Analysis of debt leveraging in private power projects
- Lawrence Berkeley Lab., CA (United States)
- Morse, Richard, Weisenmiller and Associates, Inc., Oakland, CA (United States)
As private power (non-utility generation) has grown to become a significant part of the electricity system, increasing concern about its financial implications has arisen. In many cases, the source of this concern has been the substantial reliance of these projects on debt financing. This study examines debt leveraging in private power projects. The policy debate on these issues has typically been conducted at a high level of generality. Critics of the private power industry assert that high debt leveraging confers an unfair competitive advantage by lowering the cost of capital, and that this leveraging is only possible because risks are shifted to the utility. Further, debt leveraging is claimed to be a threat to reliability. On the opposite side, it is argued that debt leveraging imposes costs and obligations not home by utilities, and so there is no financial advantage. The private producers also argue that on balance more risk is shifted away from utilities than to them, and that incentives for reliability are strong. In this study we examine the project finance mechanisms used in private power lending in detail, relying on a sample of actual loan documents. This review and its findings should be relevant to the further evolution of this debate. State regulatory commissions are likely to be interested in it, and Federal legislation to amend the Public Utility Holding Company Act (PUHCA) could require states to consider the implications of debt leveraging in relation to their oversight of utility power purchase programs.
- Research Organization:
- Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
- Sponsoring Organization:
- USDOE; USDOE, Washington, DC (United States)
- DOE Contract Number:
- AC03-76SF00098
- OSTI ID:
- 7146085
- Report Number(s):
- LBL-32487-Rev.; ON: DE93001585
- Country of Publication:
- United States
- Language:
- English
Similar Records
Analysis of debt leveraging in private power projects
Analysis of debt leveraging in private power projects
Related Subjects
POLICY AND ECONOMY
20 FOSSIL-FUELED POWER PLANTS
ELECTRIC POWER INDUSTRY
FINANCING
COMPETITION
COST RECOVERY
ECONOMICS
EVALUATION
LENDING INSTITUTIONS
MANAGEMENT
RELIABILITY
RISK ASSESSMENT
INDUSTRY
296000* - Energy Planning & Policy- Electric Power
200600 - Fossil-Fueled Power Plants- Economic
Industrial
& Business Aspects- (1990-)