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Unformatted text preview: costing from an EPC perspective
Broad project participant (which could iinclude: owning and running a development
Does this vary by sector?
sector? Are HCC funds available for development and equity investment in
What is the level of potential participation by the Company in a development company and
in various projects?
Will the Company be willing to partner with others in a development company?
What degree of control would the Company require/desired in the development company
etc.? 20 Suggested Enterprise Structure
Group A – Executive Management CEO
Business (1) Existing Construction
Businesses EPC Businesses
(new and expanding) Construction
Hydro Real Estate Capital Infrastructure
Development (3) Fund (a)
Services Hydro Highways Airports Others Group C – Enterprise Businesses. These businesses should be managed
separately from the EPC business with separate skills, compensation, etc.
(3) Different specialty JV partners needed for each of these, which can evolve
in accordance with opportunity and need. Thermal and
Others Group B – Operating Businesses Group D – Shared
Services Matrix to the
all functionalities will
have to be included. Marketing
Procurement Project Operations
Field Engineering R&D and IMS
21 Organization (2)
-Strategic Partners Illustrative
Business Structure Partner 3 -Utilities / Developers / Plant & Mine
Operators / Middle East Investors Partner 2 -Financial Partners -Funds / Institutional Investors /
Multilaterals / Middle East Investors Partner 1 Holding Company -Special Purpose Partners -Equipment Suppliers / Construction Cos.
/ Plant & Mine Operators / Fuel Suppliers
/ Lessors x% collective X% Operating Company Partner 3 Partner 3 Partner 2
Partner 1 Partner 2
Management x% collective Partner 3
Partner 1 Insurance O&M Development /
Project Finance x% x% Infrastructure Holding
Company A (IHC-A)
[e.g. Toll Road Company]
FUND x% collective Infrastructure Holding
Company B (IHC-B)
[e.g. Airport Company] Banks: Company’s
FUND Partner 1
x% collective Partner 3
x% collective -International /Local Bonds -Public Local Market / Public
International Market Project 3
Project 2 Project 2 -IFC / ADB / Export Credits / Multilateral
/ Government Subsidized/ Concessionary Project 1
• Type of Partners
• Timing to let them enter
• Level at which they would enter
• Investment appetite of HCC
• Raising a Fund(s) Project 3 Government & Multilateral Project 1 Other: Debt -Securitized Paper / Private Debt Market
/ Mezzanine Debt / Infrastructure Funds
/ Equipment Finance & Leasing Debt 22 Summary: Analysis for Business Development
What we need for this business
Commitments What we have
What is missing
What 23 MIT OpenCourseWare
http://ocw.mit.edu 1.040 Project Management
• The main objective of project is creation of value for its
• Value is created
– financially by creating net cash flow
– socially by creating social benefit. • The private sector main objective is value creation for
their owners (stock holders). This is in terms of wealth
• The public sector attempts to maximize social benefits. • Value creation is the guiding principle through out this
discussion. That is any project must be able to create
value Explicit and Implicit Cost
• In accounting all the costs and revenues are explicit, in
finance and economics, they are both explicit and implicit.
– Explicit cost are the accounting costs that are realized. For
example, labor cost, energy costs, and material.
– Implicit costs are those costs that are hidden.
– One such a cost is the difference between revenue and
revenue from best alternative investment . For example if
we make A amount of investment and we receive X
amount of return but an alternative investment would
create Y return, where Y>X, from economic point of view
there is a loss equal to Δ = Y-X. In accounting term there is
a profit of Y. Explicit and Implicit, Continued • Social cost –benefit analysis centers on the
difference between explicit and implicit cost.
– Social cost are costs that are incurred by society. A firm
maybe dumping wastes into a river. From firm’s point of
view there is zero cost associated with waste disposal.
However, the social cost of firms operation (from society
point of view) is very high since they either have to clean
water (a cost for the society) or have polluted water.
– Social benefits maybe also different that private benefit. Time Value of Money • • •...
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- Spring '12