Analysis and Project Capital Structures"
C. Rode, Peter R. Lewis, and Paul S. Fischbeck
The problems experienced recently in the power generation
sector have permeated through from project sponsors to the financial
institutions that invested, whether through debt or equity, in power projects.
In many cases, insufficient attention to the careful measurement and
management of risks exacerbated, if not caused, these problems. Now, as
financial institutions and investors face the task of restructuring these
troubled assets, it is critically important to prevent history from repeating
itself by ensuring that any restructuring activities not only recognize the
risks facing power generating assets, but also that those risks are
communicated effectively among the various stakeholders. In addition, it is
important for all of the stakeholders to understand how the restructuring
process itself is influenced by risk and risk-taking behavior. This paper
develops a framework for using simulation analysis as a common platform from
which to communicate about financing risks and capital structure.
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