Valuation of a Hydro-Electric Power Project in Emerging Markets: An Application of Real Options
We apply a contingent-claims technique and demonstrate how to value an emerging market hydro electric power investment under uncertainty. The investment project depends on reliable weather conditions and the capacity of a river to drive the water turbines. Uganda’s Bujagali dam project located at the source of the Nile River is the focus of our study. We identify four mutuallyexclusive real options and incorporate the correlation of returns on rainfall and cash flows as well as a premium for lack of transparency in the estimation of project risk. We document a leverage effect and a volatility effect on project value.
Volume (Year): 14 (2012)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: |
Web page: http://www.africagrowth.com/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:afj:journl:v:14:y:2012:i:1:p:1-36. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kirk De Doncker)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.