Ratings of the Investment Projects of Arbitrary Durations: New Methodology

Abstract

In this chapter, we develop for the first time a new approach to ratings of the investment projects of arbitrary durations, applicable in particular to energy projects. The ratings of such energy projects, as “Turkish stream,” “Nord stream-2,” energy projects relating to clean, renewable, and sustainable energy, as well as relating to pricing carbon emissions could be done using new rating methodologies developed here. In our previous chapters, the new approach to the ratings of the long-term investment projects has been developed (Filatova et al. J Rev Glob Econ 7:645–661, 2018). The important features of that consideration are as follows: (1) The incorporation of rating parameters (financial “ratios”), used in project rating and playing a major role in it, into modern long-term investment models, (2) The adequate use of discounting of financial flows virtually not used in existing rating methodologies. Here, for the first time, we incorporate the rating parameters (financial “ratios”), used in project rating, into modern investment models, describing the investment projects of arbitrary durations. This was much more difficult task than in case of the long-term investment projects, considered by us in previous chapters. We work within investment models, created by authors. One of them describes the effectiveness of investment project from perspective of equity capital owners, while other model describes the effectiveness of investment project from the perspective of equity capital and debt capital owners. The new approach allows to use the powerful instruments of modern theory of capital cost and capital structure (BFO) theory (Brusov et al. Modern corporate finance, investments and taxation, Springer, Cham, 2015; Modern corporate finance, investments, taxation and ratings, Springer, Cham, 2018a, J Rev Glob Econ 7:37–62, 2018b, J Rev Glob Econ 7:88–103, 2018c, J Rev Glob Econ 7:63–87, 2018d, J Rev Glob Econ 7:104–122, 2018e, J Rev Glob Econ 7:360–376, 2018f, Modern corporate finance and investments, Knorus Publishing House, Moscow, 2018g) and modern investment models, created by the authors and well tested in the real economy to evaluate investment project performance, including energy projects.