Credit enhancement factors for the financing of independent power producer (IPP) projects in Asia

Chowdhury, Abu Naser; Chen, Po‐Han; Tiong, Robert L. K.

doi:10.1016/j.ijproman.2015.04.007

Cited by 25 publications

(16 citation statements)

References 25 publications

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“…As such, given the high-risk profile of most PPP mega-projects especially at the construction phase (see Fig. 1 for Risk Profile of PPP Projects during Project Life Cycle), the limited recourse nature of its financing (Aladağ and Işik, 2017), vis-à-vis bank's relatively limited in-house technical skills needed for accurate estimation of project delay during funding appraisal (Chowdhury et al, 2015;Kumar et al, 2018), a key decision for lenders which is often overlooked in most PPP literature is, how do financers' evaluate and determine whether the risk of project incompletion is acceptable/bankable to them? (Özdemir, 2015).…”

Section: Construction Phase Of the Project Project Riskmentioning

confidence: 99%

Critical Success Factors for Ensuring Bankable Completion Risk in PFI/PPP Megaprojects

Owolabi

Alaka²,

Ajayi

et al. 2020

J. Manage. Eng.

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This study investigates project financiers' perspectives on the bankability of completion risk in Private Finance Initiatives and Public Private Partnerships (PFI/PPP) mega projects. Using a mixed methodology approach, focus group discussions with financier stakeholders in UK's PFI/PPP industry were used to identify 23 criteria relevant for evaluating completion risk in funding applications. These criteria were put in a questionnaire survey to wider audiences of financiers of PFI/PPP projects in the UK. Series of statistical tests were performed, including Reliability Analysis, Kruskal-Wallis Non-Parametric Test, Descriptive Statistics, Principal Rank Agreement Factor (PRAF) and Regressions Analysis. After identifying 21 reliable criteria influencing the bankability of completion risk, the general agreement of three major financier stakeholders (Senior Lenders, Equity Financiers and Infrastructure Financiers) on all the criteria were examined through Kruskal-Wallis test and PRAF. A regression model, constructed and validated with input from another team of expert financiers, revealed five key criteria influencing the bankability of completion risk in PPP mega projects. These include (1) Construction contractor with years of experience of successful completion of mega projects, (2) Construction Contractor's financial strength, (3) Existence of Tried-and Test Technology for the construction of project, (4) Availability of Independent

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Section: Construction Phase Of the Project Project Riskmentioning

confidence: 99%

Critical Success Factors for Ensuring Bankable Completion Risk in PFI/PPP Megaprojects

Owolabi

Alaka²,

Ajayi

et al. 2020

J. Manage. Eng.

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“…However, previous studies have not analyzed the financing method for real estate and infrastructure development. Previous studies investigated the current situation of PF (Ashuri and Mostaan, 2015;Liu and Wilkinson, 2014), analyzed the influencing factors for PF vitalization and proposed the improvement method (Chowdhury et al, 2015;De Marco and Mangano, 2013;Khanzadi et al, 2012;Wang and Liu, 2015;Weisheng et al, 2013;Wibowo and Wilhelm Alfen, 2014;Yu and Lam, 2013). The present study proposes a method to improve investment earnings rate of stocks issued for increasing their attractiveness to investors.…”

Section: Introductionmentioning

confidence: 91%

“…Previous studies related to PF investigated past cases and the current state of PF (Ashuri and Mostaan, 2015;Liu and Wilkinson, 2014), analyzed the influencing factors for the vitalization of PF and proposed the improvement method (Chowdhury et al, 2015;De Marco and Mangano, 2013;Khanzadi et al, 2012;Wang and Liu, 2015;Weisheng et al, 2013;Wibowo and Wilhelm Alfen, 2014;Yu and Lam, 2013).…”

Section: Literature Reviewmentioning

confidence: 99%

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Financing method for real estate and infrastructure development using Markowitz’s portfolio selection model and the Monte Carlo simulation

Lee

2019

ECAM

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Purpose Special purpose companies issue stocks to raise money to finance development of real estate and infrastructure. The advantage of a stock issue is that it does not entail financial cost such as interest on a loan. However, financing obtained in this way has been insufficient due to low interest by investors because of the large variability of the stocks’ earnings rates. The purpose of this paper is to propose methods to improve investment earnings rate for financing. Design/methodology/approach The proposed methods are Markowitz’s model and a combination of Markowitz’s model and Monte Carlo simulation. The proposed methods were verified by comparison with actual earnings rate. Findings The earnings rate was increased by as much as 23 percent over the actual value. Then, earnings rate compared with risk was analyzed using the Sharpe ratio which is a method to measure investment performance. The performance was also increased by as much as 23 percent over the actual value. The proposed method can help activate investment by increasing investors’ interest in the stock issue. Originality/value This study verified that Markowitz’s portfolio model, which is used for econometrics, could be applied for financing of construction project. It is valuable because the previous studies did not propose the method for financing.

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“…In the credit markets, there are many credit enhancement's instruments. Credit enhancements relying on third-party agency guarantees to enhance their own credit rating are also considered to solve the problem of government credit risk in PPP projects (Chowdhury et al, 2015). Credit enhancement can not only attract investors to participate in PPP projects, but also reduce the probability of government default perceived by both sides.…”

Section: Whenmentioning

confidence: 99%

Influence of Government Credit Risk on PPP Projects in Operation Stage

Zhou

Liu

2021

International Journal of Strategic Property Management

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In PPP projects, insufficient risk management may lead to the breakdown of partnerships and even project failures. Among them, the government credit risk is regarded as unbearable risk and a key risk affecting PPP projects because of its high frequency and impact. Therefore, based on the contractual relationship between both sides, a principal-agent model for the optimal choice of investors and the government under the government default probability is constructed. This paper explored the quantity relationship of the government credit risk and the project utility through analysing the effect of government default probability perceived by both parties on the investor’s optimal effort level and government allocation ratio. The results demonstrate that the government credit risk will decrease the effort level of investors and have a negative impact on the utility of the project. Furthermore, the government’s modification of the contract allocation ratio based on its own credit rating can offset the negative impact of its credit risk on the effectiveness of the project. But this regulatory effect is limited. The findings effectively provide some insights and theoretical basis for solving the negative effects of government credit risk.

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Credit enhancement factors for the financing of independent power producer (IPP) projects in Asia

Cited by 25 publications

References 25 publications

Critical Success Factors for Ensuring Bankable Completion Risk in PFI/PPP Megaprojects

Critical Success Factors for Ensuring Bankable Completion Risk in PFI/PPP Megaprojects

Financing method for real estate and infrastructure development using Markowitz’s portfolio selection model and the Monte Carlo simulation

Influence of Government Credit Risk on PPP Projects in Operation Stage

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