In project finance, the cash flow cascade regularly is the key basis and determinant for making business decisions. Whilst split in a similar fashion as in typical corporate financial reporting, a much stronger emphasis is put on the financing aspects. The cash flow waterfall usually contains many sub-totals, each of which steering different claims on a project’s operating cash flow (as defined in the financial documentation). The key line for structuring a transaction is the cash flow available for debt service (CFADS).
Cash Flow Waterfall in Project Finance
| Operating income |
| +/- Change in working capital |
| - Taxes paid |
| Cash flow from operations |
| - CAPEX |
| Cash flow before financing activities |
| + Equity inflows |
| + Shareholder loan inflows |
| + Draw down of loans |
| Cash flow available for debt service (CFADS) |
| - Debt service on loans |
| Cash flow available to sponsors |
| Dividends declared/paid |
| Net increase / decrease of cash balance |