Financing Scenarios Research Articles

ASSESSMENT OF CONSTRUCTION OBJECT FINANCING SOLUTIONS / STATYBOS OBJEKTŲ FINANSAVIMO SPRENDIMŲ ĮVERTINIMAS

Theoretical and practical issues related to the applicability of the evaluations of construction project financing having regard to the complexity, timeframe and the limited nature of the resources available have been lately increasingly attracting researchers‘ attention. The assessment of decisions as to the timing and volume of funding of a project is extremely important and relevant for any organisation; therefore, it has been considered necessary to explore different models for possible financing by applying empiric and financial models, as well as theoretical mathematical methods. The objective of the present research exercise was to develop an optimal model for the appropriation of financing of defined scope according to different financing scenarios. For that purpose the researchers used a hypothetical reference heuristic financing appropriation plan for four periods of identical duration in three construction objects. By reference to the linear programming theory an optimal plan was identified by assigning, in individual periods and to each object, different priorities rated in points. The financing appropriation plans are assessed in terms of their impact upon the enterprise value that is computed applying the cash flow discounting method and the tax shield effect theory. Since the selection of the financing source is an important factor for the enterprise value the calculations were performed assessing three possible scenarios of the enterprise financing taking into account the enterprise‘s liquidity: a – an enterprise has accumulated sufficient own funds to finance the project, b – an enterprise has accumulated funds sufficient only to pay the interest for borrowed capital, c – an enterprise does not possess any disposable monetary resources to finance the project during its implementation, therefore it capitalizes the interest payable to the bank. It was concluded that under scenario a the selection of a financing plan does not affect the enterprise value, as the enterprise finances the investment from own resources. In the case of scenario b the loan obtained from the purpose of the investment creates additional value, the choice of the plan, however, does not affect the enterprise value. When capitalising the interest payable to the bank under scenario c, the highest value of an enterprise is created in the case of selection of an optimal plan that is developed by setting an overall limit of the amount to be funded, i.e., by prioritizing mathematical logics without referring to the up-front appropriation of financial resources by objects. The present article deals with the theory of the evaluation of investment project solutions. The results of the evaluation of the solutions for construction project financing appropriation are presented by criteria for optimal solutions and possible financing scenarios. Santrauka Statybos projektų finansavimo vertinimo teorinių ir praktinių pritaikymo klausimų nagrinėjimas, atsižvelgiant į šių projektų įgyvendinimo sudėtingumą, laiką bei reikalingų išteklių ribotumą, pastaruoju metu sulaukia vis didesnio dėmesio. Sprendimų, kiek ir kada finansuoti projektą, vertinimas yra labai svarbus kiekvienai organizacijai, todėl turi būti tiriami įvairūs galimo finansavimo modeliai, taikant empirinius ir finansų bei matematikos teorijos metodus. Tyrimo tikslas – parengti optimalų statybos projekto nurodytos finansavimo apimties paskirstymo modelį pagal skirtingus finansavimo scenarijus. Tyrimui naudotas sąlygiškas euristinis finansavimo paskirstymo planas keturiems vienodos trukmės laikotarpiams pagal tris objektus. Taikant tiesinio programavimo teoriją, optimalus planas randamas kiekvienam objektui konkrečiu periodu suteikus skirtingus balais įvertintus prioritetus. Finansavimo paskirstymo planai vertinami pagal jų įtaką įmonės vertei, kuri skaičiuojama taikant pinigų srautų diskontavimo ir skolinto kapitalo dėl mokesčių sutaupymo papildomai sukuriamos vertės teoriją. Kadangi įmonės vertei svarbus finansavimo šaltinio pasirinkimas, skaičiuota vertinant tris įmonės finansavimo scenarijus atsižvelgiant į įmonės likvidumą: a – įmonė turi sukaupusi pakankamai nuosavų lėšų projektui finansuoti; b – įmonei pakanka nuosavų lėšų tik palūkanoms už skolintas lėšas sumokėti; c – įmonė neturi laisvų piniginių išteklių projekto įgyvendinimo laikotarpiu, todėl kapitalizuoja bankui mokėtinas palūkanas. Nustatyta, kad a scenarijaus atveju įmonės vertei finansavimo plano pasirinkimas įtakos nedaro, nes ji investicijas finansuoja nuosavomis lėšomis. Pagal b scenarijų investicijai paimta paskola sukuria papildomą vertę, tačiau plano pasirinkimas įmonės vertės neveikia. Kapitalizuojant bankui mokėtinas palūkanas pagal c scenarijų, didžiausia įmonės vertė sukuriama pasirinkus optimalų planą, kuris sudaromas nurodžius bendrą finansuojamos sumos apribojimą, t. y. suteikiant prioritetą matematinei logikai atsisakius išankstinio finansinių išteklių paskirstymo pagal objektus. Straipsnyje nagrinėjama investicinių projektinių sprendimų vertinimo teorija. Statybos objektų finansavimo paskirstymo vertinimo rezultatai pateikti pagal optimalumo kriterijus ir galimus finansavimo scenarijus.

Methodological Framework for Evaluation of Financial Viability of Public-Private Partnerships: Investment Risk Approach

The development of highway infrastructure has increasingly been shifting toward the use of public-private partnerships (PPP) and alternative methods of project financing. In such schemes, the evaluation of their financial viability is the most commonly used industry practice for assessing the potential of the project to achieve the financial targets of its various stakeholders and ultimately affects its selection for implementation. In this study, a methodological framework for the evaluation of the financial viability of revenue-generating transportation infrastructure projects is presented in terms of their investment risk, using the method of moments. The investment risk is defined as the risk of not achieving the expected infrastructure-generated profit and thus not being able to service the financing debt outstanding and/or obtain an adequate return on the investment. The framework leads to a probabilistic assessment of the financial viability which can be achieved by performing various sensitivity and scenario analyses. To illustrate the application of the proposed methodology, a comparison of various alternative scenarios of financing is undertaken coupled with a few additional sensitivity analyses, for the case of a highway project developed as a typical PPP concession.

Budget sheets and buy-in: financing community-based waste management in Siem Reap, Cambodia

This paper details some of the difficulties in financing a community-based waste management (CBWM) project for the collection of waste in Siem Reap, Cambodia. It presents a series of financing scenarios based on several potential logistical arrangements. The financial variables investigated include labour costs and honorariums, collection fees, charges for secondary collection, land and equipment costs, and educational programmes. The case study illustrates how the loss of a political champion and a lack of cooperation by a private waste collection company derailed the financing of a CBWM project despite the presence of other favourable conditions for its success. The waste collection company's participation was fundamental to ensuring the affordability of secondary waste collection, and this one financial element greatly affected the feasibility of the entire system. The paper concludes that without buy-in and financial cooperation from all stakeholders, the best laid plans for CBWM (and the accompanying budget sheets) are rendered irrelevant.

Analyzing Bangladesh's Debt Sustainability Using SimSIP Debt

The ability to pay for a government-led investment strategy to achieve the millennium development goals (MDGs) is determined by the resources available to the government through economic growth, taxation, loans, and grants. Unsustainable public debts increase poverty directly through negative impacts on economic growth as well as indirectly through cuts in spending. Hence, the issue of fiscal debt sustainability is critical for achieving the MDGs. In this paper, we use the debt projection module of SimSIP Debt to project the evolution of Bangladesh's public debt over a 15-year horizon (from fiscal year 2006 to fiscal year 2021) under three different macroeconomic scenarios and two different financing scenarios of an ambitious government-led investment strategy.

ECONOMICAL EVALUATION OF LOGISTICS CENTRES ESTABLISHMENT

This paper presents a method for assessing the financial viability of a new Freight village financed by private and public investments. The financial evaluation model constitutes four distinct phases, namely (a) site selection and traffic forecasts, (b) definition of services offered and corresponding dimensions, (c) estimation of investment and operation costs and (d) evaluation of investments. Furthermore, the model produces financing scenarios, based on combinations of public and private funds.

The taxpayer-shareholder fallacy and private finance initiatives

There is a growing support for the view that the private sector is at least as efficient as the public sector in managing investment risks of large projects. Governments forget that it is the taxpayer who bears all the risks in a public finance scenario of investments. So, it seems unfounded that governments should neglect the cost of investment risk in obtaining finance as the taxpayer might be seen as a shareholder in (public) investments, which by definition are risky. It is this taxpayer-is-shareholder perspective that will be criticized in this paper. This taxpayer approach neglects the variety of funding and financing positions that might be taken by the various actors in investment projects. The paper concludes that some prudence is recommended in supporting private finance initiatives

How can the security of international trade be financed in developing countries? A global public good Approach

Summary The aim of this article is to identify the modalities of financing international trade security. Our analysis is more specifically oriented toward the issue of financing developing countries, which must make a considerable effort to attain the required level, whereas the developed countries have already invested heavily in trade security since the events of September 11, 2001. First, we characterize security in the context of a global public good before studying the financing conditions and the discriminating criteria of the supply of the global public good security. We then present a critical analysis of the various possible sources and instruments for financing the global public good security and propose different financing scenarios, each one based on a specific allocation of responsibilities among the actors in security. We conclude by considering the role of the international institutions as managers of the financing and implementation of the security of international trade.

Le financement de la sécurisation du commerce international pour les pays en développement. Une approche en termes de bien public mondial

Philippe Dulbecco and Bertrand Laporte. — The financing of international trade security for developing countries : An approach in terms of « global public good » The aim of this article is to identify the modalities of financing international trade security, more specifically for developing countries. It characterises security using a global public good framework, before studying the conditions of financing the supply of the global public good security. A critical analysis of the various sources and instruments for financing allows the authors to propose different financing scenarios, based on specific allocations of responsibilities among the actors involved in security. The article concludes by considering the role of international institutions as managers of the financing and implementation of security in international trade.

Freight village evaluation under uncertainty with public and private financing

The paper presents a method and models for assessing the financial viability of a new Freight village financed by private and public investments. The financial evaluation model constitutes an integrated part of a wider planning methodology, with four distinct phases, namely (a) site selection and traffic forecasts, (b) definition of services offered and corresponding dimensions, (c) estimation of investment and operation costs and (d) evaluation of investments. The paper presents the overall methodology, and presents analytically the evaluation method with the corresponding model. The model is developed specifically for the financial evaluation of investments for a Freight village incorporating uncertainty considerations in the values of the variables considered. The financial evaluation method identifies the various transport and other variables, which determine the cash flow of inputs (revenues) and outputs (investments, expenses) related to the construction and operation of a Freight village. Furthermore, the model produces financing scenarios, based on combinations of public and private funds as well as bank loans. In addition using Monte Carlo simulation the expected values of some key variables (investment costs, forecasted volumes and revenues) are estimated. Finally using linear programming an optimization related to the amount of private funds invested for a specific Freight village can be determined related to a mix of public and private funds (under certain constraints). An application of developed methodology and models is done for the case of a Freight village in Northern Greece, demonstrating its potential to application for similar cases.

Technoeconomic assessment of a building-integrated PV system for electrical energy saving in residential sector

This paper describes the installation, technical characteristics, operation and economic evaluation of a grid-connected building-integrated photovoltaic system (BIPV) installed in Northern Greece, and in particular in the city of Kastoria. The technical and economical factors are examined using a computerized renewable energy technologies (RETs) assessment tool. A number of different economic and financial feasibility indices are calculated for different financing scenarios in order to assess the gross return of the investment. Useful conclusions were drawn regarding the feasibility of BIPV systems and their potential for increased energy market penetration.

Techno-economic assessment of a stand-alone PV/hybrid installation for low-cost electrification of a tourist resort in Greece

This paper reports on the techno-economic assessment of an autonomous hybrid PV/diesel system installed in a bungalow complex in Elounda, Crete. Technical and economic factors are examined using a computerized renewable-energy technologies assessment tool. Several different economic and financial feasibility indices are calculated, such as the Internal Rate-of-Return (IRR), Year-to-positive cash flow, Net Present Value (NPV) and the simple Pay-Back Period (PBP) for different financing scenarios, in order to assess the gross return on the investment.

TRANSPORTATION BOT SCHEMES FOR PUBLIC AND PRIVATE SECTOR FINANCING SCENARIO ANALYSIS: The Experience in Taiwan

Transportation Build-Operate-Transfer financing projects have larger payment risks and failure possibilities than other financing projects, and these factors are essential to financing scenarios. The changes of financing scenarios not only affect private sectors' financing process but the conflict between private sectors and banks. This study broadly reviews relevant factors affecting BOT financing strategies, interviews relevant experts and then uses scenario analysis to design a questionnaire to find out the most important factors affecting BOT financing. The findings of this study are four major factors affecting public and private financing scenarios. In this paper, we also propose some suggestions as possible complements to public and private sector financing strategies.

Composition of Government Expenditure, Human Capital Accumulation, and Welfare

This paper uses a dynamic general equilibrium model calibrated to Ugandan data to examine the welfare effects of alternative scenarios of government expenditure and tax financing. Two expenditure types are considered: social spending that affects human capital, and infrastructure expenditures that affect productivity. The paper finds that social expenditures lead to higher economic growth depending on the form of financing; young generations benefit most from social spending financed by consumption taxes; agents do not substitute between human and physical capital as a result of changes in expenditure composition; and improving the productivity of fiscal expenditure is both growth and welfare enhancing.

Composition of Government Expenditure, Human Capital Accumulation, and Welfare

This paper uses a dynamic general equilibrium model calibrated to Ugandan data to examine the welfare effects of alternative scenarios of government expenditure and tax financing. Two expenditure types are considered: social spending that affects human capital, and infrastructure expenditures that affect productivity. The paper finds that social expenditures lead to higher economic growth depending on the form of financing; young generations benefit most from social spending financed by consumption taxes; agents do not substitute between human and physical capital as a result of changes in expenditure composition; and improving the productivity of fiscal expenditure is both growth and welfare enhancing.

Feasibility study of a municipality solid waste incineration plant in Jordan

The rapid growth in Jordan’s population coupled with an increasing standard of life, has resulted in a large increase of household and commercial waste. Environmental and health concerns as well as the high cost of establishing and maintaining adequate new landfills, has prompted serious thoughts of alternative methods for dealing with the increasing amount of waste. This paper focuses on the prospect of building a waste incineration plant that can be used to generate electricity and recycle material in Jordan. Sensitivity analyses of the plant profitability under several financing scenarios were performed. The results show that such a plant is economically feasible in Jordan.