Infrastructure Finance Case Prep
This conversation was generated using Cook'd AI's career assistant and reviewed by Fallon Han from our editorial team for accuracy.
I am a third-year undergrad in the US on F-1 status, and I want to practice infrastructure banking. Can you quiz me on project financing basics and then evaluate my answers like a real interviewer?
Absolutely. I will keep this in infrastructure banking terms. First question: walk me through how project finance differs from corporate finance, and why lenders care so much about cash flow predictability, DSCR, and concession length.
Project finance is more about lending against the project's own cash flows rather than the sponsor's balance sheet. Lenders care about predictability because the project has to generate enough cash to service debt, so they use DSCR to see if operating cash flow can cover debt service. Concession length matters because the debt tenor usually needs to fit within the life of the concession so the project can repay before the asset reverts or the contract ends.
Good structure. You got the core distinction right. Technical feedback: you should be more explicit that project finance is usually non-recourse or limited recourse, so the lender's downside depends heavily on the project's contracted revenue and operating risks. On concession length, say that lenders usually want a buffer between debt maturity and concession expiry. Next question: what does DSCR measure, and how do you think about minimum DSCR versus average DSCR in a financing model?
DSCR measures cash available for debt service divided by debt service due. Minimum DSCR is the worst year, so it shows the tightest point in the life of the debt. Average DSCR smooths the whole schedule and tells you if the deal is okay overall. In practice, I think lenders focus more on the minimum because one weak year can cause a default, but average DSCR also matters for comfort.
Solid answer. The key nuance is that minimum DSCR is often the real covenant test, while average DSCR helps frame overall resilience and can support sizing discussions. You should also mention sculpting, where debt amortization is set so projected DSCR stays near a target level. Final question: if a project has a 25 year concession, a 2 year construction period, and cash flows that ramp up over time, how would you think about debt sizing and the relationship between debt tenor, sculpting, and repayment capacity?
I would size debt based on the operating period after construction, not the full 25 years, because the project is not generating cash during construction. Since cash flows ramp up, I would probably sculpt the amortization so early debt service is lower and later debt service is higher as cash flow grows. The debt tenor should still leave enough cushion before the concession ends, and I would make sure the target DSCR is maintained under the base case so the repayment schedule matches repayment capacity.
Strong answer. Evaluation report: you demonstrated good conceptual command of project finance structure, DSCR, concession timing, and sculpted amortization. Your biggest upgrade areas are precision and banker language. For example, say debt is typically sized off the project life after COD, underwritten to a target DSCR and tail requirement, with a construction reserve or capitalized interest if relevant. Your response was clear, but in an interview I would want you to name the relationship between target DSCR, forecast cash flow, and maximum debt capacity more directly. Overall score: 8.5 out of 10. Best next step is to practice one full case where you calculate debt size from a cash flow schedule and then defend the assumptions.