Cash surplus

For any one case, say the base case, the project cashflow is constructed by calculating on an annual basis the revenue items (the payments received by the project) and then subtracting the expenditure items (the payments made by the project capex, opex and host government take). For each year the balance is the annual cash surplus (or cash deficit). Flence, on an annual basis... 

Cash surplus is also commonly known as net cash flow. 

Having discussed the elements of the cash surplus/deficit calculation, remember that in any one year this can be calculated from... 

The project cashflow s constructed by performing the calculation for every year of the project life. Atypical project cashflow is shown in Figure 13.9, along with a cumulative cashflow showing how cumulative revenue is typically split between the capex, opex, the host government (through tax and royalty) and the investor (say the oil company). The cumulative amount of money accruing to the company at the endof the project is the cumulative cash surplus or field life net cash flow. 

The cumulative cash surplus accrues to the investor at the end of the economic lifetime of the project, and may be termed the field life net cashflow. 

The proflt-to-investmentratio (PIR) may be defined in many ways, and is most meaningful when deflated and discounted. On an undeflated and undiscounted basis, the PIR may be defined as the ratio of the cumulative cash surplus to the capital investment. This indicates the return on capital investment of the project, is simple to calculate, but does not reflect the timing of the income/investment in the project. 

The project cashflow discussed so far follows a pattern typical of E P projects a number of years of expenditure (giving rise to cash deficits) at the beginning of the project, followed by a series of cash surpluses. The annual cashflows need to be evaluated to incorporate the timing of the cash flows, to account for the effect of the time value of monef. The technique which allows the values of sums of money spent at different times to be consistently compared is called discounting. 

Year Cash Surplus ( m) Discount Factor (mid year) Discounted Cashflow ( m)... 

The total undiscounted cash surplus (the ultimate cash surplus) is 190 m. The total discounted cash surplus ( 24.8 m) is called the net present value (NPV) of the project. Since in this example the discount rate applied is 20%, this figure would be the 20% NPV also annotated NPV(20). This is the present value at the beginning of Year 1 of the total project, assuming a 20% discount rate. 

The cumulative cashflow was used to derive ultimate cash surplus - the final value of the cumulative cashflow maximum exposure - the maximum value of the cash deficit payout time - the time until cumulative cashflow becomes positive. 

The interest payable on ABSs is frequently considerably below that earned on the underlying loans, creating a cash surplus. 

Cash Surplus shall mean the excess of cash receipts over cash disbursements for a given financial period. 

The Trust Fund is ready to receive contributions from interested States Parties in the form of voluntary contributions or, for instance, of the return of any cash surplus to be distributed to the States Parties in accordance with Financial Regulation 6.3. States Parties are invited to consider making such contributions in support of the SAB s work. 

The transfer of assets shall include an eventual audited cash surplus, if any, which will be reflected in the final audited financial statements of the Commission. The transfer of assets shall not include Capital Advance payments made by Member States to the Commission, since these funds shall be reimbursed to Member States in accordance with Commission Financial Regulation 6.2, taking into account Financial Regulation 6.3. After the final audit of the Commission s account is completed, any cash surplus shall be reimbursed to the Member States of the Commission in accordance with Commission Financial Regulation 6.1(b), unless a Member State decides to temporarily credit this amount to the OPCW until it becomes a State Party. Cash surpluses of those Member States which are also States Parties of the OPCW shall be treated in accordance with OPCW Financial Regulation 6.3(c). 

To obtain cheaper funding frequently the interest payable on ABS securities is considerably below the level payable on the underlying loans. This creates a cash surplus for the originating entity. 

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