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Essay / Research Paper Abstract
This 4 page paper is based in a case study supplied by the student. PDVSA, a Venezuelan company is going to invest in a new project and needs a large amount of money. There are a number of choices and considerations regarding the use of project rather than traditional funding and the type of tools used to raise capital, risks and returns. The paper answers a set of questions set by the student.
Page Count:
4 pages (~225 words per page)
File: TS14_TEPDcono.rtf
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Unformatted sample text from the term paper:
the financing for this project separate from other operations. This increases the flexibility of the financing in terms of the amounts and structure that is offered/sought. This will facilitate the
potential to gain a investment credit rating at a rate associated with the sponsors, which could be beneficial in the way that the finance for project is offered. However, there
are also some difficulties; there is the potential that the separation may be a deterrent to some finance sources, such as those that require a higher level of
security. This may be particularly pertinent as this is a new project and may be perceived as risky due to the lack of history. Project financing will also ensure existing
assets in other areas are not tied up and keep other sources of capital for the existing operations open. Whatever approach is used for financing there are a number
of issues that need to be considered in terms of risk. Any project will have risks; in the petro-chemical industry there are some specific risks, these will need to be
allowed for in the financing. The first risk the potential for a significant fall in the price of oil. The projections make an assumption of $12.87 per barrel for sync
crude and $18.62 for Maya crude. There is already a predicted price drop, with analysts expecting prices to fall to $16. The company are not in a position to control
the price gained for oil; this is dictated by the market, they are also unable to leverage revenues though supply management as Venezuela is a member of OPEC which controls
the output of oil; quotas are set by OPEC. This leads to a second risk. There is the potential that further constraints could be placed on production which may limit
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