World trade 202128.05.2021
Based on modern political and economic realities, a serious shortage of justified investment projects, as well as an additional investment budget of 17,000,000 Euros, Alfa Resonance Capital announces the start of a competition for investment projects in order to finance them from its own funds.
Terms of the competition: until June 30, 2021 (inclusive). The number of applications considered is not limited. The size of the investment core (for each individual investment idea), business segment and geolocation are considered and discussed on an individual basis.
General requirements for investment projects:
It is necessary that the investment project is carried out on the basis of a private partnership and provides for the creation of interconnected (functional, economic, technological, etc.) chains with the investing party.
Investments must be strictly scalable business segments.
The total cost of the project is the residual value of the project, i.e. cost without taking into account the costs incurred earlier for the implementation of the investment idea.
Specialized activities not directly related to the creation of investment objects included in the ecosystem of the investment project are not taken into account as part of the project implementation costs.
Objects of social infrastructure and socially significant aspects of the investment idea are priority.
The profitability index of the project must be at least 1.24.
The internal rate of return on the investment project must be at least 24%.
General requirements for investment applications:
the estimated cost of an investment project must be indicated in two types of prices:
in prices as of the date of filing an investment application;
in prices of the corresponding years (forecast prices).
At the same time, the forecast prices for each year are calculated on the basis of the corresponding deflator indices for capital investments as of January 1 of the corresponding year (recommended deflator indices).
The Application must clearly describe the investment objects, the creation of which is envisaged in the framework of the investment project, as well as their cost, broken down by funding sources and years of project implementation. It is also necessary to indicate the form of ownership in which the investment objects are received.
The Application must also provide a justification for the relationship between investment objects created at the expense of the investing party and investment objects created by the initiating party.
General requirements for a package of investment documentation:
an assessment sheet of the effectiveness of the investment project, including calculations of the integral efficiency;
appraisal sheet of the value of the investment idea;
an appraisal memorandum of the value of a business, including calculations of its value 3-5 years after the launch of the project (for 49 and 100% shares of the authorized capital);
financial model of the project and / or feasibility study of the project – 3 possible scenarios for the development of events;
The package of investment documentation is prepared and justified by the efforts of the initiator of the investment project and at his expense.
General requirements for a business plan and calculations:
– The preparation of a Business Plan is recommended in accordance with the UNIDO structure guidelines.
– In accordance with the investment policy and investment criteria of Alfa Resonance Capital, the life of an investment project should not be less than 3 years.
– It should be borne in mind that the period of direct forecasting should be from 3 to 10 years, starting from the year of filing the application. If the project implementation period is longer than a 10-year period, the initiator can choose it as the forecast period, providing a justification for the choice.
– Calculations of indicators of financial and budgetary efficiency should be carried out on the basis of prices prevailing as of January 1 of the year in which the investment Application is submitted.
– When drawing up a financial model (feasibility study) for indexing costs, it is necessary to provide for the use of deflator indices for capital investments. For indexing the cost of finished goods, the cost of selling real estate, etc. it is recommended to use indices reflecting inflation (in particular, the consumer price index officially published by the state statistics bodies in the country where the investment project is being implemented), while a qualitative justification for the use of one or another index is required.
– The financial model (feasibility study) should separately reflect the calculations of expenses, income and financial flows (CF) for newly created investment objects.
– The financial model of the project must be submitted as part of the Application in electronic form in Excel format with the saving of cell connections and calculation formulas in the files.
General requirements for the preparation of a business plan for an investment project. The business plan should contain:
– the name of the investment project, its essence and feasibility of implementation;
– sectoral direction of investment activity;
– substantiation of the regional and social significance of the project;
– substantiation of the positive effect for society and the economy of the region;
– justification of the project’s compliance with the environmental aspects of the region;
– information on the proposed tender procedures for the selection of key suppliers and contractors for the project;
– justification of the attractiveness of the project for the investing party, supported by the results of financial forecasts, analysis of the market potential, transparency of the project and the ability to monitor the progress of the project and the targeted use of funds;
– Justification of the feasibility of the project, supported by the presence of a clear strategy for the implementation of the project and plans for its implementation, the ability to attract the necessary resources for implementation, the presence of a team of managers and developers;
– analysis of possible risks associated with the implementation of the project, and ways to minimize them;
– The information in the business plan must be objective, based on sound data and reasonable assumptions that do not contradict them. All numerical data and key assumptions should be accompanied by links to sources of information, indicating the date as of which the information is provided.
– The presentation of information in a business plan should be clear, logical and structured.
– The structure and content of the business plan must meet the following requirements and recommendations for the structure of the business plan, taking into account the industry and other specifics of a particular investment project. The recommended structure of a business plan includes the following sections:
Description of the project;
Information about the main participants of the project;
Sales plan and marketing strategy;
Production (operation) plan;
The impact of the project on the environment;
Analysis of project risks;
Analysis of the economic efficiency of the project;
The format and structure of a business plan may vary depending on the nature of the project, but the sections listed above should be included in the business plan without fail. If there are no sections in the business plan that correspond to the above, an explanatory note should be attached to the business plan with instructions on the sections in which to look for the required information, or a justification why information is not provided in the business plan. It is recommended that reference material be included in the business plan, including:
information about the compilers of the business plan;
content with indication of pages;
a dictionary of key technical and other highly specialized terms used in the business plan;
a list of definitions and calculation formulas for financial indicators (ratios) that are mentioned in the business plan and calculated in the financial model;
information on the regulatory and methodological framework used in drawing up a business plan and conducting an analysis;
brief information on technical, economic, marketing and other studies used in drawing up a business plan.
The content of the main sections of the business plan. Project summary. In this section, it is recommended to disclose in a concise form: the essence of the project and the feasibility of its implementation; key information about the Recipient of Funds and the Principal Participants of the Project; market potential analysis results; project implementation strategy (general implementation schedule); key forecast financial indicators (ratios); the total cost of the project, the total need for funding and the proposed sources of funding; key success factors and main risks of the project (it is recommended to present it in the form of a SWOT analysis); other key information on the project.
Description of the project. In this section, it is necessary to: state the essence of the project, including indicate the type of investment project (creation of a new production / facility from scratch; reconstruction of an existing production / facility; modernization of an existing production / facility; release of new products at an existing production; expansion of existing production; other change for the purpose of conducting business). Indicate the stage of the project and the phase (a specific stage within a stage) the project is currently in. Indicate the region and industry in which the project will be implemented. Justify the feasibility of implementing the project for the Recipient of funds (for example, the ability to increase sales and market share; reduce costs; occupy a free market niche or create a new market; take into account environmental requirements, etc.). Describe the positive effect for the economy and society, as well as provide a justification for the national (regional) significance of the project.
Information about the main participants in the project. The section should indicate: The recipient of funds and other Main participants of the project; roles and order of their interaction during the project implementation; reasons for interest in the project; experience in the industry; other essential information about the main participants in the project. It is recommended to: briefly outline the history of the development of the company – the Recipient of the funds; give a description of the nature and directions of activity and information about the location of the main participants in the project; provide key financial information on the Recipient of Funds and / or the Group (revenue, gross margin, net margin, net profit, total assets, equity / debt ratio, etc.) over the past few years; if the Recipient of funds belongs to a Group of Persons, present in a graphical form the organizational structure of the Group or its fragment, including the Main Project Participants, if they are also part of the Group, and indicate the shares of participation in the authorized capital or other relations connecting the members of the Group.
Product description. This section should include a description of the product (product line) that is planned for release in accordance with the project, and an analysis of their competitive advantages and disadvantages. The section should contain: information about the dominant part of the product program, which constitutes a significant part of the proceeds from sales, including (if applicable): purpose and scope, brief description and main characteristics, availability of a quality certificate, patentability and copyright, the need for licensing the release products, product safety and environmental friendliness, disposal after the end of operation; indicates the degree of readiness of the product for release and sale (note, if applicable, at what stage of development the product is, for example, a concept, a prototype, a finished market product), whether the product was previously sold in the domestic market or abroad, experience in the production and sale of the product Project participants. It is recommended in the section: to provide the main qualitative characteristics of the product (product line), analysis of the usefulness for consumers (including indicate the target audience), possible substitute products (substitutes) and complimentary (related) goods and services; analyze the product life cycle, indicate the planned changes in the range and anticipated product upgrades in the future.
Market analysis. In this section, it is necessary to give a description of the sales market for which the products and / or services provided for by the project are intended, and forecasts of market development for the near future. The section should provide an analysis of the current state of the market, including: current and potential (forecast) market volume; saturation degree; dynamics of development (including the emergence of new players, dynamics of sales volume, key changes and trends, the current stage of the market life cycle); description of the structure (main segments) of the market; market concentration indicators; main direct competitors and competitors producing substitute products; barriers to entry into the industry (including legal restrictions, restrictions on access to key resources, restrictions on the scale of production); data on the seasonality of supply or demand; main sales channels and sales promotion methods (advertising, merchandising, etc.); pricing principles, historical dynamics of product prices and forecasts of its changes; the speed of innovation and technological change in the industry; the degree of state regulation of the market (industry); other essential information. To highlight market segments, it is recommended to use a geographic, price, social (industry) feature and other features that make it possible to clearly identify the target group of buyers to which the product is focused. In the case of a significant degree of state regulation of the market (industry), as well as the participation of state bodies and organizations in the project, it is recommended to make an overview of the regulatory framework in a separate section, in which information on the regulation of pricing (tariffs), antimonopoly regulation, necessary permits for work and other essential information. It is also necessary to include in this section: forecast of sales volume or other indicator of demand for the market as a whole and for segments in which products (works, services) intended for implementation under the project will be positioned (the forecast period, as a rule, should be at least five years); analysis of the level of competition in the industry (it is recommended to use M. Porter’s “five forces of competition” scheme – to consider the “market power” of suppliers, consumers, existing and potential direct competitors, competitors producing substitute products). It is also recommended to provide data in the section: by main competitors: market position (location, market share), current and forecast production capacities, main competitive strategy, competitive advantages and disadvantages (mandatory in the case of an oligopolistic market structure – the presence of several large players in the market ); about the industry as a whole (general dynamics of enterprises in the industry; profitability level, asset structure, asset turnover, typical cost structure, degree of depreciation of fixed assets, level of utilization of production facilities / technological equipment; other important factors characterizing the industry). If the purpose of an investment project is the construction of a predetermined number of facilities (production facilities) for sale to a predetermined customer, with whom a preliminary agreement has been reached (an agreement has been entered into) on the acquisition of facilities (production facilities), or the sale of products / works / services intended for a single buyer, It is recommended to replace market analysis with an analysis of the needs of a key customer (buyer).
Organizational plan. In this section, it is necessary to describe the general strategy for the implementation of the project, provide a timetable for the implementation of the project, indicating the expected start of the project implementation and the duration of the main stages (pre-investment, investment / capacity commissioning stage, operational, liquidation), as well as intermediate stages (phases). The section should contain information on the plan for the commissioning of production facilities or other investment objects into operation (in the form of a graph or flowchart), if applicable, indicating critical (control) points. Also, the section may contain a plan for design and survey, geological exploration, construction, installation, commissioning and other works on the project with an indication of their duration and / or a schedule for the implementation of work on the project (in the form of a schedule or flowchart), other organizational plans and schematics. Organizational charts and diagrams and work plans for the project can be placed in annexes to the business plan.
Sales plan and marketing strategy. This section should reflect the target dynamics of the volume of sales (target intensity of exploitation) and the predicted market share, as well as the strategy to achieve them, including the strategy of competition. The section requires: a. provide the forecasted volume of sales (intensity of operation) in natural units, forecasted selling prices (tariffs) and / or forecast of proceeds from sales in monetary terms for the project – taking into account the analysis performed in the market analysis section; b. describe the marketing strategy for the project, for example: an extended product concept (analysis of the possibilities of product differentiation in order to increase the value of the product for the consumer, including by improving the design, adding additional services, using a brand, etc.), pricing strategy, policy distribution (selection of sales channels) and sales promotion (including when the actual sales volumes deviate from the target); indicate the current and projected market share of the company (if an increase in market share is expected); describe the strategy of competition (market penetration, increase or retention of the target market share). If product differentiation is possible, it is required to bring a comparative competitive analysis of the product that is planned to be released according to the project (advantages and disadvantages compared to competitors’ products). In the case of an oligopolistic market structure (there are several large players), it is required to give a comparative analysis of competitors’ strategies and take them into account when developing a marketing strategy for a project. If the project is innovative, it is recommended to work out the issue of legal protection of intellectual property rights to the product (technology). If the purpose of an investment project is the construction of a predetermined number of facilities (production facilities) that will be sold to a predetermined customer, with whom a preliminary agreement has been reached (an agreement has been made) on the acquisition of facilities (production facilities), it is recommended to replace the marketing strategy and sales plan with an agreed estimated commissioning schedule capacities and transmission (implementation) of objects.
Production (operation) plan. It is necessary to provide in the business plan: a plan for the volume of production in the context of products (product lines) or a plan for the operation of facilities, built taking into account the forecast of the volume of sales (intensity of operation), defined in the section of the sales plan and marketing strategy; a brief description of the production process (flow diagrams) or business model (description of the main business processes) at the operational (operational) stage of the project. If part of the production process or individual business processes are supposed to be outsourced, it is necessary to indicate the main prospective contractors with a justification for their choice; a brief description of the production technology (construction) and equipment that will be used for the production of finished products (construction of facilities), as well as the factors that determined their choice. At the same time, it is necessary to highlight the issues of novelty and competitiveness of technology (equipment) from the point of view of Russian and international standards, as well as provide information on the experience of the Project Participants in their use; unit costs of raw materials and materials, energy, operating time of equipment and personnel for the implementation of key business processes or for the release of a unit of product. It is recommended to provide information on the product quality assurance system (if high quality refers to the competitive advantages of the product).
Resource analysis. In this section, it is necessary to analyze the material, organizational, human and other resources that are required for the implementation of the project. It should be noted what resources are already available to the main Project Participants and what resources will need to be attracted additionally during the implementation of the project (production / construction site; infrastructure (energy supply, heat supply, water supply, transport, etc.); machinery and equipment; raw materials, materials , energy, components; services and work of contractors; manpower / personnel; management resource, etc.). It is necessary to provide in the business plan: an analysis of the production / construction site (if necessary for the implementation of the project), which should include: location, including proximity to the sales market and raw materials; sufficiency of the area; availability and quality of adjacent infrastructure and communications, including storage facilities; the degree of deterioration of the building and communications; required changes and improvements; other important characteristics that determined her choice; if the project belongs to the category of creating a new enterprise / production / facility from scratch, information on how it is supposed to ensure a sustainable material and technical supply (indicate the prospective suppliers and their location); analysis of the project’s management resources (a resume of the team of key managers and developers should be attached to the business plan), as well as justify the interest of managers and developers in the successful implementation of the project (for example, through the transfer of part of the shares / shares of the Recipient of funds into ownership, use of option schemes, other compensation schemes (remuneration), etc.). It is recommended to: allocate key resources and analyze the relevant resource markets, including analyzing the current and forecast volumes of demand and supply of resources, market structure, price dynamics; if production is labor-intensive or the main product of the project is services or work, the analysis of labor resources can be separated into a separate section or application, in which it is described: the personnel required for the implementation of the project, including the number of personnel by category, the necessary skills and qualifications, the expected level wages; available staff (if any), including composition and qualifications, need for training, staff turnover, level of remuneration.
The impact of the project on the environment. This section should contain information on the impact of the project on the environment and on the compliance of the project with environmental legislation. The section should contain the main results of the state ecological expertise, other ecological expertise, ecological audit (if any). It is also necessary to provide a description of the planned measures for environmental protection (indicating the cost of the measures and the schedule for their implementation).
Financial plan. The section should provide the following information: basic input data, assumptions and assumptions used to build financial forecasts; key financial indicators (ratios) by years of project implementation; forward-looking financial statements; results of assessing the impact of changes in key risk factors on financial forecasts; other information, including graphic material, illustrating and detailing the results of financial forecasts.
Financing plan (1). The section should contain the following information: total funding requirement (broken down by major investment cost categories); the proposed structure of funding sources; the amount of own funds (which will be invested in the project by the Recipient of funds and its shareholders / participants); the possibility of additional (reserve) financing by the Recipient of Funds or other Project Participants; the size, form and conditions (including preliminary) of the provision of financing by other Project Participants (if such a possibility is being considered).
Analysis of project risks. The section should contain the types and description of the main risks for the project, their assessment (qualitative assessment of the risk and / or quantitative assessment of the likelihood of risk occurrence and the degree of potential damage), methods of risk management (their reduction, distribution among the Participants) and the offered guarantees to investors. For projects implemented on the principles of public-private partnership, it is necessary to bring a matrix of risks and proposals for the distribution of risks between the private and public sectors in order to minimize them.
Analysis of the economic efficiency of the project. The section should contain: calculation of the project efficiency (without attracting funds from investment funds; with attracting funds from investment funds); calculation of WACC – weighted average cost of capital; calculation of criteria for the economic and financial efficiency of the project: net present value (NPV), internal rate of return (IRR), profitability index (RI), payback period of the project, annual index of economic efficiency of the project (Egt), integral indicator of the economic efficiency of the project (Et); calculation of budgetary efficiency: index of budgetary efficiency PIв; comparison of 2 variants of the results of the calculation of the above criteria: taking into account the funds of investment funds and excluding funds from investment funds; conclusions about the economic feasibility of the project and the rationale for the use of IF funds.
Applications. It is recommended to include annexes in the business plan that illustrate, detail or confirm the information set out in the main part of the business plan. Typical attachments to the business plan: Team of key managers and developers for the project (the attachment is required): in this attachment it is recommended to provide the resume of managers and developers who will participate in the implementation of the project (information about their qualifications, experience, successfully implemented projects and received awards etc.). Buyers and customers (the application is mandatory if applicable): a list of prospective buyers and customers, strategic partners, including the main buyers (customers), who have given guarantees of purchase of a significant amount of products (services) sold within the framework of the project. Estimated terms of delivery and payment; If available, pre-agreed or guaranteed purchase volumes (order book). Information about competitors. Total project cost / Budget of investment costs for the project (annex is required): costs at the investment stage by periods, broken down by main categories (costs of project preparation and pre-project work, design work, capital investments, recruiting and training personnel, covering the need for working capital capital, etc.) and cost items with an indication of whether they are forthcoming or have already been incurred (forthcoming investments are indicated taking into account forecasted inflation, made – according to the actual amount). Equipment for the project: a list of equipment that is planned to be purchased under the project (specifications for the main equipment must be attached), main characteristics, prospective suppliers and contractors. Suppliers and contractors (the application is mandatory if applicable): prospective suppliers of raw materials, materials, services and contractors for the implementation of work at the investment stage, the expected terms of delivery and payment for the work. Justification of the choice of the general contractor and the company that will supervise the installation of the equipment (if not performed by the equipment supplier); prospective suppliers of raw materials, materials, services that make up a significant share in operating costs or the cost of finished products / works / services, proposed schemes and working conditions at the operating (operational) stage; a description of the competitive procedures that will be applied when selecting the main suppliers and contractors. Operational costs: calculation of the need for basic types of resources for the production of a unit of production (provision of services, performance of work), indicating the sources of information for the calculation; calculation of the cost of a unit of production; information on the main variables and conditionally fixed operating costs (indicating the factors that determine the value of variable costs). Human Resources / Personnel Costs: draft project staffing table and / or budget for project personnel costs including, if applicable, labor costs of production, commercial and administrative personnel, personnel recruitment and training costs, labor safety, labor costs activities related to the motivation of employees, including teams of key developers and project managers, etc. Organizational schedules, diagrams and plans for design work. Cost budgets: marketing budget, media plan, environmental spending budget, R&D (development and research), insurance, consulting, audit and legal services budget, etc. Licenses and patents, other key documents for the project. Discount rate calculation.
Financial model requirements. Requirements for the functionality of the financial model. The financial model must be created in Microsoft Excel format. The name of the financial model file must clearly indicate the financial model version and the date of preparation. No part of the financial model should be hidden, protected, locked, or otherwise unavailable for viewing or modification. The financial model should have a clear and logical structure. Initial data (assumptions), financial forecasts and interim calculations, results of financial forecasts should be presented sequentially; the specified elements should be visually separated from each other, but connected with each other by calculation formulas. All elements used in calculations as part of formulas must be valid references to cells that contain assumptions (source data), or cells containing formulas. Links to external files (not provided as part of the Project proposal) and circular links are inadmissible. In exceptional cases, the fact and reason for deviation from these rules should be stated in the description of the financial model. The financial model should allow for changes to the assumptions originally laid down and automatically adjust the financial projections if such changes are made. The financial model should be constructed in such a way as to allow the analysis of the sensitivity of the results of financial forecasts to changes in all assumptions (input data) of the model. If the financial indicators derived from the financial model are based on one or more baseline models, it is necessary to provide dynamic links between these baselines and the financial model so that when changes to any baseline model are made, the financial model is updated. The financial model must have a sufficient degree of detail, that is, contain breakdowns by main types of products, regions, production units, periods, items of income and costs, etc. (if applicable). At the same time, the financial model should provide information in an integrated form, namely, it should contain interconnected forecast profit and loss statement, forecast balance sheet, forecast cash flow statement. Forms of forward-looking financial statements and interim reports should not contradict each other. The financial model should follow the principle of uniformity and consistency in calculations and formatting. Formulas for calculating financial indicators (ratios) that are present in the financial model must be unchanged for all parts and periods of the financial model. Minimize the number of external files. All external files associated with formulas with the financial model, as well as external files in which graphs, tables and charts were built that are present in the business plan, must be provided as an attachment to the financial model. The relationship between external files and the financial model and the purpose of external files should be disclosed in the description of the financial model.
Requirements for the composition of the initial data (assumptions) of the financial model. The initial data (assumptions), on which the financial forecasts are based, should be presented in the description of the financial model or in the business plan. The list of recommended sources for input data (assumptions) is shown below. Among the initial data (assumptions) of the financial model, the following should be indicated (if applicable to the project): Basic methodological assumptions used in the construction of financial forecasts, including: the life of the project; the duration of the forecast period (no more than 10 years); the initial moment of the forecast period; forecast step (minimum: for the investment stage – one quarter, in case of monthly seasonality – one month; for the operating stage – one year); type of cash flows (nominal, real) and final currency of cash flows; type of discount rate and method of its calculation; methodology for calculating the final cost (indicating the expected growth rate in the post-forecast period); other key methodological assumptions. Macroeconomic data (forecasts of inflation, exchange rates, growth of real wages, etc.); Capital investment forecast; Forecast of sales and production volumes (other quantitative factors that determine revenue); Forecast of prices / tariffs for finished products / services; Rates of resource consumption per unit of output; Forecast of prices for basic raw materials and materials and other costs that make up a significant share of the cost, forecast of other variable costs; Forecast of personnel costs (staffing or budget of personnel costs, taking into account the planned indexation of wages and increase in staff); Projection of conditionally fixed costs; Terms of settlements with counterparties (deferrals and prepayments for settlements with suppliers and contractors, buyers, budget, personnel) and / or turnover rates; Tax prerequisites: information on taxes and other compulsory payments (duties, contributions for compulsory insurance, etc.) that are payable in accordance with the current legislation (tax, base, rate, payment procedure), taking into account the expected changes in tax legislation ; Accounting policy prerequisites (policy for amortization, capitalization of costs, creation of reserves, revenue recognition); Forecast structure of financing, conditions for debt financing (interest rates, schedule for obtaining and servicing debt); Stock market data for calculating the discount rate; Other inputs and prerequisites that are important for the industry and type of project.
Requirements for the composition of the results of financial forecasts. Forms of forward-looking financial statements. Forward-looking financial statements are prepared for the Recipient of Funds and are in the nature of management reporting, in particular: some items, the amount of which is relatively insignificant on the scale of the project, can be combined; depreciation should be on a separate line and should not be deducted from revenue when calculating gross profit. The following forms of forecast financial statements must be submitted without fail: forecast cash flow statement, forecast profit and loss statement, forecast balance. The forecast income statement must be prepared on an accrual base and contain, inter alia, the following financial indicators: revenue, gross profit, gross margin, EBITDA (operating profit before depreciation, interest and taxes), EBIT ( operating income before interest and taxes), net income, net profitability. If, due to industry-specific or other features of the project, these indicators are not presented, the fact and reasons for their absence in the description of the financial model should be indicated; A forward-looking statement of cash flows should include cash flows from operating, investing and financing activities. Cash flows associated with the payment and receipt of interest and dividends should be disclosed on separate lines; In the case of proposed debt financing, free cash flows before debt service (CFADS) should be provided for reference. Other reports may also be provided.
Methodical instructions for drawing up financial forecasts. General requirements: Only cash flows are forecasted to be made available (spent) by the Recipient of funds; Project-related costs incurred prior to the start of the forecast period should not be accounted for in the forecast financial flows, but may be accounted for as assets on the balance sheet of the Recipient of Funds; The financing attraction schedule should be linked to the investment schedule, cash flows from financing activities should be projected on the basis of cash flows from operating and investment activities; At the end of each forecast step, the amount of the balance of funds on the settlement and reserve accounts cannot take negative values (if there is a shortage of funds in any period, the attraction of additional sources of financing should be predicted); When attracting debt financing, debt service payments should be forecasted (taking into account a possible delay in the payment of accrued interest); It is recommended to forecast cash flows in those currencies in which they are realized (receipts and payments are made), and then bring them to a single, final currency. It is recommended to select the currency in which most of the cash flows are received as the final currency; Cash flows arising from the receipt and payment of interest and dividends should be disclosed on separate lines; If at the end of the life of the project it is planned to liquidate the Recipient of funds or the investment object or transfer the rights to derive income and incur costs from the operation of the investment object to another person, the Recipient’s cash flows must take into account the costs and income associated with the specified liquidation or transfer of rights (in including, in accordance with the requirements of the legislation on ecology and subsoil use, as well as labor legislation); The project lifetime is set at the discretion of the Project Initiator. It is recommended to define the life of the project as an economically feasible (maximizing), technically feasible and legally permissible period during which the creation, subsequent operation and (if required in accordance with the legislation or concluded agreements between the Project Participants) the liquidation of the investment object or the transfer of extraction rights income and incurring costs from the operation of the investment object to another person. When determining the life of the project, it is recommended to take into account: the expected period of termination of the Recipient’s ability to access key resources (for example, depletion of raw materials, expiration of the lease of a land plot, etc.); the expected period of loss of control of the Recipient of Funds over the investment object (for example, the end of the license period or the period specified in the concession agreement, etc.); the expected term for the termination of the possibility or feasibility of further operation of the investment object due to its physical or moral deterioration (including due to changes in technical and environmental standards and norms for the manufactured product, production technology or working conditions, the emergence of more efficient means of production); the expected time period for the termination of the market demand for a product due to its obsolescence or loss of competitiveness (the duration of the product’s life cycle). The duration of the forecast period is set equal to the duration of the long-term forecasting (10 years); If at the end of the forecast period for the Recipient of funds it is economically feasible, technically feasible and legally permissible to continue to extract income from the operation of the investment object for a limited or (in exceptional cases) an unlimited period of time (for example, when operating a renewable resource), it is assumed that the stabilization of cash flows received by the Recipient of funds (change in cash flows with a constant or zero growth rate is predicted), the post-forecast period can be considered and the Final Cost (final cash flow) can be calculated. When defining the post-forecast period, it is necessary to substantiate that the continuation of the extraction of income from the operation of the investment object for the Recipient of funds during the post-forecast period is economically feasible, technically feasible and legally admissible; The discount rate and discounted cash flows must be of the same type (calculated for the entire project or only for owners) and type (with or without inflation). The discount rate should reflect the required rate of return for an investment denominated in the same currency as the currency of the cash flows; When calculating, all cash flows, including the final value (final cash flow), should be brought to the beginning of the forecast period by discounting.
Assessment of the stability of financial indicators (ratios). To assess the stability of financial indicators (ratios), the method of sensitivity analysis is used – assessing the degree of impact of changes in key sensitivity factors on the results of financial forecasts. If sensitivity analysis does not allow measuring / illustrating individual risks, other methods are used, including calculation of the break-even point, Monte Carlo method, scenario analysis, factor analysis, etc. Key sensitivity factors include assumptions (initial data) of the financial model, the actual values of which during the implementation of the project (due to the impossibility of their accurate assessment or their inherent volatility) may significantly deviate from the values embedded in the financial model. In particular, typical sensitivity factors include: prices for finished products and tariffs for services; sales volume (intensity of use, number of buyers / users); the volume of capital expenditures; delays in putting the investment facility into operation and reaching the design capacity; prices for basic raw materials and supplies, fuel, labor resources; the amount of fixed operating costs; discount rate; projected inflation rates; exchange rates, etc. It is imperative to conduct a sensitivity analysis to changes in the discount rate, product selling price, key resource price and sales volume. Typical results of financial forecasts, the volatility of which can be measured in the course of sensitivity analysis, include indicators of the effectiveness of regional investment projects, calculated in accordance with the above Methodology.
Requirements for the description of the financial model. The description of the financial model is drawn up as an attachment to the financial model. The description should include: a description of the structure of the financial model; a description of the mechanism of operation of the macros used in the financial model (if applicable); basic assumptions (assumptions) and initial data for financial projections, indicating the sources of information, if they are not provided in the business plan; formulas for calculating financial indicators (ratios), if they are not given in the business plan; contact details of persons responsible for providing clarifications on the financial model; other information necessary to understand the structure, principles of construction, mechanism of operation, and other features of the financial model.
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