RATE UNBUNDLING: ARE WE THERE YET?
FEBRUARY 15, 1996
models, he says.
Sharing Risks and Risk Management
The collection of investment risk takers in foreign projects can include a host of types of businesses and financial entities. Multilateral banks and commercial banks both make loans and take equity positions. Insurers, exporting suppliers, other public and private investors, and finally the developing utilities themselves take on a variety of risk elements. Breaking overall risk into bite-sized components and types is what may make a successful deal work; premiums are paid for those who take the greater risks, and limits to exposure can come from corporate bylaws, from outside risk analysts, or from the good business sense within the utility's development team.
Should utilities hire top consulting guides when venturing overseas? Should they form joint ventures with local partners or specialized financial entities? Or should they just build expertise in house? It all depends on the complexity and size of the project, says Kassin. "A lot of project developers have amassed in-house capabilities, while others have outsourced risk management expertise with a variety of bankers like Morgan Stanley or Goldman Sachs. There is a high cost of setting up a trading system, so out-sourcing or forming an alliance may work best."
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