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Returns On Project-Financed Investments: Evolution And Managerial Implications

Listed author(s):
  • Benjamin Esty
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    In the past, project finance was used primarily to fund relatively low-risk natural resource projects with highly predictable cash flows. Today project finance is used for a wide range of assets, such as satellite telecommunications systems, amusement parks, and microprocessor factories, and in developing as well as developed countries. The author explores how the evolution into riskier assets has changed expected returns on project-financed investments. Higher return variability and greater failure rates have caused project debt capacities to fall. What is notable about project-financed investments, however, is that the best returns are not very high. And because the nature of most projects limits the upside potential, a much higher fraction of project-financed investments must be successful for capital providers to earn acceptable returns on their investments. 2002 Morgan Stanley.

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    Article provided by Morgan Stanley in its journal Journal of Applied Corporate Finance.

    Volume (Year): 15 (2002)
    Issue (Month): 1 ()
    Pages: 71-86

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    Handle: RePEc:bla:jacrfn:v:15:y:2002:i:1:p:71-86
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