Are 7 4 4 organization infrastructure projects are

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Unformatted text preview: e Operating Company level could be one or more Below Holding Companies. This approach allows The Company to maximize This opportunities for investment of capital from outside sources, while continuing to maintain its desired level of control through the various levels of the organization 10 4. 4. Organization Organization Also below the Operating Company, one could organize a series Also of Service companies. The Service Companies could include such things as: Operations and Maintenance Operations Management (accounting and other support to projects) Management Development Development Project Finance/Financial Advisory Services Project These entities grow expertise, provide differentiators in the These marketplace, provide career growth opportunities, and also provides the flexibility to capture associated revenue streams 11 5. 5. Finding Partners Important to Understand: Important The Company’s existing joint venture/partnership relationships The The Company’s criteria for selecting future partners, could include: The Recognized name Recognized Development experience in the sector being considered Development Operational experience in the sector being considered Operational Reputation for ethical conduct and best operating practices Reputation Strong financial position with robust balance sheet Strong Compatible with culture, modes of operation and business Compatible expectations Ability to help build the sector in which they will invest Ability Ability to relate-to and comply with the particular local laws and Ability to regulations, The partners would typically vary by sector, although there can be The some cross-over 12 6. 6. Financing Infrastructure project finance is a specialized skill-set. Infrastructure These are complex, often unique projects with multiple parties These Often Project/Limited Recourse Financing Often Recourse Financing Typically, there are diverse financing sources Typically, Export Credits Export Aid and concessionary finance Aid Bank consortia Bank Institutional Institutional Contractor and equipment supplier Contractor Mezzanine and other types of debt funds Mezzanine General purpose Funds General 13 6. Financing (2) (2) Financing often conducted in two phases Financing Short-term construction loans Short Longer term take-out financing Longer Some signs of secondary markets evolving Some Interest rates can be fixed or floating Interest Generally banks are floating Generally Institutional is fixed Institutional Funding can cover: Funding Development of greenfield facility with construction risk Development construction risk Construction period funding Construction Acquisition of existing project (s) Acquisition existing 14 6. 6. Financing (3) Financing (3) Special considerations that are changing the funding Special requirements of projects Increased liquidity available for projects globally Increased Proliferation of funds being formed to invest-in or finance projects Proliferation Examples of funds include: Goldman Sachs, Macquarie Infrastructure, Examples include: Sachs, re, GE Capital, Citi-IFDC ($5-b), Blackstone, Carlyle GE 15 7. Managing Project Risk 7. Projects have diverse risk Projects Front-end development exposure Front Pricing of bid/purchase Pricing Completion Completion Geopolitical or local/national political risk (change of regulatiions, tax policy, Geopolitical risk (change regulat ons, expropriation, etc.) expropriation, Labor (operational) Labor EPC Risks: EPC Engineering, construction, procurement, shipping/logistics, cost risks including Engineering, inflation Raw materials and feedstock (pricing and availability) Raw Technology (doesn’t work or becomes obsolete) Technology Market disruptions Market Reliability of off-taker Reliability Market for product or market pricing Market Force majeure Force 16 7. Managing Project Risk (2) (2) Risk mitigation techniques Risk Evaluation: Experience and expertise which understands, can Evaluation: evaluate and mitigate risks Risk sharing arrangements amongst parties to the project Risk Insurance (completion, bonding, technology, all-risk, business Insurance risk, interruption, political) interruption, 17 8. Merchant Bank/Fund Capability Example: Concept: Create a funding mechanism to support projects being Concept: developed Start initially at $300-million Start Take 25% ($75-million) as lead investor? Take Remaining funds raised from institutional investors around the world Remaining Retain core team:– complete by month 3 Retain Develop a Fund prospectus: complete by month 3 Develop Fund raising and commitment: complete by month 15 Fund Closing of Fund: complete by month 17 Closing 18 8. Merchant Bank/Fund Capability (2) 8. If a 15% interest in taken in projects, the $300-million If million investment will support about $8-billion of projects financed investment billion 25% equity and 75% debt 25% Fund/merchant bank also to have an international debt Fund/merchant raising capability and capability to locate other partners for projects. 19 Investment Appetite Investment What is the breadth of the Company’s interest in development? What Company The total package of these activities could include: The Development from an owner's perspective Development Project development and...
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This note was uploaded on 07/25/2012 for the course ECON 111 taught by Professor King during the Spring '12 term at CSU Bakersfield.

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