Infra PE operating model
Hi guys:
I'm a current corporate PE associate trying to lateral into Infra PE - can someone point me to where I can get a Infra PE operating model so I understand the difference and nuances? Any pointers to resources would be greatly appreciated! Happy to chat to anyone interested in making the switch from Infra to Corporate PE in return as well!
Thanks!
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Curious why you're interested in moving from corporate to infra?
deleted duplicate comment
OP here - mostly geographic reasons for me, I'm from an area with more infra presence and will have more jobs in Infra than Corporate back home
What funds/sectors are you interested in learning about? Infra PE is generally broad so would help to get a sense of what sectors you're focusing on e.g. transport, telecom, renewables, etc. all of which have varying operational nuances (which impacts the modeling side of things).
At a high level, the objective of most Infra funds is to acquire businesses which own real assets that provide an essential service (power, transport, storage, connectivity, etc.). There is a strong emphasis on free cash flow generation and thus most of the modeling is predominantly on the cash flow side of things. With consistent cash flow visibility, debt becomes a big area of focus. Debt modeling is different vs. corporate PE where you might more frequently see PIKs, optional CF sweeps, etc. Typical debt modeling involves sizing debt such that a certain minimum Debt Service Coverage Ratio (Cash Available for Debt Service divided by Total Debt Service for the period) is maintained throughout the debt tenor. Another item to consider from a modeling standpoint would be frequency and magnitude of growth and maintenance capex. The aforementioned vary depending on what subsector you're looking at e.g. telecom deals could involve structuring debt on an EBITDA basis (I'd say presently telecom deals exhibit the most similarity with corporate PE vs. other Infra sectors).
Sadly, there aren't a ton of (free) online resources available that can supplement your learning.
Thank you! This is super helpful!
Are there any paid modeling course/resources for Infra out there by chance? When you say modeling is more on the free cash flow side - can you give an example? In corporate PE we also model but mostly down to EBITDA. How much more nuanced/detailed is Infra PE modeling? What are typical "additional topics" one should know about?
I'll tackle these to the best of my ability.
Modeling courses / resources: I'm not 100% sure whether WSO, BIWS and WSP offer it but you can search up Corality / Mazars and you'll find project finance modeling courses which should set you up nicely.
Modeling depth: Lets take an operating renewable asset as an example. Modeling a wind farm would require you to go down to EBITDA (as with any asset/business). Next step would be to account for any maintenance capex. Next would be modeling the debt piece which could include a debt service reserve account +/- LC facility. Next would be taxes. And thats it essentially. The complexity imo is more so on the financing side where you might come across niche financing structures (e.g. tax equity). If you're looking at a greenfield (new build) asset, you'd have to model out the construction side as well which can get deep as well. Instead of EBITDA, most deals are compared on an IRR perspective given the variability in financing/taxes.
Additional topics: Would be good to know where the industry is trending towards and be able to exhibit an opinion on subsectors like renewables, telecom, etc. E.g. for renewables, you can talk about the implications of the stimulus bill, state-level RPS targets, the potential of energy storage, etc. For transport, the theme might revolve around govts looking to monetize nationally-held assets to service existing debt or focus on provision of other services. Having these views will prove more valuable than the modeling expertise imo as you'll learn the modeling on the job.
On modeling courses other than the above - WSP has a project finance one (partnered with Corality to made it). Pivotal180 is good and cheaper than Corality - they have a project finance/P3 course and a renewables course. Gridlines has a free project finance one that is in beta.
This is tough to answer comprehensively since infrastructure funds evaluate deals at all different stages. We work with infra funds (800M - 2B recent fund size) that will purchase mature assets or infrastructure-oriented companies, buy deadweight assets/companies that will be strategically accretive to future deals w/in the same vertical, but also fund greenfield deals. For the more mature companies/assets, I imagine they use an LBO model, could be wrong. For the latter, they like to use our very-detailed project finance model. I work for a developer.
For the greenfield projects, every minute detail within the construction contract, development timeline, operating agreement, etc. is poured over by what feels like hundreds of buy-side-hired consultants/bankers/lawyers.
For project finance modeling, the Wall Street Prep project finance course is a great starting point. I bought it, and I would highly recommend buying the course. If you do not want to drop the cash, I am happy to send you the WSP model if you PM me.
I have also read there are also a few inexpensive ($50-$150) courses on Udemy that do a pretty good job. Just look for the highest-rated courses with at least 500+ reviews.
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