What is the most conceptually rigorous modeling exercise you have ever had to put together?
I'm spinning through a combustion cycle natural gas Powerplant to BTC mining conversion deal right now and it has got to be among one of the mathiest and most technical scenarios I've ever had to model, from the buyside (ignore title, in PE now). Makes me wonder what else is out there that could possibly be worse.
During my sell-side tenure I once had to put a pitch together for a company that was basically a subprime mortgage originator and securitizer who then sold the bonds to a taxable reit subsidiary, and that was pretty hellacious too.
So definitely Securitization & Power are the two toughest things I've ever had to model out, how bout yall?
Anything Spec Fin related, like your securitization deal, can be a real pain in the ass.
Probably the most difficult I'd say are Factoring or Equipment Lending business models. With both, especially equipment lending, they can be simple and straight forward, but depending on the structure of arrangements the company is entering into with their counterparties, it can get realllllly difficult trying to make a standardized, malleable financial model that can be adjusted easily. Especially if there are tons of leases currently in some level of distress with an option for esoteric PIK features with a Cure Interest Rate blah blah blah
There are just so many weird conceptual caveats, accounting methods and conditional logics that have to flow through every line-item.
I agree with this, like trying to get all the covenants to work in complex structures
I think energy in general tends to have pretty atrocious org structures with a seemingly endless amount of subs/opco’s which in turn leads to some pretty brutal modeling depending on where the debt sits and how cash moves between entities outlined in the operating agreement.
I’m working on a defense contractor deal right now that’s pretty annoying to model tbh. Lots of factoring and individual builds for each contract.
Are all defense contractors that complex from a modeling standpoint? I am starting FT in an A&D group and it would be cool to hear a little more about the quirks/complexities if you have anything else to share on that.
Not a HUGE A&D guy but have done a few deals in my day. In my experience the complexity comes from having to model out individual contracts in detail vs. making broader assumptions. The businesses themselves often aren’t super complicated.
At what bank were you in dedicated A&D?
Im luckily on the sidelines of them but i have to fend of a seizure at any tax equity model I see. OP what’s the added complication with the BTC mining? Plain CCGTs are pretty bread and butter for power so guessing the btc pricing/monetization opens up a whole bunch of convoluted steps.
One of the most conceptually rigorous modeling exercises I have ever had to put together is a generative model of chemical reactions. This involved representing molecules as graphs, and using graph neural networks to predict the products of a reaction given the reactants. The model also had to take into account the stoichiometry of the reactants, and correctly predict the formation of multiple products. In addition, the model had to be trained on a large dataset of experimentally-determined reaction outcomes and had to be able to generalize to unseen reactions. This was a challenging task due to the combinatorial complexity of the possible reactions and the variability in the chemical properties of the molecules involved.
An intragroup financing model for a mining client, that was taking into account subsidiaries debt arrangements, group cash pooling, minorities everywhere due to the industry, withholding taxes on dividend flows, etc.
I was an A1, i fucked up a lot, but that taught me how to do something else than a high level LbO / dcf
In my current job we also regularly have fairly complicated commercial structures (think JVs with assets contributions, commercial flows…) that need to match contracts…
Power models / project fin models are complex because they involve macros, which in my experience are not there in models relating to other sectors
This might sound dumb. But you’re working on a deal where you’re converting a natural gas plant to a Bitcoin mining operation? Or am I completely misreading the BTC acronym?
Dolorem sed porro eos nihil quidem blanditiis quasi. Reiciendis nobis vel debitis perspiciatis corporis quisquam alias. Et iusto qui ut ipsam.
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