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Setting the pace

01 October 2001

Daniel E. White, Executive Vice President and Rutherford S. Poats, Vice President, Financial Services, Pace Global Energy Services, LLC outline solutions to problems in some of the world's most attractive but difficult power markets ? Brazil, China and Indonesia.

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Attracting foreign investment and, more specifically, project financing to global power markets requires addressing a common mix of issues concerning project cost and revenue risks. Solutions can vary, however, to accommodate resource and institutional differences among markets. Herein we use three markets ? Brazil, China, and Indonesia ? as examples that offer attractive supply/demand fundamentals but remain challenging for foreign investment and project finance.
Currently, Brazil faces significant impediments to attracting project finance in urgently needed thermal capacity, while China and Indonesia being relatively dormant despite strong underlying fundamentals, as each country is in process of changing its structural approach to securing power generation investment. The unique resource and institutional features of fundamentally strong but economically challenging investment environments beg for finding structural and market solutions. We review current impediments to securing investment and suggest several institutional and structural modifications to overcome financing hurdles.

While regulatory, market, contract, and...

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