Reality hits home
The sudden devaluation of the Mexican peso in December 1994 and the possibility that the government would default on its foreign exhange payments has sent a sobering message to the independent power industry. Developers are facing new challenges in raising money in the capital markets to finance projects in other emerging markets. 1994 was a busy year for developers, bankers and investors, although not as busy as they had hoped. After Mexico, project risks haven`t changed, but investors` perception of government risk is that it is much riskier than it was before. There is greater appreciation of soverign risk which was overlooked before. The crisis is likely to cause the following changes: Country ratings will have more effect on power project financing structures; The role of Exim Banks will be increasingly important to the success of project deals; Countries with active local capital markets will find them being tapped more for investment in power projects; Developer equity requirements will continue to increase in many deals; and, Developers will turn to commercial bank debt over the 144a bonds for most greenfield projects.
- OSTI ID:
- 83414
- Journal Information:
- Independent Energy, Journal Name: Independent Energy Journal Issue: 3 Vol. 25; ISSN 1043-7320; ISSN IDPEEW
- Country of Publication:
- United States
- Language:
- English
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