have never been in finance, you have never used Excel, you can do this course. If you’ve been working in the industry, doing modeling for a year, this course is still valuable to you because it may cover things that you’ve just not seen before. You’ve not seen everything in one year, a guarantee of that. And it helps tie together things like how documents tie to the model. If you’re just interested in renewables. I think there’s still a great course. You might not want to do all the detailed modeling, but you may be interested in sort of how the stuff ties together. You might be interested in how people make decisions using a financial model. So I do think it’s as relevant to you as well.

All right. I think that’s all the questions. So thanks everyone for joining. If you’ve got any further questions, please just reach out at any point in time, happy to help and to answer any additional questions. And I do hope to see you, be lovely to see you in our lifetime course where you can interact, but do not worry there’re plenty of discussion board questions. You know, many of the lessons have four or five different discussion questions and Q and a about things that go well beyond the course, just out of interest or a deal people are working on. So hopefully get to see you soon. Thank you.