Offtaking agreements and how they impact the cost of funding for project finance deals

Veronica Bonetti, Stefano Caselli and Stefano Gatti

Review of Financial Economics, 2010, vol. 19, issue 2, 60-71

Abstract: Offtaking agreements are an important risk transfer mechanism in project finance. However, they can also be thought of as a trade‐off between lower market and higher counterparty risks. We use the case of the Quezon Power Ltd Co. to test the effect of higher counterparty risk on the cost of funding. Results indicate that the spread of Quezon's bond and counterparty risk are positively correlated when risk is represented by the daily volatility of the offtaker's stock returns. We also find an inverse relation between the rating upgrades of the offtaker and the spread paid by Quezon Power.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1016/j.rfe.2009.11.002

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:19:y:2010:i:2:p:60-71

Access Statistics for this article

More articles in Review of Financial Economics from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().