Contingent equity LC fee: What is it and how to model it
Originally published: 02/11/2021 09:21
Publication number: ELQ-69671-1
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Contingent equity LC fee: What is it and how to model it

This is a manual and Excel template aiming to explain issue around contingent equity in a project finance deal

Description
This manual and Excel template contains information about contingent equity and issues around it in a context of a project finance transaction.

- Explains what is contingent equity
- What are the key issue regarding contingent equity during contract negotiations
- How to include LC fees related to contingent equity in a project finance model

The manual contains 7 pages on text and images explaining the issues related to contingent equity. The concept is explained through a story to give the user a better understanding on how the topic of contingent equity can be addressed and dealt with in real life situations.

the Excel template is a simple but complete project finance model. For the sake simplicity, the financing fees like interest during construction are not included in the construction budget.

The Excel template contains the following worksheets:
✔️QA: A worksheet aiming to keep track of questions and answers on the financial model.
✔️Inputs: Contains the model inputs structure in form of scenario analysis.
✔️Scenario Output: A tool to keep track of scenarios.
✔️Summary: Summary key inputs & Outputs like Summary Sources and Uses of Funds Cover ratios, and Shareholder return.
✔️Guide: Contains the color codes used in the model, and model structure.
✔️TableOfContent: List all worksheets in the model with links.
✔️Mastersheet: You can use it to create a new worksheet.
✔️Time: Calculation of the different timing flags and counters, used as time reference throughout the model.
✔️CapEx: Calculation of construction cost breakdown
Financing: Includes:
- Calculation of sources and uses of funds during the construction period.
- Calculation of disbursement profiles
- Debt drawdown and repayment profiles
✔️Rev&OpEx: Includes :
- Revenues of the project
- Opex calculation
- Account receivables
- Account Payables
✔️Tax: Includes calculation of:
- Depreciation
- Corporate Income tax payment
✔️Return&Ratios: Calculation of debt and equity ratios, including the debt service coverage ratio (DSCR), and equity IRR
✔️IFS: Cashflow, balance sheet and income statement on periodic basis using time inputs from "Inputs" sheet.
✔️Checks: contains model error and integrity checks

You can use the manual and template to include the LC fees related to contingent equity into your own project finance models or use it for educational purposes.

This Best Practice includes
1 PDF manual and 1 Excel template

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