Financial modeling and economic feasibility analysis

Financial modeling, economic feasibility analysis and valuation analysis is a core part of most AWR Lloyd assignment work. For project financial models we focus in initially on building up a set of assumptions and scenarios. We do this through a combination of our own experience, networks and databases, site due diligence, our client’s information and databases, engineers’ estimates and public sources. In most cases an independent technical consultant or engineering advisor will be appointed by the client and their cost and timeline estimates will form the core part of a ‘base case’ set of assumptions.

Key assumptions (depending on the industry) we focus on will normally include project construction timeline, capital expenditure, operating cost structure, feedstock and raw materials pricing, demand and utilization scenarios, off-take pricing, depreciation, tax, debt finance and the cost of equity capital.

AWR Lloyd develops detailed financial models which can be linked to market demand models and other pricing models to generate sensitivity and scenario-based conclusions in relation to potential net present value, IRR and payback. Where appropriate or required AWR Lloyd will give its view on the financial and economic feasibility of the project based on the analysis provided.

For example

AWR Lloyd provided financial and economic feasibility studies for two underground rock cavern oil storage projects in Vietnam for a joint venture including Vietnamese and Korean companies.

The first project involved strategic reserves caverns for a new refinery project (storage for crude oil, diesel and base gasoline) and for a new petrochemical project (storage for naptha and LPG). The second project involves storage to support an existing refinery.

The economics of underground storage are not commonly well known in the oil industry and so AWR Lloyd worked closely with the engineering consultants appointed and with the client to develop some of the key assumptions.

AWR Lloyd’s reports have been used to assess the feasibility of the projects. They have also been used to support tariff negotiations. AWR Lloyd has also been asked to assist in these negotiations.