Financial Metrics & Modelling
Project Life Coverage Ratio (PLCR)
Summary
Project life coverage ratio (PLCR) measures discounted debt-supporting cash flow over the remaining economic project life relative to debt.
Why this matters in ship finance
It can indicate ultimate economic capacity even when debt matures earlier and refinancing or balloon risk persists.
The concept
Compared with LLCR, PLCR extends the cash-flow horizon through the project end date. In shipping, vessel economic life, dry-dock requirements and end-of-life sale assumptions influence the extra horizon.
How it is used in practice
Project vessel CADS over the realistic economic life, add terminal recovery only under an explicit definition, discount at the selected methodology rate and report LLCR alongside PLCR.
Analytical formulation
Illustrative worked example
Illustration: EUR 110m of discounted remaining-project-life CADS supporting EUR 60m debt gives PLCR of 1.83x.
Practical issues
A high PLCR cannot cure a near-term repayment shortage or prove a refinance will be available. Do not double-count a sale price after already valuing continued operations.
How ShipFinance.ai uses this concept
ShipFinance.ai can structure this topic around a transparent, auditable record of formula inputs, time basis, scenario assumptions and debt/equity cash-flow reconciliation. A useful decision output is a base case beside a clearly labelled alternative case, with input sources, effective dates and the assumptions responsible for any change in financing capacity.
Key takeaways
- Project life coverage ratio (PLCR) measures discounted debt-supporting cash flow over the remaining economic project life relative to debt.
- Project vessel CADS over the realistic economic life, add terminal recovery only under an explicit definition, discount at the selected methodology rate and report LLCR alongside PLCR.
- A high PLCR cannot cure a near-term repayment shortage or prove a refinance will be available.