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Thabiso KaliEnergy engineer · CEM

For finance, commercial and investment people

Debt sizing by DSCR: sculpted vs annuity

Project lenders size senior debt from the cash flow, not the cost: each year's cash flow available for debt service (CFADS) must cover that year's interest and principal by a set margin, the debt service cover ratio (DSCR).

Inputs

Pre-filled with an illustrative case. Results update as you type. Jump to results

Cash flow available for debt service
R

EBITDA less tax and maintenance capex.

%

Tariff escalation net of cost growth and degradation.

Lender terms
x
%
years
%

Debt as a share of project cost.

R

Results

Sculpted repayment supports R9.9m (76% gearing); a level annuity R8.3m (64%).

Sculpted debt
R9.88m
76.0% gearing; DSCR binds
Annuity debt
R8.29m
63.8% gearing; DSCR binds
Extra from sculpting
R1.58m
Less equity needed
PV of CFADS
R12.84m
At 11.5% over 12 years

Cash flow and debt service

Rand a year. Sculpted debt service follows CFADS at the target cover; the annuity is flat, so the weakest year sets it. Hover for values.

  • CFADS
  • Sculpted
  • Annuity
R0R500kR1mR1.5mR2mR2.5m123456789101112CFADSSculptedAnnuityRepayment year

Sculpted against annuity

MeasureSculptedAnnuity
Maximum debtR9,875,477R8,291,531
Debt the DSCR alone allowsR9,875,477R8,291,531
Gearing76.0%63.8%
EquityR3,124,523R4,708,469
Minimum DSCR1.30x1.30x
Average DSCR1.30x1.63x
LLCR1.30x1.55x
Weighted average life8.6 years7.8 years
Total interestR9,773,654R7,400,777
Show both repayment schedules

Sculpted schedule

Rand. DSCR = CFADS ÷ (interest + principal). Scroll sideways on a phone.

YearCFADSOpeningInterestPrincipalDebt serviceClosingDSCR
11,700,0009,875,4771,135,680172,0121,307,6929,703,4641.30x
21,768,0009,703,4641,115,898244,1021,360,0009,459,3631.30x
31,838,7209,459,3631,087,827326,5731,414,4009,132,7891.30x
41,912,2699,132,7891,050,271420,7051,470,9768,712,0841.30x
51,988,7608,712,0841,001,890527,9251,529,8158,184,1591.30x
62,068,3108,184,159941,178649,8291,591,0087,534,3291.30x
72,151,0427,534,329866,448788,2001,654,6486,746,1291.30x
82,237,0846,746,129775,805945,0291,720,8345,801,1001.30x
92,326,5675,801,100667,1271,122,5411,789,6674,678,5591.30x
102,419,6304,678,559538,0341,323,2201,861,2543,355,3401.30x
112,516,4153,355,340385,8641,549,8401,935,7041,805,5001.30x
122,617,0721,805,500207,6321,805,5002,013,13201.30x

Annuity schedule

Rand. DSCR = CFADS ÷ (interest + principal). Scroll sideways on a phone.

YearCFADSOpeningInterestPrincipalDebt serviceClosingDSCR
11,700,0008,291,531953,526354,1661,307,6927,937,3651.30x
21,768,0007,937,365912,797394,8951,307,6927,542,4691.35x
31,838,7207,542,469867,384440,3081,307,6927,102,1611.41x
41,912,2697,102,161816,749490,9441,307,6926,611,2171.46x
51,988,7606,611,217760,290547,4021,307,6926,063,8151.52x
62,068,3106,063,815697,339610,3541,307,6925,453,4611.58x
72,151,0425,453,461627,148680,5441,307,6924,772,9171.64x
82,237,0844,772,917548,885758,8071,307,6924,014,1101.71x
92,326,5674,014,110461,623846,0701,307,6923,168,0411.78x
102,419,6303,168,041364,325943,3681,307,6922,224,6731.85x
112,516,4152,224,673255,8371,051,8551,307,6921,172,8181.92x
122,617,0721,172,818134,8741,172,8181,307,69202.00x

Method

CFADS in repayment year t
CFADS_t = CFADS_1 × (1 + g)^(t − 1), t = 1 … n
Sculpted repayment
DS_t = CFADS_t ÷ DSCR, D = Σ DS_t ÷ (1 + i)^t
Debt is the present value of the target debt service at the loan interest rate.
Annuity (level) repayment
A = min_t CFADS_t ÷ DSCR, D = A × (1 − (1 + i)^−n) ÷ i
Gearing cap
D_final = min(D, gearing_max × project cost)
Schedule
interest_t = opening_t × i, principal_t = DS_t − interest_t, closing_t = opening_t − principal_t
Cover ratios
DSCR_t = CFADS_t ÷ DS_t, LLCR = Σ CFADS_t ÷ (1 + i)^t ÷ D
For sculpted debt sized at the DSCR, LLCR equals the target DSCR.
Weighted average life
WAL = Σ t × principal_t ÷ D

Assumptions

  • Annual periods, payments in arrears, one fixed all-in interest rate (base rate, margin and fees combined).
  • Repayment starts in year 1 of operations; no grace period, construction interest or reserve accounts.
  • CFADS grows at a constant rate. In practice lenders size on a downside case (often P90 generation) and test the base case.
  • When the gearing cap binds, sculpted debt service is scaled down pro rata, so the DSCR rises evenly above the target.

Sources

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