Over spreadsheet models
Historically, project finance models use spreadsheets to analyse the projected cash flows on a project. The use of spreadsheets is fraught with dangers which are well recorded in a variety of publications.
The following quotes come from a recent European Spreadsheet Risks Interest Group publication
"end users are putting their companies at risk by setting up spreadsheets without realizing that this demands the discipline of traditional programming."
"the presence of a spreadsheet application in an accounting system can subvert all the controls in all other parts of that system."
"Sarbanes-Oxley implies managers can't ignore un-controlled spreadsheets"
"We nearly always find that modellers have no formal training in good modelling techniques, and that their organizations do not have even the most rudimentary internal modelling standards"
"Spreadsheets are a powerful modelling language, mainly used by amateur programmers on a diversity of applications which are typically deployed throughout a wide range of different business functions"
Why use a proprietary program?
Spreadsheets are perfectly adequate for simple models typically developed early in the planning phase. They may also be good enough when the returns on the investment are sufficiently high that you do not have to worry about the correct calculation of the cover ratios.
However, such models are rarely adequate for proper planning. A typical model for a major project will consist of many tens of thousands of formulae, sometimes hundreds of thousands. The effort in developing an individual model for each project is high. The developer has to grapple with circular references and coding. In practice, such models usually have many errors and are poorly documented. Furthermore, by ignoring such factors as the accounting and loan currencies, the dividend policy and the sinking funds, many spreadsheet models overstate the returns to the investor, often by many percentage points.
Using a well-tested proprietary model allows the analyst to ignore the detailed formulae and to concentrate on the important factors which can affect the viability of the project. By examining the basis rather than the details, the analyst can make a much more valuable contribution to the success of a project.
It also allows him or her to compare different projects on a level basis.
Why use Promoter?
The Formulae are built-in
When setting up a new project the user goes through a two step process. In the first step the user invokes a wizard which guides him/her through a series of dialog boxes. These collect the information needed to assemble the modules with the formulae appropriate to the required settings (industry, funding basis, taxation basis, accounting basis and so on). Choosing the structure takes just minutes. In the second step, the user then inserts the input figures (or selects choices from drop down boxes, etc) through a series of tabbed dialog boxes. The system guides you through key input data and it ensures that you introduce figures between predetermined limits.
At no stage does the user have to compose any formulae.
The Macros are built-in
A spreadsheet may be a very powerful tool, but there are instances when you find that you have produced a model with circular references. You can often overcome these by using macros which contain iterative functions to arrive at the correct result. Typical examples are:
1) setting the ratio of local to foreign currencies in the capital cost in a planning model
2) setting the initial debt to equity ratio in a planning model
3) setting the dividend payments when these are restricted by debt service cover ratios to be calculated for future periods
In Promoter, the iterative calculations are built-in
The Audit Trail is built-in
Who opened the model and when? Who made the change to a specific input and when?
Promoter records these automatically.
Spreadsheet models are rarely tested until they are audited at considerable expense by third parties. During its development and whenever any change is made to it, Promoter is put through thousands of unit and integration tests to ensure its integrity.
Promoter has many features which are unavailable in a typical spreadsheet model. See Features.
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