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Everything energy related
Infrastructure (Energy / Reg Utilities / Digital Infra)
Digital Infra is a lot easier to model than Infra - the assets are growthier so aren't running 800 scenarios using macros and sculpting debt. FIG modelling can be painful too from what I hear.
I think it'll be difficult for people to rank unless you are a generalist across many industries. Like an O&G, utility, real estate, FIG, pharma, etc. models are going to look different than a normal services/mfg./etc. EBITDA business but isn't necessarily harder or easier if that is what you've been trained doing.
I will say though, within auto especially, businesses with combined manufacturing & leasing/financing business are a real pain and can get quite complicated with the integration of the IS/BS, separating out finco BS items, etc. Most ER is lazy and won't do this as well which can make comparisons very difficult unless you parse through this yourself
Slightly disagree with this …
If you were to give an energy banker a consumer and retail model they could understand it and build it in a couple hours without help
If you gave a consumer and retail banker an energy model they couldn’t understand nor build that thing in 5 years without help
My source for this was 2 laterals in my group coming over from energy to C&R (not An1 btw, wso just doesn’t know how to refresh) When they hit the desk they would breeze through the models as if they had been doing it for 2 years. At times they would need clarification on what a line item means but they knew how to link it and use it. One time we were messing around at night and started talking about energy modeling and one of them pulled up an intro template and after about an hour playing around with it I didn’t do anything productive. The model had an insane amount of tabs, pricing assumptions, geographical assumptions, engineering assumptions, and more that I can’t even remember/name.
I do agree though that it can all be learned but to say because you learned it or were trained to model like that suddenly makes it “easy” is wrong. Some models are a lot easier and less technical than others to begin with.
Yes - this is very well said. When I was a first year analyst, I worked in energy and this is exactly what I had been trying to emphasize about this sector that people seemed hesitant to believe for whatever reason. The energy sector is extremely complex and technical, and even if it's not rocket science, it could still take possibly years to learn how this sector works + years to learn how to build the models, so as a junior most of the time you're just sitting there all day wondering what is going on. Meanwhile modeling in ind or c&r is much more straightforward, even if they're detailed it could still generally make sense to someone who has a good understanding or foundation of financial knowledge.
Can I PM you so that you share me the intro template in case you still have it around? Would be much much appreciated 🙏
Wait until you’ve built or used a Regulated utilities model or multi asset PPP model and you’ll realise how terribly wrong you are… not only are they thousands of tabs and sheets long, but the financial concepts are difficult to follow through as it is all operating in reverse. Top that off you’ll need to know read and use code / vba for various debt solves , bid pricing solves , regearing solves … all making sure they can operate smoothly in one master solves that can run through hundreds of scenarios. I once used a PPP model which took 1 hour for each master solve cycling through the scenarios painful as well .. especially when debugging any errors GG
Upstream O&G modeling
Energy and then Healthcare in my book
Do you have a healthcare vertical in mind? In my experience healthcare has some of the very easiest models. It doesn’t take a rocket scientist to model a medical devices business
Not in healthcare group but from speaking with friends in HC groups and self-educating myself biopharma seems a bit different when you have to calculate a drugs successful life and factor that into the financial analysis
Healthcare is not too bad. Biotech can be tricky but not to the same degree as FIG or NatRes
Interesting. I’ve done both and energy absolutely hands down hardest to get IMO Why also healthcare in your opinion? I can only think of complexities with corporate practice of medicine with a PC/Corporation structure being a little complicated and/or refunding bonds on larger hospitals- which I guess could be complicated.
Anything where the core build comes down to “price x volume” is relatively simple at the end of the day. Consumer, services, industrials, etc all fit this mold and are just variations of the same thing.
Tech is weird in that you’re usually doing ARR builds instead, but they’re relatively simple at the end of end day (and are still ultimately driven by a combination of new logos + price).
Energy, insurance, etc all get far more complicated because there’s balance sheet components, all sorts of different corp structures, etc.
Yeah, life insurance can get messy pretty quick. A lot of the best bankers in the space started off as actuaries, so they understand all the fine details; another difficult aspect is most have an incredibly complicated entity structure (often international) with many having significant roles in business operations which adds more nuances. Insurance broker modeling is easy as its EBITDA based, the only mildly challenging aspects that mostly just annoying is they do a ton (sometimes 100s) of roll-up acquisitions a year so you have to put the impact of that in and get it run-rated and adjusted, again not very hard but very annoying. Commercial and resinurance companies can be get pretty messy but still not as bad as life..
I’ve done tech, healthcare and energy- among others. I think tech is one of the easiest IMO.
FIG i think because there are a lot of balance sheet linkages to the income statement/Cash flow statement. Energy? not as bad but as complex.
Prob renewable asset modeling that requires tax equity. Buncha nonsense.
Oil and gas modeling can be super intense if you’re building from the asset level but otherwise it’s honestly not that complicated. It’s price x volume and then you have opex, G&A, etc. Now the calculations for price, volume, and opex can all be very involved (not sure id call it complicated though) and you’ll have to calculate capital spend (or at least you should) on a relatively detailed level, but I bet I could teach someone in a few hours at most. There is ZERO chance that I can teach someone to model DRO’s and recapture and all that BS in a day. Could maybe do some basic partnership flip math that gets you to a 90/10 type answer but you can’t underwrite anything in that space with a less than fully polished model.
Yep and it’s getting worse since now renewable models are trying to input more scenarios around tax credit transferability with the IRA in addition to the typical third party tax equity scenarios. Certain situations eat into the term debt depending on if you raise more tax equity that covers the entire bridge loan, just even more of a mess when you want to close something without tax equity executed.
Will also add some software modeling depending how you waterfall RPO and the churn/pricing/migration assumptions - depending on the company and operating model this can become very complex very fast. In our covg universe one companys rev build is known as "the associate killer" across the street.
Curious for this company name as someone about to start a stock pitch on a tech company
All the above are piss easy until you’ve worked with multi asset regulated utilities and PPP models
A lot of highly technical infra modelling teams still won’t be able to build these for clients. It truly is a small subset of people that are capable of doing such modelling. At least in my region only 3 banks we wud be comfortable approaching for any deep portfolio of regulated utilities modelling work
Can confirm, have worked on two reg assets, gas and electricity distribution both RAB based and it was pure insanity
I went from a TMT coverage group to Corp Dev at a Energy shop…. World of difference modeling wise hahaha
good or bad way
Maybe not the case for every sub-sector within TMT, but I found it much easier than the O&G / commodity chemical landscape of modeling.
Energy + FIG
By far the most complex modelling is Renewables. Layering on hundreds of projects each in different geographies / utility territories, managing state by state pricing curves for energy and subsidies, managing development and construction, layering on debt sculpting + tax equity (yield based flips, calendar dated flips, inverted leasing structures, and managing DevCo / HoldCo mechanics are all very complicated.
Most of the time, models require macros to run the sculpting and tax equity, and are extremely chunky. When you start working on the buy-side, then layering in hundreds of scenarios... really technically challenging industry.
After doing deep portfolio modeling of multiple reg assets I actually find renewables modelling a piece of cake in comparison. Mainly because of Straight forward logical drivers. And I’ve built portfolio of multiple operational , in construction and dev pipeline assets in one model . Wait until you touch Reg - all drivers are in reverse logic, some even with inflection points when running scenarios
i do renewables as well and found the vba/debt sculpting it a bit complicated. had previously done fig/tmt/c&r and those were a piece of cake relative to renewables/utilities. Where can I find models for reg assets? I want to see if they are as complicated as you make em sound
Real Estate 😂
I do not understand people's obsession with having to do the hardest most difficult thing all the time. You've graduated college, you can leave all of that behind. You don't get any brownie points from anyone because you can model oil price volatility into a model over someone who originates loans. Most people, like 99% of the general population, don't know the difference and don't care.
PPP Infrastructure blows.
Lateraled out of Infra after a year and never looked back. Industrials all day baby. Price x Quantity, slap on a gross margin, light work on SG&A build, maybe a bit of nuance on CapEx, nothing crazy. If you ask me, stay the fuck away from complex business models and transaction structures. There's little upside for the average banker/investor. Simplicity = scalability = close more deals in less time = make more money. The counterargument is with some of these market niches you may be part of a select few people that can actually understand the project structures which may make you a rarity and thin out your competition, but still, in today's day and age, shoot for something simple and scalable and try not to suck would be my best advice. You don't need to be the best to make a lot of money in some MM Industrials/Consumer/Tech M&A or LBO group.
I take it this was PPP toll roads and the like. Are your hours better at Industrials job?
The Infra world (PPP at least) is too technical and there's just too many nitty bits of detail.
FIG modeling is tough for regulated businesses like insurance or banks because you have to worry about all of the capital ratios etc. For a vanilla non-bank lender it is still more complex modeling than an EBITDA business, but can be relatively brainless once you've done it a few times and understand how they are financed because you are basically just forecasting the balance sheet which drives everything else.
Hardest - life insurance and utilities
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