This workout is quite complex and it is asking us to model what happens in this project throughout the construction period where we are going to take out a loan in stages to fuel our ambitions of construction. And then we are gonna start depreciating that in the operational year. But we're also gonna start topping up the CapEx with maintenance CapEx and that maintenance CapEx will have a different depreciation profile to the construction CapEx. And by that period we will also have capitalized some costs during the construction period in the form of the interest. And that will also need to start amortizing. So there is a lot going on here and let's just break it down and take our time with it.

The first thing we should do is figure out how much loan we have. And what we're gonna do is a little base calculation and we're gonna say. How much loan will we start with? Nothing. How much loan will we add? Well it's the loan required for our construction CapEx because we'll need to borrow to fuel that. And then how much loan will we end up with? And we can actually pull that all the way to the right to year nine. And that's because it will start pulling in zeros. You might think, hold on, don't we need a loan for the rest of the CapEx? No, because by the year of operation we'll have nice inflows as in the project will be earning money and that will be able to afford the maintenance CapEx.

The next thing is the interest expense and that will start accruing immediately. So it doesn't wait. And what we'll do is we'll take an average of the beginning and the ending and then we'll multiply that by the interest rate and just remember to lock that because we're about to copy it to the right and that will be the interest expense. And again, we can take that all the way over to the right and if I show you actually a formula, you can see I've taken the average and then I've taken it, multiplied it by the locked interest rate and then copied it all the way to the right. Now you can see the interest is ramping up, but what's gonna be happening is that that interest will be in two phases. This interest here will capitalize because the construction period does not have an income statement. It only has a balance sheet and all costs are capitalized.

Then when we switch over to the operational period, there is an income statement and that income statement will start absorbing this interest expense. So we won't capitalize that interest during that time.

Okay, next, let's start taking the CapEx that we built during the construction period.

Then we can start putting in the maintenance CapEx and we can model all of the appreciation. And again, this is quite a fi leap so we're gonna take our time.

The first thing to realize is that this entire thing is a giant base. So we can say the beginning will be the last ending.

Now the construction CapEx will be the CapEx in the starting period. And let's go and find that. And you can see it's up here and it'll be safe to copy that to the right because it starts becoming blank from the operational period.

We've gotta be a bit careful with the capitalized interest because although we're gonna point it to row 16, we've gotta be careful because if we were to blindly copy that all the way to the right, we would start capitalizing during the operational period. And so we're gonna need to copy to the right carefully in two stages.

The other thing we'll need to be careful of is that there's no depreciation in the construction period. So this will currently be a blank.

Similarly, there is no maintenance CapEx yet, so there's really nothing going on. And that means that there's no depreciation on the maintenance CapEx, there's nothing going on there either. And that means that initially the ending balance, although we'll make it everything, it's not summing up very much yet. And we've gotta be really careful. I'm gonna copy that to the right and what I'm gonna do is just make uh, really clear, okay, this is the construction period that's done now.

Okay? And we're gonna switch over to the operational period, which means certain of these lines will survive and other lines will need to replace and then there'll be new ones. So first off, we'll just go line by line. The beginning balance is fine. Let's take that all the way to the right.

Okay, the construction CapEx, that will actually work just fine because it'll start throwing zeros. So we didn't need to do that. Now the capitalized interest, if we actually took that to the right, we'd be wrong now because we'd keep capitalyzing during the operational period. So we've gotta skip that. And then the last one, the ending balance, that one will work as well. Okay? And so what we need to do now is it's awaiting the new stuff. We're gonna start depreciating and start spending on maintenance and then subsequently depreciating that maintenance. So let's do the depreciation on the construction CapEx. Now it's tempting to go and fetch the starting balance, lock it and then find out what the period is, okay? Which is over there, it's kind of hidden. It says construction period 10 years and then lock that. And it's tempting to say, well that's the depreciation and because the period ooh look keeps going. Didn't even notice that because the period is quite long. We might get away with that. Let's say we just copied it to right there, we'd get away with it. But if we take the whole thing now and it's quite nice that I didn't see that until just now. Okay? If we take the whole thing that we've just created and copy that all to the right now, let's just see, yeah, we still get away with it. Okay? Now let me make it really clear because it's starting to get quite complicated. So if for starters, I put all of my formula here, I have just said, okay, take the initial 325.

Okay, 323, divide it by the 10 years and then depreciate over those 10 years. And I've got away with it. But if I were to copy that one cell to the right and so the project was a little bit longer, then what would end up happening is I'd end up with negative capital and that wouldn't be good. So what I've gotta do instead of what I've done, okay, is I've gotta almost start that one again. So let me get rid of this stuff and what I've gotta do is I've gotta wrap this stuff in a minimum, okay? And I've gotta say yes, go for it if that's lower. But if the opening balance on the construction CapEx is lower, then take that instead. And now I can copy that to the right confident that if the project got a little bit longer, then that would not go through the the floor. Okay, so that's the construction CapEx done. Next, let's do the maintenance CapEx. And again, this is fiddly, so we're gonna take our time with it.

Now you can see that every year in the operational period we're gonna be spending 30.

And you can see that every bit of maintenance, it has a three year life. Now, before when we were doing construction, we were okay to do the depreciation all in one go because although the construction CapEx was happening in different years, it all started depreciating in the same year. Now, unfortunately for us, the maintenance CapEx is not that easy. And although we're gonna get the same maintenance contract, CapEx 30 every year, that 30 will start depreciating one year after that 30 will start depreciating one year after itself. That 30 will start depreciating one year. And and so we're gonna have this kind of diagonal situation where we're gonna have to create a depreciation profile for every purchase of the maintenance. And so what we're gonna need to do is say, alright, grab that and then let's be careful.

We want that to copy to the right but not down. So I'm gonna lock the 22. So if I copy it to the right, I'll grab the one to the right, but if I copy it down, it, it won't budge. And then I want it to divide by that 3 and I'm gonna lock that. And then I'm actually gonna do something a little bit naughty. I'm just gonna hit enter there and I'm gonna copy to the right and I'm not gonna build a minimum there. And that's just in the interest of time. You could build a minimum at that point and make it quite fancy, but I'm just gonna keep it really simple. And what I'm gonna do is I'm gonna grab that block and copy it. There, there, there, there, There, Okay. There, There.

And we started to fall off the end of the project. So what I'm gonna do is I'm gonna get rid of that lot, okay? And I'll just make sure that everything is working there. So I'll get rid of that. I'll just prove that it's okay. So you see that's based on that 30, that's based on the next 30, that's based on the next 30, et cetera. And so you can see that it's a little bit of a fudge, but I didn't wanna spend the time to create the minimum there. And I'm satisfied with that. And so what we've got is every time we're spending 30, subsequently the year after, it'll start to depreciate away. And you can see that not every year makes it into our schedule. And that's because our schedule's only 10 years long. And the upshot of all of that is that it's quite a complex interplay. We've got a shifting of the dynamic between the construction and the operational period. And we have quite a complicated depreciation profile for the maintenance CapEx.