Technical Guides

Technical Assumption Review for Energy Models

Technical assumption review is the discipline of checking an energy model's resource yield, degradation, availability, and O&M cost assumptions against their independent, external sources — technical reports, equipment specifications, and O&M contract terms — rather than only confirming the model is internally consistent. This guide sets out how this review should be structured and sequenced, as a distinct discipline from a structural formula audit.

Technical Due Diligence

Technical due diligence, in the transaction context, assesses the physical, engineering, or technology condition of a target's assets — plant and equipment condition, technology infrastructure and intellectual property, or, for an infrastructure or real estate target, the physical asset's engineering and construction condition. This is distinct from the "technical guide" content category this Knowledge Centre itself uses for modelling how-to guides; here, "technical" refers to the engineering or technology substance of the target asset, not the financial model. Its findings translate into capital expenditure and asset condition assumptions in the transaction model.

Tenant Mix Modelling

Tenant mix, the composition of tenants by category, size, and covenant strength across a multi-let asset, is a value and risk driver independent of any individual lease's own terms. This guide sets out how tenant mix should be modelled as its own schedule, how co-tenancy dependency between an anchor and surrounding tenants should be represented, and how concentration risk should be reported to a reviewer separately from lease-by-lease detail.

Terminal Value: Perpetuity Growth vs. Exit Multiple

Terminal value, representing the cash flows a business is expected to generate beyond the explicit forecast period, is calculated using one of two standard methods: the perpetuity growth (Gordon Growth) method, which assumes cash flow grows at a constant rate forever, or the exit multiple method, which applies an observed market multiple to a terminal-year financial metric. Because terminal value frequently represents 60 to 80% or more of total DCF value, the choice of method and the resulting cross-check between the two is one of the most consequential technical steps in the entire valuation.

Toll Road Operations Financial Models

A toll road operations financial model represents the asset's ongoing traffic-driven revenue, pavement and structure asset renewal, and toll escalation mechanics once the road is in service. This guide covers how to build that operations-phase model: traffic forecasting methodology and its inherent uncertainty, pavement lifecycle and resurfacing cycle scheduling distinct from a bridge or structure's own renewal cycle, and how toll escalation formulas should be modelled against the underlying concession or regulatory basis.

Tornado Analysis for DCF Valuation

A tornado chart ranks a DCF's key assumptions by the size of their individual effect on value, presenting each variable's output range as a horizontal bar sorted from largest to smallest impact, producing the characteristic tornado-shaped visual. This guide sets out how to construct a tornado chart from a DCF model's one-way sensitivity outputs, which variables are typically included, and how a tornado chart complements rather than replaces the two-way sensitivity tables and scenario summaries addressed elsewhere in this Knowledge Centre.

Transaction Due Diligence Best Practices

This page synthesizes institutional best practice across the full M&A and Transaction Due Diligence domain into a single reference, drawing together the workstream coordination, model-risk, and process governance disciplines covered in depth elsewhere on this Knowledge Centre. It is the capstone page for this domain, intended as a starting orientation for a reader new to the domain and a quick reference for an experienced practitioner, in both cases pointing to the full dedicated guide for any practice that needs deeper treatment.

Transition Finance

Transition finance funds carbon-intensive activity that is credibly moving toward a lower-carbon state, distinct from green finance because the underlying activity is not yet environmentally clean. This guide covers how a credible transition plan is assessed as a condition of transition financing, the instruments used (transition bonds, sustainability-linked loans with step-up KPIs), and the greenwashing risk specific to financing activity that remains carbon-intensive at the point of financing.

Transition Risk Models

Building a transition risk model quantifies an entity or portfolio's exposure to the policy, regulatory, and market shifts of decarbonisation, carbon pricing exposure, demand-shift exposure, and stranded asset risk, run against paired transition scenarios. This guide covers how each exposure channel should be quantified and how the resulting risk should be aggregated at portfolio level.

Transmission and Grid Models

Connecting a power project to the electricity grid involves interconnection capital cost, ongoing transmission losses between the point of generation and the point of sale, queue position risk in congested interconnection processes, and potential responsibility for network upgrade costs beyond the project's own connection. This guide covers how each of these transmission and grid mechanics should be modelled, distinct from the generation and revenue mechanics covered elsewhere in this pillar.

Treasury Model Structure

A treasury model forecasts a company's cash and liquidity position at a shorter horizon and finer granularity than the three-statement model it draws from, and adds mechanics the standard forecast does not need: a rolling daily or weekly cash position, cash pooling and intercompany funding between group entities, headroom against committed facilities, and FX and interest rate exposure on non-functional- currency cash and debt balances. This guide covers how to structure the cash position build, how cash pooling and intercompany loans should be modelled without double-counting group cash, how to size facility headroom against a minimum liquidity buffer, and how FX and interest rate exposure are surfaced without duplicating the debt schedule's own mechanics.

Upstream Financial Models

Upstream financial models project revenue and debt capacity from a depleting reserve base using a production decline curve rather than a steady-state or growth volume forecast common to most other industries. This guide sets out how upstream models are structured around exploration and production economics, reserve categories, decline mechanics, fiscal terms, and the reserve-based lending structures that finance the segment, the foundational technical grounding this domain's asset-level and commercial analysis content builds on.

Vendor Model Assurance

Vendor model assurance is the model-specific counterpart to vendor due diligence — an independent structural review of the seller's transaction model, commissioned by the seller and prepared by an independent advisor, for distribution to multiple prospective bidders alongside a vendor due diligence report. Its purpose is the same efficiency logic as vendor due diligence generally: substituting a single, independently verified model review for what would otherwise be duplicated structural review work by each bidder, provided the reviewing advisor's independence is genuine.

Version Control for Financial Models

Version control for financial models is the systematic management of changes to a model over time, ensuring that each version of the model is identifiable, that all material changes are recorded with their date and author, and that previous versions can be recovered when needed. Unlike software version control systems (such as Git), financial model version control is typically implemented through a combination of file naming conventions, an in-model change log, and an archive of previous model files. The FAST Standard and the ICAEW Financial Modelling Code both require a version control protocol as a core component of institutional model governance.

Waste-to-Energy Models

A waste-to-energy project earns revenue from two distinct sources: a tipping fee paid for processing incoming waste, and electricity revenue from the power generated by combusting that waste, both of which depend on the same underlying waste supply and processing plant availability. This guide covers how to model this dual revenue stream, waste supply and putrescible feedstock risk, and how plant availability differs in character from a generation-only asset.

Water Utility Operations Financial Models

A water utility operations financial model represents regulated tariff revenue, a buried network asset base with a fundamentally different renewal profile from above-ground infrastructure, and non-revenue water, the gap between water supplied and water billed, as a distinct operational and financial metric. This guide covers how to build that operations-phase model: regulatory price control mechanics, buried asset condition assessment challenges, and how non-revenue water connects to both revenue leakage and asset renewal prioritisation.

Whole-Life Cost Modelling

Whole-life cost (WLC) modelling discounts every cost an infrastructure asset incurs across its full lifecycle, acquisition or construction, operating cost, routine and major maintenance, renewal capital, and disposal or decommissioning cost, to a single present-value figure, so that competing asset or design options can be compared on total economic cost rather than initial capital cost alone. This guide covers how a whole-life cost model should be built: the cost categories it must include, the discount rate question, and why comparing options on capital cost alone systematically favours the option with the highest deferred cost.

Wind Farm Financial Models

A wind farm financial model specializes the base power project model structure with technical output mechanics specific to wind generation: a wind speed distribution converted through the turbine power curve to energy output, wake effect losses from turbine-to-turbine interference within the farm layout, and turbine class selection matched to the site's wind resource. This guide covers each of these wind-specific mechanics and how they should be built into the model.

Workbook Design and Model Architecture

Workbook design and model architecture is the specific skill of deciding how a financial model's worksheets are ordered, how a reader moves through them, how cell types are visually distinguished, and how sheets and files are named. It is distinct from the broader engineering principles covered in Spreadsheet Engineering and the policy-level standards covered in Model Standards — this guide addresses the concrete layout decisions a model builder makes before entering a single formula. A well-architected workbook is not a matter of taste — it determines how quickly a reviewer, lender, or successor analyst can navigate the model and trust what they find.