22 July 2014
Global Project Financing
During the ongoing process of globalization many countries, both developed and emerging, are creating opportunities for the development of extremely large projects. These projects are in excess of $500 million US dollars and are very difficult to design, build and operate successfully. In order to mitigate the risks involved with these mega-projects, companies and governments both are interested in creating stand-alone entities that are successful or fail on their own merits, leaving the initiating organizations un-affected. These projects create unique opportunities to study the effects of many of the underlying questions discussed in corporate finance. For example, the separation of the financing and investment decision, alternative governance systems, the discipline created by high leverage commitments and how to structure risk mitigation strategies. The cases provide vehicles to address many unresolved issues in Corporate Finance. In the area of cost of capital, two troublesome situations are explored. How does a firm compute the cost of capital for a project in an emerging economy? The other, how to value a project when there is no target capital structure throughout the life of the project.
Alan Frankle, Boise State University
Structure does affect value! Project Finance provides an alternative to Corporate Financing and creates an important realistic laboratory to study capital structure, risk management, valuation, contracting, and corporate governance. The complex cases provide a bridge from Corporate Financial Theory to actual projects and financial practice.
EUR 0: Students on a bilateral exchange programme do not have to pay. Freemovers are obliged to pay participation fees while tuition fees only apply to freemovers from countries outside the EU/EEA/Switzerland.