We've raised a lot of equity, but especially in 51 there is still a lot of slack and so we're going to have to draw down on debt. The funding need is in this line here and it's very important not to get mixed up between the funding need and say just CapEx because the funding need will contain the debt service reserve account eventually once we work that out. The funding need is being covered by the equity financing in the first year, but in the second year and if our model changed, there may be a need to get additional debt. This is what we're going to put into this line. We're going to say the funding need to the extent that it's covered by equity will drive how much debt is necessary.

The resulting debt will be analyzed into the different types debt and if I pulled out to the right, we should find there is a need for debt in the second year and it breaks down 70 30 into senior and junior.

Ambition of the next section is to create the IDC.

The IDC is a period where you're able to charge the interest but put it on PPE as opposed to let it hit your P&L. To work out the IDC, we're going to need to work out the levels of debt and the way our model's behaving right now. That's quite simple because we only appear to have one level of debt, but if our model changed, we may draw more in the next year, which would mean that our interest would be different in the next year and we may have a different period of construction and so a longer IDC period. So we need to make this flexible. The first thing we need is the balances and we don't need to do a full debt waterfall and that's because we're only modeling the CapEx period and it being the CapEx period. There should be no real operational income. There should also be no paying down of debt and that means that we can safely just add up all of the debt and assume that will be the debt that creates interest that will be capitalized during this period.

To do this, we're going to use a summing trick, which we've used a couple of times.

We're going to say senior debt, we're going to start there. We're going to seem to just end there as well, but we're going to lock that and we'll lock it just a column and that way when we copy it down, it should work. If we then copy that to right, you'll see the amount drawn, it increases and then it stays increased. That's going to create the interest and we're only interested in the interest that will be subject to IDC. This means we're going to need to first off actually calculate the interest. So if we lock that to column, multiply that by the average, like that.

But because we're only interested in the IDC amount, we're gonna attach that to the flag that we've got at the top of the page, the IDC flag. Because we're gonna copy this down, we better lock this to row.

Let's copy that to the right and down. And you can see we do have an IDC amount. There's only one qualifying amount and that's because of two things. First off, there is no debt in the first year and that's because we've used our equity portion of the package by preference to avoid interest and the cash flows that come from it. There is debt in the second year and beyond, but beyond is no longer the IDC period.

We then have the total IDC.

We're now gonna do a bit of doubling back and given that we've got the IDC, we're gonna plug it in up here. This is our first circular line. You can tell it's circular because if I try and grab the total IDC there, Excel gives me a warning and it just flat refused to do it. And I'm lucky today it doesn't always give me this, but it's given me the arrows, which is very helpful for error checking. Now, as you're probably aware from our other modeling materials, the problem with leaving this the way it is, is that any unintended circularity will not be picked up very effectively. I didn't get a warning there.

And so what we do is we're going to wrap this in a switch.

I've called that circ switch.

If that's one we're gonna say go ahead and do your job.

And if it's not, we're gonna say don't. Now you can see that's removed the circularity from the view of Excel. And so if I were to create an unintended circularity, I would get a really nice warning that relies on me having iteration off.

It also relies on me modeling with the switch turned off because this model will become very circular. Indeed, it is a good idea to build with the switch off.

We would like to see that working however. So we'll take a moment, turn on iteration, turn on the switch, and you can see it's happening there. And if you've got an excellent memory, You may spot that that's actually a different number to the one we had before and that's because extra borrowing means extra interest. Extra interest means extra borrowing, et cetera.

Now before we move on, we should turn off the switch, turn off iteration to get back into that clean building mode and make sure that everything is working properly.