Infrastructure Financial Model: Hydropower Dam

Financial Model, Hydropower, Infrastructure, Renewable Energy

10-year Financial Projections, 5-year Financial Projections, Budgeting, Cap Table, Cash Flow Analysis, Cash Flow Projections, CFO, DCF Model, Debt Schedule, Debt Service Coverage, Discount Rate, Excel, Financial Analysis, Financial Feasibility, Financial Model, Financial Modeling, Financial Planning, Financial Projections, Financial Statements, Financing, Forecast, Forecasting, Income Statement, Investing Cash Flows, Investment Multiple, Investor Cash Flows, IRR (Internal Rate of Return), Joint Venture, Know-How, NPV (Net Present Value), Private Equity, Private Equity Waterfall Distribution Models, Pro-Forma, Profitability Analysis, Return on Invested Capital (ROIC), Return on Investment (ROI), Revenue Projections, Scenario Analysis, Sensitivity Analysis, Startup Financial Models, Terminal Value, Three Statement Model | Three Financial Statements, Valuation, Venture Capital

Video Overview:

A hydropower dam is considered an infrastructure project. Infrastructure projects typically include large-scale public works such as roads, bridges, airports, and utilities like water supply and electricity generation. Hydropower dams fit into this category as they are significant constructions designed to generate electricity, control water flow, and often provide other benefits such as irrigation and flood control. These projects usually involve substantial investment, long-term planning, and maintenance, which are characteristic features of infrastructure projects.

I did my research when looking into the properties and key assumptions that are needed to come up with the potential power and electricity that a dam can generate. The key factors include head (height), flow rate, and dimensions for what the water is flowing down through. I have denominated all measures in meters, which is used to figure out the total watts of power produced. There are assumptions for uptime, efficiency, and kWh pricing over the 20-year period.

A large part of constructing a dam is the financing. Where are you going to get the money from and how expensive will it be? This model has two sources to balance between. There is an interest-only loan with options for accrual or not as well as assumptions for converting that into a regular term loan at the end of the defined interest-only period (usually the end of the construction period). The second source is from investors / or operator capital. The model solves for this last piece after taking all other factors into consideration. The minimum cash balance will be the minimum investment required.

I’ve fully integrated financial statements into this template, so you will see monthly and annual Income Statement, Balance Sheet, and Statement of Cash Flows. I’ve also included a DCF Analysis, IRR, Equity Multiple and a joint venture waterfall option with IRR hurdles. You can do a lot with this financial model.

The revenue assumptions that define how much energy is created are adjustable for each year. The fixed operating costs are dynamic and can start at varying points in the future. The primary variable expense is measured as a cost per kWh transmitted. You also have staffing configurations and a separate capex section that defines other depreciable items that may not be included in the construction costs or subject to financing. For construction costs, there are over 100 slots to define how much various things will cost per month and this can be used for multiple years as many hydropower construction projects will often take 3-7 years to complete, some even going to 10 years.

This model will tell you if the expected future cash flows produced will be worth the initial investment based on the defined assumptions. There are lots of visualizations to make the results more digestible to a regular viewer.

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