In a project, including renewable energy projects. We spend money on capital assets before we obtain any revenue. If there's no revenue coming in, but there's a lot of expenditure going on, buying or building capital assets, we need some funding to bridge the gap in time between when we're spending, buying or building these assets and when some revenue starts to be earned. We usually fund projects with a combination. Shareholders money, which would be call what we call equity and borrowings. We negotiate debt facilities and then we draw down those debt facilities as we need the money. The order in which that funding is drawn and repaid is known as a cash waterfall. Equity finance is normally used first. Up To the limit that the shareholders have agreed at financial close that they will contribute to the project. The reason equity goes in first is to protect the lenders from being overexposed. If it was the other way around, if the project was funded entirely with debt first, and then when the lenders reach the limit of how much they've agreed to contribute, they then go to the shareholders and say, it is now time for your contribution to the project. If those shareholders were unable or unwilling to come up with the money and contribute the equity, then the lenders would have a serious problem. They would be the sole funders of the project. I would have 100% exposure to that. That is not what the lender wants, they just simply want to be a get holder. They don't want to own 100% of the project. That's the reason equity normally goes in first. When that equity funding has topped up right the way to the limit that the shareholders have agreed the amount that they were gonna put in, then we start to draw down the debt.

On some projects, equity and debt are drawn together in a set Proportion, 50 50, 60 40, 80 20, whatever that proportion is, and Each time funding Is needed, the amount is split and the shareholders put in some, and the debt is drawn down as fixed proportion in each period, when funding is needed. That's what we call Harry Pasu, which means effectively we would have a constant debt equity ratio. To model this, the formula that we need is the amount of equity that we need to use in any one period is the minimum of how much do we need to fund and what's our cash shortfall from investing during that period. Compare that to the amount of equity not yet used, which is how much that the shareholders agree to put in minus what they have already put in to date for loan or debt finance. We need to know or at least be able to estimate when and how much debt will be drawn. The formula we need here is again, look at the funding that you need. If the funding needed is bigger than the amount of equity that is to be used, then we'll need to draw some debt. So take the amount of funding we need minus the amount that the shareholders put in the equity that they're using. That's the amount we'll draw on debt. If the funding needed is not more than the equity that is used, then we don't need to draw any debt at all, so we'll draw zero. We'll build up the debt finance using cork screws or base calculations if you prefer that term. To do that, we would also need to be able to estimate or obtain from documentation from the bank if it's already been negotiated, what the interest rate will be, what fees need to be paid, what the repayment terms are going to be, how much over what period of time, and the hierarchy of which debt gets repaid in which order. There could be multiple pieces of debt and we need to understand which one of those will come first, which one second, third, etc