Risk transfer in project finance loans for toll road using credit default swaps

Purpose The purpose of this paper is to demonstrate the applicability of the Credit Default Swaps (CDS), as a financial instrument, for transferring of risk in project finance loans. Also, an equation has been derived for pricing of CDS spreads. Design/methodology/approach The debt service cover ratio (DSCR) is modeled as a Brownian Motion (BM) with a power-law model fitted to the mean and half-variance of the existing data set of DSCRs. The survival probability of DSCR is calculated during the operational phase of the project finance deal, using a closed-form analytical method, and the results are verified by Monte Carlo simulation (MCS). Findings It is found that using the power-law model yields higher CDS premiums. This in turn confirms the necessity of conducting rigorous statistical analysis in fitting the best performing model as uninformed reliance on constant time-invariant drift and diffusion model can erroneously result in smaller CDS spreads. A sensitivity analysis also shows that the results are very sensitive to the recovery rate and cost of debt values. Originality/value Insufficiency of free cash flow is a major risk in the toll road project finance and hence there is a need to develop innovative financial instruments for risk management. In this paper, a novel valuation method of CDS is proposed assuming that DSCR follows the BM stochastic process.

The IMF or the AMF: Defining the Future of Financing for Investment and Development Projects in Africa

Since independence the government of many African countries have depended on the International Monetary Fund (IMF) and the World Bank as their main sources of finance for major developmental and investment projects in their respective countries. Accordingly, besides the granting of loans to Low Income Countries (LICs) at zero interest rate, the IMF also assists member countries to resolve their balance of payment challenges as well as granting interest-bearing loans to both member and non-member countries. Similarly, the African Monetary Fund (AMF) which is a prototype of the IMF was created by the African Union (AU) and is not yet operational. Just like the IMF, the AMF is intended to fund major developmental projects in Africa. This article examines the IMF loans conditionality and the award of Special Drawing Rights (SDR) to African Countries as seen during the COVID-19 crisis. It argues that the AMF would not be the African countries’ panacea as far as funding for developmental projects in Africa is concerned. In this regard, the article further examines Agenda 2063 as a future development model for Africa, as well as the various sources of project finance as envisioned in the Frameworks Document of Agenda 2063. It concludes that IMF still has the financial muscle to fund developmental projects and resolved balance of payment problems in Africa despite alternative sources of finance recommended by Agenda 2063.

Sistem Pendanaan Proyek Perusahaan Jasa Konstruksi Berbasis Web

CV. Yusti Karya as a construction company realizes that the ability to manage project finances is an important requirement for smooth project management. CV.Yusti Karya often has to manage several projects simultaneously in remote locations. This condition makes it difficult for the finance staff in the office to manage project financial allocations and also makes it difficult for project managers in the field and must report the status of project expenditures to the office. This difficulty drives CV. YustiKarya improved the project's financial management system from using spreadsheets to a web-based information system. Web-based information system will be developed using object-oriented methods. The object- oriented system development method was chosen because of its modular development capabilities and adapts to system requirements. The development of this system aims to enable Person in Charge (PIC) projects in the field to submit expenditures and can be immediately approved by the financial staff in charge. Online project finance management between project PICs and finance staff helps harmonize financial management. The Director can monitor the flow of the latest project finance developments online.

El project finance, las asociaciones público-privadas y la brecha de infraestructura en el Perú

La necesidad de cerrar la brecha de infraestructura en el Perú es, creemos, indiscutible. Y uno de los mecanismos más apropiados para el desarrollo de la infraestructura y la prestación de servicios públicos de calidad, sostenibles en el tiempo, son las asociaciones público-privadas (APP). En ese sentido, uno de los aspectos más destacados de las APP es el tipo de financiamiento especial que se utiliza en tales proyectos, conocido como project finance. En el presente trabajo, se analizan brevemente las principales características del project finance, la brecha de infraestructura y la manera concreta como, mediante las APP, se ha impulsado la ejecución de obras de infraestructura pública, utilizando el project finance como modalidad de financiamiento.

Círculos financeiros e circuito do petróleo: instrumentos financeiros para investimento em atividades e fornecedores da Petrobras

Após a abertura de capital da Petrobras, na década de 1990, a empresa petroleira de capital misto passou a intensificar o uso de instrumentos financeiros para viabilizar suas principais atividades via mercado de capitais. Entre eles, destacamos a capitalização por meio de oferta pública de ações, as estruturações financeiras (project finance), os fundos de investimento em direitos creditórios (FIDC) e os fundos de investimento em participações (FIP). Pela análise do uso desses instrumentos pela Petrobras, buscamos mostrar como a empresa incrementa seus recursos e expande suas atividades no circuito do petróleo, bem como antecipa capitais a sua extensa cadeia de fornecedores de produtos e serviços. Verificamos que o emprego desses instrumentos cria e reforça compromissos do circuito do petróleo no território nacional com um amplo conjunto de agentes privados ligados aos serviços financeiros, levando ao aprofundamento da lógica da valorização financeira na orientação das atividades produtivas da empresa estatal e também impondo-a a outras empresas e lugares que, direta ou indiretamente, participam desse circuito.

ANALISIS PERBANDINGAN PENGATURAN HUKUM BUILD OPERATE TRANSFER (BOT) DI INDONESIA DENGAN NEGARA-NEGARA ASEAN

<p>Tujuan penelitian ini untuk mengetahui dan menganalisis perbandingan pengaturan BOT diberbagai negara Asean sebagai acuan pembaharuan hukum BOT di Indonesia. Pembangunan infrastruktur baik sarana dan prasarana adalah kewajiban pemerintah. BOT sebagai alternatif pembiayaan harapannya dapat memenuhi kebutuhan itu. Namun pada tataran regulasi perlu juga diperbaiki agar dapat memberikan kepastian dan keadilan bagi semua pihak, seperti halnya regulasi BOT yang dibuat oleh Filipina yang kemudian membawa ketertarikan bagi swasta asing ataupun lokal untuk ikut terlibat membangun infrastruktur di negaranya. Metode penelitian yang digunakan adalah yuridis normatif dengan pendekatan perundang-undangan, konsep, dan perbandingan, bahan hukum yang dikumpulkan adalah bahan hukum sekunder baik itu putusan ataupun peraturan-peraturan terkait. Konsep umum BOT disebut <em>Project Finance</em>, dengan dua peserta utama, yaitu pemerintah tuan rumah dan sponsor swasta. BOT di Indonesia, Fililipina, Malaysia, dan Vietnam sangatlah beragam. Pengaturan ini dibuat menyesuaikan dengan kondisi negara masing-masing. Perbandingan BOT antara Indonesia dengan Filipina, Malaysia, dan Vietnam menjelaskan bahwa BOT di Indonesia masih sangat liberal dan tidak pro nasionalisasi, hal tersebut dapat dilihat pada tidak adanya aturan mengenai kepemilikan saham perusahan BOT yang dimiliki oleh orang Indonesia, bahkan jangka waktu konsesi, serta model penyelesaiannya.</p>

Public-Private Partnership in New Zealand and Malaysia

<p>The importance of high quality infrastructure and its maintenance lies in its ability to stimulate economic growth as it fuels business activities, creates job opportunities, markets product, and generates earnings (Yakcop, 2006a). In consideration of this importance, the public sector encourages private sector participation in the delivery of public services and infrastructure in terms of funding and expertise. A successful Public Private Partnership (PPP) is one vehicle used internationally. Both New Zealand and Malaysia acknowledge the potential of PPPs in delivering high quality infrastructure and services to the general public. Consequently, both countries made a move towards PPPs by creating PPP-specialized units and producing PPP guidelines. However, thus far, Malaysia has been more active in pursuing PPPs when compared to New Zealand‘s cautious approach to PPPs. Hence, the purpose of this thesis is to find out the reasoning behind this trend. Issues relevant to reasons for implementing PPPs, features of PPPs, allocation of risks, performance indicators and accounting for PPPs are analysed to justify this trend. This thesis finds that the Malaysian "Vision 2020" has signalled a government preference for PPPs, including its ability to encourage bumiputera participation. Further, the government has developed a system involving Special Purpose Vehicles and utilizing government-held superannuation funds for project finance aid. Consequently, the system reduces the transfer of risk from the public sector to the private sector partners. This has transcended the major issue in New Zealand where the lack of a competitive market has restricted the development of PPPs. A lack of public support has also contributed to New Zealand‘s PPP under-development.</p>

Public-Private Partnership in New Zealand and Malaysia

<p>The importance of high quality infrastructure and its maintenance lies in its ability to stimulate economic growth as it fuels business activities, creates job opportunities, markets product, and generates earnings (Yakcop, 2006a). In consideration of this importance, the public sector encourages private sector participation in the delivery of public services and infrastructure in terms of funding and expertise. A successful Public Private Partnership (PPP) is one vehicle used internationally. Both New Zealand and Malaysia acknowledge the potential of PPPs in delivering high quality infrastructure and services to the general public. Consequently, both countries made a move towards PPPs by creating PPP-specialized units and producing PPP guidelines. However, thus far, Malaysia has been more active in pursuing PPPs when compared to New Zealand‘s cautious approach to PPPs. Hence, the purpose of this thesis is to find out the reasoning behind this trend. Issues relevant to reasons for implementing PPPs, features of PPPs, allocation of risks, performance indicators and accounting for PPPs are analysed to justify this trend. This thesis finds that the Malaysian "Vision 2020" has signalled a government preference for PPPs, including its ability to encourage bumiputera participation. Further, the government has developed a system involving Special Purpose Vehicles and utilizing government-held superannuation funds for project finance aid. Consequently, the system reduces the transfer of risk from the public sector to the private sector partners. This has transcended the major issue in New Zealand where the lack of a competitive market has restricted the development of PPPs. A lack of public support has also contributed to New Zealand‘s PPP under-development.</p>

Financiamento da infraestrutura pelo mercado de capitais brasileiro: relato do caso Entrevias: pure project finance e debêntures

Com o apoio de governos e instituiçes de pesquisa da América Latina e do Caribe, em 2020 o BID desenvolveu a Rede de Análise e Melhores Práticas em Parcerias Público-Privadas (Rede PPP), com o objetivo de melhorar o desenvolvimento de infraestrutura na região em termos de qualidade, sustentabilidade, competitividade e eficiência. A Rede PPP foi criada com o objetivo de (a) conectar as demandas públicas de conhecimento com a pesquisa aplicada desenvolvida (em outras palavras, que o trabalho analítico sobre PPPs responde ao que os desenvolvedores de políticas e projetos querem saber sobre o que funciona e o que não funciona); (b) sistematizar a informações: (c) gerar e coordenar a evidência existente: desenvolvendo um trabalho analítico baseado na informações gerada pela rede disponível publicamente, assim como conectar a pesquisa aplicada regional para aumentar as sinergias na geração de conhecimento.