Financial Model For Irrigation Agriculture
Multibillion-dollar investments in irrigation Agriculture facilities over the past decades have boosted economies, and increased food production for millions of people around the world. This provides huge benefits for communities using reclaimed water for agricultural and technical needs. However, each new project must be carefully planned, as increasingly stringent environmental regulations and the high cost of capital make mistakes extremely costly for sponsors and investors. Project Finance for irrigation Agriculture remains the basis for the future success global food production, allowing the financial team to predict its response to changing conditions.
Havelet Finance Limited has brought together an international team of experienced professionals in project finance, financial modeling and project management to provide large companies with a full range of services for the implementation of irrigation agricultural system from A to Z. We are also ready to offer investment financing for irrigation agricultural projects in the amount of 50 million euros and more for a period of more than 10–15 years.
The concept of Project finance Modeling for Irrigation Agriculture Projects
The Project finance model means a model of interrelated financial parameters that ensure the achievement of the project’s goals. A high-quality financial model, on the one hand, expands the idea of the company’s future financial results and its success in the market. On the other hand, it allows the financial team to better control many factors that affect the development of the project.
In Irrigation Agricultural projects, this is an extremely important element, since the initiators of the construction of such facilities must take into account numerous legal regulations, social requirements, trends and financial constraints. The search for opportunities for effective analysis of uncertain situations related to the adoption of investment decisions and the choice of appropriate financial instruments leads to an improvement in the results of financial modeling.
The importance of the financial model as part of the business case for an irrigation agricultural projects has changed significantly in recent years. It has become one of the determining factors for the success of a project presentation to a lender or investor.
The main purpose of financial modeling is to forecast the project’s cash flow and evaluate its financial efficiency under threshold values of key input parameters. An adequate financial model is a very important tool in the process of financial evaluation of an Irrigation Agricultural Projects.
Sources of Finance for Irrigation Projects.
The large share among financial sources can be explained by a vague and complex process of attracting financial resources, especially in developing countries (unfavorable investment climate, underdeveloped financial market, etc.). The right choice of sources, schemes and methods of project financing based on a high-quality financial model plays a critical role in the future success of the project.
Self-financing of construction of for large industrial facilities can be carried out at own expense with the use of net profit and depreciation deductions. At the same time, the internal financial resources of a business usually cannot be fully used to finance large projects, as part of the net profit is directed to the growth of working capital, payment of dividends and so on. This practice causes many structural, financial and technological obstacles in running a modern business.
Therefore, most companies are actively raising funds from external sources, including long-term investment loans from commercial banks. In addition, in a crisis, many industrial enterprises are operating at a loss or are acutely short of financial resources to support investment activities. However, strict environmental legislation requires increasing investment in Agricultural irrigation management infrastructure. Therefore, companies seek to attract borrowed financial resources through long-term lending, including through the use of project finance mechanisms (PF). External sources of funding for irrigation agriculture projects can be funds from state and local budgets, as well as funds from investors.
Public funds and subsidies often fund targeted integrated programs that are of particular importance to the environment. Government financing of modernization projects can take the form of interest-free or soft loans. External sources of funding for Irrigation projects can be funds from state and local budgets, as well as funds from investors.
Public funds and subsidies often fund targeted integrated programs that are of particular importance to the environment. Government financing of modernization projects can take the form of interest-free or soft loans.
Building a financial model in the preparation of irrigation projects
The process of building a financial model for a large irrigation project can be conditionally divided into stages. These steps apply to irrigation agricultural projects as capital intensive investments with high technical complexity and environmental risk.
The first stage is preparatory. Before starting modeling, the financial team needs to carefully study the essence of the business processes of an environmental project. The input data (main financial parameters) of the model, the scale and level of detail of the modeling should also be defined. The second stage is the systematization and organization of the initial data.
At this stage, the main business processes and cash flows of the investment project are modeled. It is important that the relationships and calculations displayed in the model correspond exactly to the business processes that will occur in real world.
The other stage is the calculation of capital costs and accounting for fixed assets and intangible assets. The model should describe in detail the capital costs of the project, since they usually receive the lion’s share of the funds raised. When calculating capital costs, it is also necessary to take into account the periods of investment until the moment when the assets are put on the balance sheet of the water treatment plant and begin to be depreciated.
The last stage is the calculation of operating costs. Typically, these costs are projected based on industry standards and industry statistics. These calculations do not seem obvious, and their correctness largely depends on the professional experience of the finance team.
Our offering also includes project finance term loans, reserve-based lending facilities, export credit agency-backed loans, bridging loans and working capital facilities for project companies.
Brokers/Intermediaries who will refer business to us is entitled to 1% commission on the contract loan thus, after successfully closure of the transaction.