Learning to Infra Model

Starting at an infrastructure PE fund with detailed modeling requirements can be a steep learning curve, but with the right approach, you can ramp up effectively. Based on the most helpful WSO content and insights from advanced modelers, here’s how you can tackle this:

1. Understand the Fundamentals of Infrastructure Modeling

• Industry-Specific Knowledge: Infrastructure models often include unique elements like interest during construction (IDC), debt service reserve accounts (DSRA), and detailed cash flow waterfalls. Familiarize yourself with these concepts as they are critical to understanding the mechanics of these models.
• Granular Builds: Unlike simpler LBO models, infrastructure models require detailed operational assumptions (e.g., energy production, toll revenues, or maintenance costs). Start by understanding the key drivers for the specific sub-verticals (e.g., renewable energy, transportation, utilities).

2. Leverage Resources for Advanced Modeling

• VBA and UDFs: Many advanced modelers recommend learning VBA User Defined Functions (UDFs) to handle circular references (e.g., IDC or DSRA) instead of relying on iterative calculations. This can make your models more dynamic and efficient.
• Free Resources: Check out the free e-book on model optimization from F1F9, which is highly regarded for its quality. Additionally, explore Ed Bodmer’s project finance exercises, which cover A-Z project finance modeling and are tailored for infrastructure assets.
• Templates and Guides: Use financial modeling templates available on WSO to get a head start. These can provide a solid foundation for understanding how detailed models are structured.

3. Approach to Reviewing Models

• High-Level First, Then Drill Down: When reviewing a model for the first time, start with the high-level financials (e.g., income statement, cash flow, and balance sheet) to understand the overall flow. Once you grasp the big picture, trace the mechanics row by row for critical sections like debt schedules, cash flow waterfalls, and operational drivers.
• Focus on Key Drivers: Identify the most important drivers and assumptions for the specific asset or project. This will help you prioritize your review and avoid getting lost in less impactful details.
• Raw Data Tabs: While it’s not always necessary to trace every single row, understanding how raw data feeds into the model is crucial for accuracy and troubleshooting. Over time, you’ll develop an intuition for which areas require deeper scrutiny.

4. Balance Efficiency and Thoroughness

• Iterative Learning: Don’t aim for perfection on your first pass. Focus on understanding the structure and key mechanics, then revisit the model to refine your knowledge.
• Ask Questions: Leverage your team’s expertise. Senior colleagues can provide insights into industry-specific nuances and modeling best practices.
• Practice: Rebuilding models from scratch isn’t always efficient, but selectively recreating key sections (e.g., debt schedules or cash flow waterfalls) can solidify your understanding.

5. Develop Industry Knowledge

• Learn the Sub-Verticals: Each sub-vertical (e.g., renewable energy, transportation) has unique characteristics. Spend time understanding the operational and financial drivers for the assets your fund focuses on.
• Case Studies: Review case studies or past deals to see how models were structured and what assumptions were used.

6. Advanced Tips for Growth

• Dynamic Sensitivities: Learn to build models that can handle dynamic sensitivities without breaking. This is a critical skill for infrastructure modeling.
• Scenario Analysis: Practice creating robust scenario analyses to evaluate different outcomes (e.g., changes in interest rates, construction delays).
• Continuous Learning: Stay updated with industry trends and modeling techniques. Resources like WSO forums, podcasts, and newsletters can be invaluable.

By combining these strategies, you’ll not only improve your modeling skills but also develop a deeper understanding of the infrastructure sector. Remember, the learning curve is steep, but with consistent effort, you’ll gain confidence and expertise over time.

Sources: Modeling as a professional vs. as a student, Q&A - Infrastructure PE & IBD, Q&A - Infrastructure PE & IBD, Infrastructure Private Equity Basic Skills