Project Finance

Project ratings primarily reflect the amount and stability of future cash flows as well as the creditor’s position in the event of the project being liquidated. Frequently, no historical data is available.

CASH FLOW AND RECOVERY OF PROJECTS

The purpose of a project rating is to assess the performance of an investment in a specific project generating cash flow of its own (e.g. solar parks, ship finance, real estate, wind farms etc.) on the basis of a project plan and analysis of its economic viability.

This involves answering the following questions for example:

• What overall flowback can be expected and what risks result in deviations from the forecast?
• How great is the probability of the capital employed being recovered at the end of the investment period at least (in nominal or real terms)?
• How great is the probability of the investment vehicle (fund, SPV ….) becoming insolvent, i.e. what is the appropriate rating for project finance from the creditor’s point of view?

Material and particularly also uncertain assumptions underlying the project plan (including variables in the business environment) are described transparently and the realistic extent of deviations from the plan identified and systematically evaluated. We systematically identify technical, economic and legal risks in the realisation and operating phase. The simulation of systematically analysed planning risks (“stochastic financial model) reveals the frequency of illiquidity and overindebtedness scenarios and, hence, the probability of insolvency.