What new project finance analysts and associates must know and how to train them

Hiring good analysts and associates is difficult enough. Training them is even harder.

Dan Gross and I have spent a big part of our careers both growing and developing large teams either in advisory or investment roles. Managing a team is a role that requires constant effort and the guidance available to new team managers as to what you need to teach your team is limited. What do you teach them? We hope this blog can help

Perhaps you are responsible for hiring and training a team. Or perhaps you are an analyst or associate hungry to understand what you should learn this year. The aim of this blog is to provide some guidance to you covering:

1. The attributes required to be successful in project finance
2. What analysts and associates must do on the job
3. The knowledge required of all analysts and associates by the end of their first year
4. How to train your team

Attributes required to be successful in project finance

Although there are some relatively specific things an analyst or associate should learn, I want to start by sharing my thoughts on the attributes that are required to succeed in project finance. I have personally made some great hires (and some not so great….that did not work out quite as well….). I am sharing my lessons learned!

My view on the most important attributes of an individual:

1. An analytical mindset. The role will include constant analysis of various structures and possibilities. The role requires constant problem solving.
2. Curiosity. Why is the most important question. Nothing should be taken for granted and knowing the reason for something is often a way to help solve a problem. Analysts and associates need to identify problems and propose solutions.
3. Attention to detail. Analysts and associates need to be willing to cross every t and dot every i. Read and re-read, model and cross-check model outputs through many, many iterations of documents and models.
4. Relationship driven. Like any role, you must be capable of developing good working relationships with co-workers and clients. This doesn’t mean ‘bond over football’. It means you’re a good listener and communicator with respect for others and a shared passion for the quality of the work you do.

Prior experience in project finance or having learned project finance at University is of course helpful, but this is not a requirement. There are many talented people who have not had a chance to learn project finance skills at University. Do not omit talent because their background is different to yours. Many of my best hires had no finance experience and went to schools most people have never heard of.

What analysts and associates are required to do on the job

There is no standard role in project finance. That is why I love it. But there are some typical tasks that analysts and associates must complete. Outside of usual office job functions (like running meetings etc), the common tasks for analysts and associates in project finance roles include:

1. Documentation
   1. Reviewing large commercial agreements
   2. Summarizing these to highlight the main commercial terms (often called ‘Term Sheets’)
   3. Seeking clarification on documents (coordinating with various parties, including legal counsel)
2. Financial modeling
   1. Developing new financial models
   2. Modifying a template financial model or a financial model provided to you by another party
   3. Reviewing financial models including the source of all inputs
   4. Running scenarios to structure the deal and sensitivities to stress-test the project (see blog for more info here)
3. Due diligence
   1. Review documents and models to identify project risks (and of course find mitigation measures)
   2. Seek quotes, define scope, and manage external consultants (i.e. tax, technical, and financial advisors)
4. Preparing and delivering presentations
   1. Preparing documents summarizing the transaction for the purpose of marketing the project or such that senior decision makers can make an investment decision. These documents are often called a ‘Confidential Information Memorandum’ or simply ‘Information Memorandum’ (‘CIM’ or ‘IM’ for short).
   2. Presenting presentations to support decisions

Variation in role type

The amount of time spent on each of the above tasks will depend on the type of organization you work for. The work required also depends on the size of a company. As a generalization, smaller firms will require a larger range of tasks than a larger firm, just because smaller firms have less people. Some roles require more modeling, others almost none. It really depends, but the core skills required don’t change.

An upcoming blog will highlight the differences in the roles of developers, lenders, equity investors, and advisory shops, but the same core skills are required in each role.

Knowledge required within first year on the job (hint: it’s not all modeling)

This is a big list of items that analysts and associates should know after one year on the job. It’s hard. And this is the minimum requirement!

Although modeling may form a big part of the workload, you can’t expect analysts and associates to perform without a broader understanding of transactions.

1. The typical structure of project finance transactions (i.e. corporate structure, limited vs unlimited liability, non-recourse nature, tax structure etc)
2. Who the various participants to a transaction are and how risk is shared between them
3. The structure of legal documents (i.e. what reps and warranties are, positive and negative covenants etc)
4. The main aspects of core Agreements including the Facility Agreement, EPC, O&M, Offtake Agreement (i.e. PPA, Project or Concession Agreement)
5. 1. How to create a Term Sheet from these documents

5. Applicable industry and technical concepts
6. How to build a financial model and analyze the deal, including

1. 1. Calculate operational cash flows
   2. Size and structure debt
   3. Calculate output debt ratios (DSCR and LLCR) and returns
   4. Prepare 3-way statements (i.e. need accounting knowledge)
   5. Create dashboards that help with decision making

We all work long hours. How do we transfer knowledge to new employees?

Dedicate time to training

Most importantly, you must dedicate time as a team to run training. The best training is often based on real life projects that your team are working on. Consider conducting a formal debrief after completing a project and discuss openly what worked well, how you overcame challenges, and what could have been done better. Create standard training material that can be used in future years. Don’t have someone create it from scratch each year.

I feel I can be honest with you. My challenge to the above was always “finding the time”. The first people to get busy in a team are the ones with experience. They can get the job done quickly. But they are of course also the individuals most equipped to train.

Consider outsourcing some training

Training is important. A well-informed team performs well, and training opportunities elsewhere is often cited as a reason for leaving an employer. Sometimes you must also recognize that you don’t have the time and/or you don’t have material that is readily available. I would never recommend outsourcing all training, but there are options when it comes to foundational training in project finance for analysts and associates.

Encourage industry training and memberships

It is important your team members have an opportunity to network. This is not just for the benefit of meeting others, but also as networking events often have an educational component and a chance to discuss industry trends. Why not make attendance at some industry events compulsory for your team?

There are plenty of options, such as:

• Young Professionals in Energy (North American centric)
• IPFA (a global industry body for infrastructure and project finance)
• CFA institute (generally limited in terms of project finance support, but broad-based content can be helpful)

Provide access to news and industry updates

Your team needs to be abreast of updates in the market. I have dealt with this in two ways in the past:

1. Provide access to a leading subscription service with market intelligence
2. Have weekly team sessions where we discuss relevant news, particularly in relation to the specific work we do or our clients. I found this particularly useful as analysts and associates are so busy on project delivery a short overview is easiest for them to digest.

Pivotal180 training courses teach the skills required

In addition to training our own teams, we have spent years developing content designed specifically for analysts and associates as well as others newer to the sector (or even those who want a refresher). We have best-in-class training content for renewable energy, project finance & infrastructure, and tax equity professionals.

Our courses do not just cover modeling. If you need your team to understand legal documents, EPC contracts, or perhaps how wind forecasting is done, then we can help.

We offer:

1. Self-paced online training
2. Live courses taught in-person
3. Live online courses (‘livestreaming’)
4. Tailored courses

Our tailored courses can be created to match a specific deal even down to country specific taxes. We believe that context is important to retaining knowledge.

It is sometimes hard to decide what is best for your team, so in the next blog we will share our view of the benefits of each form of training.