As AI reshapes how we build models, knowing exactly what we want to build matters more than ever.

I want to start a series of discussions about project finance model structure, and I am going to begin with what I consider the backbone of any project finance model: the timeline.

Every infrastructure project goes through three phases: development, construction, and operation. The first question you need to answer when building the model is a simple but important one: where should the model start? Should it start at the development start date, the construction start date, or financial close?

You might say: I work for a fund that only invests at the construction stage, so why should I care about the development phase? Or: I am an investment officer at a lending institution that injects funds at construction, so what is the point of starting the model from development?

Development costs are going to be part of the construction budget. Even if you are not investing in the development phase, you still need to understand what those costs look like. There will be discussions with all parties about the development fee, about remuneration, and about what lenders and sponsors can each accept as legitimate line items in the construction budget. To have those conversations properly, you need to look at the development costs, understand them, and benchmark them against market standards. Starting the model at the development start date and building out a sources and uses of funds table for the development phase gives you exactly that.

There is another practical reason. Starting from development forces you to begin incorporating actuals into the model early. You build that mechanic during the pre-financial close phase, so it is already in place when you need it. This makes the incorporation of actuals post financial close significantly smoother.

If you want to get started, I have put together a development phase sources and uses of funds template that you can use directly in your model:

https://www.eloquens.com/tool/nNaLtg5k/finance/project-finance-models/development-phase-sources-and-uses-funds-manual-and-excel-template

Next time, I want to continue talking about the timeline and discuss what I consider a very important and often underestimated decision: model periodicity.