Hello and welcome to the Renewables Model.

We're going to spend this time taking a bit of a look at the model, taking a tour through it and just getting used to it.

These videos will be a bit longer than usual and that's because this is quite an involved model and the sections are a bit longer than your average workout.

If we take a look, you can see that we are modeling Sussex Wind, which is a small renewable energy, so it's a wind farm.

We're gonna be starting the project at the end of 2049, so effect via fictional year.

The project is in great British pounds in thousands, so it's not colossal.

You can see here the circular switch and it's on now that should definitely be off, so I'm going to switch that off.

That's gonna be important for the more tricky parts of the model.

There's quite a lot of circularity in the model and so we need to make sure that we're building with that off, that we're building switches and that we're being really careful.

You can see down here normal ways of looking at modeling in terms of styles, I've added two more styles, which are a little unusual.

That will just help us in terms of understanding the flow of building the model.

I wouldn't suggest building models with this sort of styling in it.

It's just really from a teaching and understanding point of view.

You can see that we've got yellow here and these are gonna be lines that we can't do in the normal flow and so we have to leave them, defer them, and then come back to them.

And then we've got blue and these will be lines with circularity and so we'll need to build switches around them if we're gonna be really careful. Taking a quick tour through the model then, and we won't land on any page in any detail because it would take too long.

You can see we've got all the assumptions in one place.

Now we've also got the outputs there and that's driven from the fact that data tables need to be where the assumptions are.

So if you're wondering why the outputs are here and not on their own tab, it's because they need to be able to control the assumptions.

We've then got the operations and so we've got our wind farm, we're going to model who we're selling to when we're selling inflation, that kind of thing.

We've got source and uses where we start thinking about financing, where are we going to get our money from and how much money do we need to get the project started. During the setup phase there'll be a great need for cash and then the project will actually be able to fund itself eventually.

We then start with our three statement modeling.

Now we've got the P&L here.

The P&L is quite simple in this model, but what isn't simple is the tax situation because what we're going to do is we're going to bring in some difficult taxes and we're going to model thin capitalization, which is a limit on the amount of interest the project can charge.

And we're going to model net operating losses NOLs.

So although this tab is notionally a P&L actually most of the work will end up being tax.

We then move on to the balance sheet and the balance sheet's gonna be quite straightforward, but it will give us a really nice check, which is that the balance balances.

And that's always a really nice reassuring moment when you get that integrity check and it all flows nicely.

You can see we're going to create a cash flow statement as well.

And then on the debt we're gonna create a sort of alternative cash flow statement where we take the debt wallfall and we use our cash to repay our debt if that's what's in the schedule.

And we're also going to work out what's available for distributions to shareholders i.e. dividends on this page.

There are actually a lot of outputs on this page as well.

This model's overall aim is to figure out whether we are in breach of various targets, covenants, rules of our lenders, principally rules around DSCR debt service coverage ratio, but also some others.

And what we're going to do is we're going to double back and some of the outputs right at the bottom here.

What we'll do is we'll try and figure out whether we're in breach and that will take from the debt tab and then eventually we'll be able to analyze some situations that we as the shareholders might be interested in the kind of P50 scenario as it's called, the most likely outcome.

And we'll be able to analyze it from a more credit point of view, which is the P90 more conservative view, or even the P99 if that was how you wanted to analyze it.

So it's important to note that some models, if you're going to work in this space, may end up sculpting the debt in reverse.

So they may take the available cash flows and then work out how much debt can be afforded within the bounds of various targets and cash flows available.

This model takes the opposite approach and so what it does is it takes the debt as an input and so we are going to input the debt and then we're going to explore the debt levels through data tables and figure out whether we're in breach.

Okay, so now we've taken a tour through the model.

Let's get into the individual tabs.