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IN CASHFLOW WATERFALL IN PROJECT FINANCE
Cashflow Waterfall Introduction
The Cashflow Waterfall ensures that each cashflow item occurs at the correct seniority to other items. This article outlines key categories of cashflow items and how to present Cashflow Waterfall in comparison to Cashflow Statement in a Project Finance Model. In Project Finance, a project’s cashflow is summarised using a Cashflow Waterfall, which shows the priority of each cash inflow and outflow. The cashflow waterfall ensures that each cashflow item occurs at the correct seniority to other items. The cashflow waterfall becomes especially important when illustrating debt repayments of many debt tranches with reducing seniority. The figure below is a high level illustration of a typical cashflow waterfall. Each category will be separated into individual line items, such as individual operating costs. It clearly shows that by going down the page, the user is able to identify the timing and seniority of each cashflow and the highlighted key cashflow lines.
Period Start Period End Construction Operations Jan-07 Dec-07 1 Jan-08 Dec-08 1 Jan-09 Dec-09 1 Jan-10 Dec-10 1 Jan-11 Dec-11 1

Cashflow Waterfall
Revenue Spot Sales Interest Income Total OpEx Variable OpEx Fixed OpEx Total CapEx Expansion CapEx Exploration CapEx Total Cashflow before Funding Funding Debt Equity Total Corporate Income Tax Working Capital Adjustments CFADS Debt Service Interest Principal Total Cash Available for Reserve A/c Reserve: Addition Reserve: Release Cash Available to Equity Dividends Paid Net Cashflow Cash Balance B/f Cash Balance C/f 6,975 (6,975) 16,919 (16,919) 16,797 (16,797) 27,438 37,382 37,259 73,265 73,265 88,685 88,685 88,732 88,732

Key categories of cashflow Items
A cashflow waterfall is simple in its approach, as all cashflow items are placed in the order in which they occur. The main categories of a cashflow waterfall, in order of occurrence are: • • • • • • Revenues: Operating