The main difference in the accounting of project finance is to do with the construction period versus the operational period. So if you think about a timeline from the very beginning of the project to the very end of the project, we can broadly split that into two key phases. The first phase is the construction period, which is obviously the shorter period.

This is the period in which all of the investment goes into capital expenditure and any other costs which were involved in getting the project up to operational status. This means that these costs will get capitalized. It's completely obvious that CapEx would be added to PP&E property, plant and equipment, but other costs to do with the construction period, such as salaries of the planners, interest on funding. Everything else like that will also be treated as fixed assets, gross PP&E or intangibles, they'll get capitalized. When it comes to modeling, we split this between the hard cost, which is CapEx and soft costs, which are intangibles. On the funding side, we have debt and equity financing, which will support the investment, and we put those into a sources and uses of funds. When you get to the operational period, that's when we'd start to see an income statement. The revenues and costs will be seen in that income statement, and all of the costs that you previously capitalized will start to find their way into that income statement. Through depreciation and amortization, we'll have three financial statements at this point. The new income statement, the balance sheet, and the cashflow statement. You can do a balance sheet and cashflow statement during the construction period, but it won't tell you very much. The financial statements are much more easy to follow once you enter the operational period. Let's look at an example of CapEx spend during the construction phase and depreciation in the operational phase. So in this case, you'll notice that we have a line for both construction and maintenance CapEx and the construction CapEx only happens in the first three years when the project is being built. And then in the operational phase, we have maintenance CapEx. Below we've got the depreciation calculation, and you can see that each year of the construction phase where we're spending a hundred million, it's accompanied by depreciation of 5, and that strongly implies that the depreciation period of the construction CapEx is 20 years. Notice, however, that the operational maintenance CapEx of 30 million only starts depreciating the year after for simplicity, and that depreciation is 3 million. This means that although we're spending 30 million, we end up with depreciation of 3 million, and that strongly implies a much shorter depreciation period of 10 years. This is normal and is generally reflected by These type of projects. Another thing we'll see in projects is that we generally build up working capital even in the construction phase. So for the plant to be operational, you need to buy raw materials, and these will need to be bought during the last year of construction ready for operation. And that means we need an additional bit of investment or funding for that. Then if we look at the sources and use of funds down here you can see we've got a set of assumptions for debt financing and equity financing as a percentage, and we've got our uses of funds being CapEx, other costs and the working capital. Then we're financing with debt and equity and notice that the debt and equity increase in a pro-rata basis. So as we draw down on debt, we'll also draw down on equity, and this will maintain a leverage percentage at 55 to 45%.