This paper analyzes the capital structure of energy infrastructure projects in the Gulf Cooperation Council region, where energy project form the bulk of the deal-making backload. The econometric estimation of 108 energy project finance for the period 2005-2014 valued at 258 USD sheds light on the success factors for such projects in the region, confirming the relevant relationships among project size, owner concentration and debt duration. The analysis illustrates the roles that debt, equity, interest rate and the economic crisis play in the financial structuring of infrastructure projects in rapidly growing emerging markets. First, it confirms that longer debt duration is correlated with higher debt ratio. Second, it shows that larger project size is correlated with lower debt ownership concentration. Third, the financial crisis had a different effect on debt ratio and debt duration. Fourth, project size and interest rate are negatively correlated, although regional specifics patterns would emerge when comparing the effect of the 2008 financial crisis on interest rates. These findings have several multi-levels implications for regulators, debt issuers and investors. For regulator, findings amplify the way in which to improve debt issuance in GCC countries. For issuers, findings suggest that they should be more concerned about bond’s security and seniority as the firm-specific characteristics, such as size and debt and equity concentration of finance project, affect the capital structure. For investors, the study offer an analytical framework to investigate structure of bond before to invest.

Energy project financing in the GCC region: an empirical investigation

D’Errico, Maria Chiara
2019

Abstract

This paper analyzes the capital structure of energy infrastructure projects in the Gulf Cooperation Council region, where energy project form the bulk of the deal-making backload. The econometric estimation of 108 energy project finance for the period 2005-2014 valued at 258 USD sheds light on the success factors for such projects in the region, confirming the relevant relationships among project size, owner concentration and debt duration. The analysis illustrates the roles that debt, equity, interest rate and the economic crisis play in the financial structuring of infrastructure projects in rapidly growing emerging markets. First, it confirms that longer debt duration is correlated with higher debt ratio. Second, it shows that larger project size is correlated with lower debt ownership concentration. Third, the financial crisis had a different effect on debt ratio and debt duration. Fourth, project size and interest rate are negatively correlated, although regional specifics patterns would emerge when comparing the effect of the 2008 financial crisis on interest rates. These findings have several multi-levels implications for regulators, debt issuers and investors. For regulator, findings amplify the way in which to improve debt issuance in GCC countries. For issuers, findings suggest that they should be more concerned about bond’s security and seniority as the firm-specific characteristics, such as size and debt and equity concentration of finance project, affect the capital structure. For investors, the study offer an analytical framework to investigate structure of bond before to invest.
2019
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11391/1458137
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