IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v61y2013icp285-291.html
   My bibliography  Save this article

Capital structure in LNG infrastructures and gas pipelines projects: Empirical evidences and methodological issues

Author

Listed:
  • Pierru, Axel
  • Roussanaly, Simon
  • Sabathier, Jérôme

Abstract

This paper provides new empirical insights on the capital structure of project-financed LNG infrastructures and gas pipeline projects, by using data relating to projects whose financial close occurred between June 2004 and March 2011. Most results are consistent with the basic view of risk-averse funds suppliers. Especially, the projects located in risky countries and larger projects tend to exhibit lower debt ratios and less-concentrated equity ownerships. In addition, regasification projects appear to have a more diluted equity ownership. Methodological issues raised by the financing of these projects are also examined from a capital-budgeting perspective. In particular, the equity residual method, usually used by industrial practitioners to value these projects, should be adjusted.

Suggested Citation

  • Pierru, Axel & Roussanaly, Simon & Sabathier, Jérôme, 2013. "Capital structure in LNG infrastructures and gas pipelines projects: Empirical evidences and methodological issues," Energy Policy, Elsevier, vol. 61(C), pages 285-291.
    • Handle: RePEc:eee:enepol:v:61:y:2013:i:c:p:285-291
    DOI: 10.1016/j.enpol.2013.06.112
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421513006198
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2013.06.112?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Christian Hirschhausen & Anne Neumann, 2008. "Long-Term Contracts and Asset Specificity Revisited: An Empirical Analysis of Producer–Importer Relations in the Natural Gas Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 131-143, March.
    2. Pierru, Axel, 2009. ""The weighted average cost of capital is not quite right": A rejoinder," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(4), pages 1481-1484, November.
    3. Shah, Salman & Thakor, Anjan V., 1987. "Optimal capital structure and project financing," Journal of Economic Theory, Elsevier, vol. 42(2), pages 209-243, August.
    4. Pierru, Axel, 2009. ""The weighted average cost of capital is not quite right": A comment," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 1219-1223, August.
    5. Benjamin C. Esty, 2004. "Why Study Large Projects? An Introduction to Research on Project Finance," European Financial Management, European Financial Management Association, vol. 10(2), pages 213-224, June.
    6. Paul Vaaler & Barclay James & Ruth Aguilera, 2008. "Risk and capital structure in Asian project finance," Asia Pacific Journal of Management, Springer, vol. 25(1), pages 25-50, January.
    7. Dailami, Mansoor & Leipziger, Danny, 1998. "Infrastructure Project Finance and Capital Flows: A New Perspective," World Development, Elsevier, vol. 26(7), pages 1283-1298, July.
    8. Denis Babusiaux & Axel Pierru, 2009. "Investment project valuation : A new equity perspective," Working Papers hal-02469464, HAL.
    9. Esty, Benjamin C. & Megginson, William L., 2003. "Creditor Rights, Enforcement, and Debt Ownership Structure: Evidence from the Global Syndicated Loan Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(1), pages 37-60, March.
    10. Isik Inselbag & Howard Kaufold, 1997. "Two Dcf Approaches For Valuing Companies Under Alternative Financing Strategies (And How To Choose Between Them)," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(1), pages 114-122, March.
    11. Megginson, William L., 2010. "Introduction to the special issue on project finance," Review of Financial Economics, Elsevier, vol. 19(2), pages 47-48, April.
    12. Richard A. Brealey & Ian A. Cooper & Michel A. Habib, 1996. "Using Project Finance To Fund Infrastructure Investments," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(3), pages 25-39, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kim, Seon Tae & Choi, Bongseok, 2019. "Price risk management and capital structure of oil and gas project companies: Difference between upstream and downstream industries," Energy Economics, Elsevier, vol. 83(C), pages 361-374.
    2. Choi, Bongseok & Kim, Seon Tae, 2018. "Price volatility and risk management of oil and gas companies: Evidence from oil and gas project finance deals," Energy Economics, Elsevier, vol. 76(C), pages 594-605.
    3. Sophia Rüster, 2015. "Financing LNG Projects and the Role of Long-Term Sales-and-Purchase Agreements," Discussion Papers of DIW Berlin 1441, DIW Berlin, German Institute for Economic Research.
    4. Narayan, Paresh Kumar & Nasiri, Maryam Akbari, 2020. "Understanding corporate debt from the oil market perspective," Energy Economics, Elsevier, vol. 92(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jakob Müllner, 2017. "International project finance: review and implications for international finance and international business," Management Review Quarterly, Springer, vol. 67(2), pages 97-133, April.
    2. Müllner, Jakob, 2016. "From uncertainty to risk—A risk management framework for market entry," Journal of World Business, Elsevier, vol. 51(5), pages 800-814.
    3. Jakob Müllner & Sinziana Dorobantu, 2023. "Overcoming political risk in developing economies through non-local debt," Journal of International Business Policy, Palgrave Macmillan, vol. 6(2), pages 159-181, June.
    4. Dorobantu, Sinziana & Müllner, Jakob, 2019. "Debt-side governance and the geography of project finance syndicates," Journal of Corporate Finance, Elsevier, vol. 57(C), pages 161-179.
    5. Veronica Bonetti & Stefano Caselli & Stefano Gatti, 2010. "Offtaking agreements and how they impact the cost of funding for project finance deals," Review of Financial Economics, John Wiley & Sons, vol. 19(2), pages 60-71, April.
    6. Francesco Corielli & Stefano Gatti & Alessandro Steffanoni, 2010. "Risk Shifting through Nonfinancial Contracts: Effects on Loan Spreads and Capital Structure of Project Finance Deals," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1295-1320, October.
    7. João Pinto & Mário Coutinho dos Santos, 2014. "Corporate Financing Choices after the 2007-2008 Financial Crisis," Working Papers de Economia (Economics Working Papers) 03, Católica Porto Business School, Universidade Católica Portuguesa.
    8. Bonetti, Veronica & Caselli, Stefano & Gatti, Stefano, 2010. "Offtaking agreements and how they impact the cost of funding for project finance deals: A clinical case study of the Quezon Power Ltd Co," Review of Financial Economics, Elsevier, vol. 19(2), pages 60-71, April.
    9. Byoun, Soku & Xu, Zhaoxia, 2014. "Contracts, governance, and country risk in project finance: Theory and evidence," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 124-144.
    10. Contreras, Gaby & Bos, Jaap & Kleimeier, Stefanie, 2018. "Link About It: Information Asymmetry, Knowledge Pooling and Syndication in Project Finance Lending," Research Memorandum 008, Maastricht University, Graduate School of Business and Economics (GSBE).
    11. Giulio Pasi, 2014. "Challenges for European welfare systems. A research agenda on social impact bonds," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 8(2), pages 141-150, June.
    12. Hainz, Christa & Kleimeier, Stefanie, 2006. "Project Finance as a Risk-Management Tool in International Syndicated Lending," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 183, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Stefanie Kleimeier & Roald Versteeg, 2010. "Project finance as a driver of economic growth in low‐income countries," Review of Financial Economics, John Wiley & Sons, vol. 19(2), pages 49-59, April.
    14. Pinto, João M. & Alves, Paulo P., 2016. "Project finance in Europe: An overview and discussion of key drivers," EIB Working Papers 2016/04, European Investment Bank (EIB).
    15. João Pinto, 2014. "What is Project Finance?," Working Papers de Economia (Economics Working Papers) 01, Católica Porto Business School, Universidade Católica Portuguesa.
    16. Megginson, William L., 2010. "Introduction to the special issue on project finance," Review of Financial Economics, Elsevier, vol. 19(2), pages 47-48, April.
    17. Choi, Bongseok & Kim, Seon Tae, 2018. "Price volatility and risk management of oil and gas companies: Evidence from oil and gas project finance deals," Energy Economics, Elsevier, vol. 76(C), pages 594-605.
    18. Barclay E. James & Paul M. Vaaler, 2018. "Research in management and related fields largely assumes that host-country state (“state”) ownership in investment projects raises risk for private coinvestors. We question that assumption in theoriz," Organization Science, INFORMS, vol. 29(4), pages 653-677, August.
    19. Barclay E. James & Paul M. Vaaler, 2017. "Experience, Equity and Foreign Investment Risk: A PIC Perspective," Management International Review, Springer, vol. 57(2), pages 209-241, April.
    20. Francesco Corielli & Stefano Gatti & Alessandro Steffanoni, 2010. "Risk Shifting through Nonfinancial Contracts: Effects on Loan Spreads and Capital Structure of Project Finance Deals," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1295-1320, October.

    More about this item

    Keywords

    Project finance; Gas; Debt ratio;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:61:y:2013:i:c:p:285-291. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.