This document discusses renewable energy investments in growing economies like India. It analyzes required returns on equity for solar power projects in India based on interviews with 21 investors. The auctions for these projects yielded very low prices, suggesting investors were satisfied with returns of 10-15%, much lower than typical expectations. The document explores behavioral explanations for this, finding investors had diverse risk perceptions and many saw opportunities to gain skills and resources by investing sooner despite uncertainty. Lower perceived risks around policy, technology costs, and economic growth helped trigger waves of earlier investment at below-average rates.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
The increasing awareness of stakeholders is leading firms to adopt strategies related to the reduction of their environmental impact, not necessarily linked to existing regulatory provisions (e.g. Corporate Social Responsibility strategies). We focus on the potential role of banks, when dealing with the credit merit of potential investors, and move a first step in the direction of understanding the consequences and trade-offs involved in the adoption of “green credit merit” (GCM) measurement tools. After providing a theoretical background for our investigation, we develop a descriptive analysis using firm level Spanish data. We show that in certain cases projects featuring a low environmental impact would gain access to credit according to green credit merit procedures but not according to standard credit merit indicators. Also, and remarkably, indicators focused on specific environmental problems (e.g. related to energy consumption) might prove much more effective and informative than wider ones.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
The increasing awareness of stakeholders is leading firms to adopt strategies related to the reduction of their environmental impact, not necessarily linked to existing regulatory provisions (e.g. Corporate Social Responsibility strategies). We focus on the potential role of banks, when dealing with the credit merit of potential investors, and move a first step in the direction of understanding the consequences and trade-offs involved in the adoption of “green credit merit” (GCM) measurement tools. After providing a theoretical background for our investigation, we develop a descriptive analysis using firm level Spanish data. We show that in certain cases projects featuring a low environmental impact would gain access to credit according to green credit merit procedures but not according to standard credit merit indicators. Also, and remarkably, indicators focused on specific environmental problems (e.g. related to energy consumption) might prove much more effective and informative than wider ones.
The aims of the paper are to study the financial performance between the independent finance companies and the
integrated finance companies over the period 2001-2011.
Fin 405 Enthusiastic Study / snaptutorial.comStephenson093
Question 1
In addition to the market-risk premium and a firm-size factor the Fama and French model adds
Question 2
Consider an asset that currently plots below the security market line,
This research investigates the determinants of the capital structure of firms listed service sector on BIST(Borsa Istanbul) and the adjustment process towards this target. The econometric analysis employs the Generalized Method of Moments estimators (GMM-Sys, GMM difference) techniques that controls for unobserved firm-specific effects and the endogeneity problem. The findings of the paper suggest that firms have target leverage ratios and they adjust to them relatively fast. Consistent with the predictions of capital structure theories and the findings of the empirical literature, the results of this paper suggest that size, assets tangibility, profitability, growth opportunity except earnings volatility have significant effects on the capital structure choice of hotels and restaurants.The capital structure or leverage is measured by total debt ratio. Analysis results indicates that firms with high profits, sizable, high fixed assets ratio and high total sales and more growth opportunities tend to have relatively less debt in their capital structures.
The aims of the paper are to study the financial performance between the independent finance companies and the
integrated finance companies over the period 2001-2011.
Fin 405 Enthusiastic Study / snaptutorial.comStephenson093
Question 1
In addition to the market-risk premium and a firm-size factor the Fama and French model adds
Question 2
Consider an asset that currently plots below the security market line,
This research investigates the determinants of the capital structure of firms listed service sector on BIST(Borsa Istanbul) and the adjustment process towards this target. The econometric analysis employs the Generalized Method of Moments estimators (GMM-Sys, GMM difference) techniques that controls for unobserved firm-specific effects and the endogeneity problem. The findings of the paper suggest that firms have target leverage ratios and they adjust to them relatively fast. Consistent with the predictions of capital structure theories and the findings of the empirical literature, the results of this paper suggest that size, assets tangibility, profitability, growth opportunity except earnings volatility have significant effects on the capital structure choice of hotels and restaurants.The capital structure or leverage is measured by total debt ratio. Analysis results indicates that firms with high profits, sizable, high fixed assets ratio and high total sales and more growth opportunities tend to have relatively less debt in their capital structures.
ANALYSIS OF RISK CATEGORIES AND FACTORS FOR PPP PROJECTS USING ANALYTIC HEIRA...A Makwana
Success of Public Private Partnership projects is greatly influenced by proper management of the risks associated with the project. All projects which are undertaken using conventional procurement method or using a PPP approach have known risks and unknown risks. Risk identification plays an important role in development of PPP framework. The participation and investment of Private sector has been the main stay of the Government of India policy toward infrastructural growth. In this study main risk categories and factors of Public Private Partnership projects have been recognized. The identification of collective influence of risks and its variation over numerous PPP projects is been done. Generally Analytic Hierarchy Process (AHP) is widely used as multi criteria decision making. Normally it is very hard to meet the consistence need of a comparison matrix in analytic hierarchy process. In this study AHP is used to categories the risks of PPP projects in different levels and the impact of those risks on the PPP projects are identified.
Dr. John Paglia, lead research for the Pepperdine Private Capital Project, presented a workshop on his cost of private capital model at IACVA-Germany's Fourth Annual Business Valuation Conference on October 8, 2010 in Munich. http://bschool.pepperdine.edu/privatecapital
Nick O’Donohoe, former Global Head of Research at JP Morgan, author of their report on Impact Investments presented a summary of the report's findings, specifically how impact investing is emerging as an asset class.
Be sure to check out the other presentations, videos and audio recordings from the conference at www.tbnetwork.org/uknc11/media
Abstract
The study examines the effect of corporate information on equity investors' decision making in listed non-financial firms in Nigeria. The population comprises all the listed non-financial firms in Nigeria and a filtering sampling technique was used to arrive at forty-eight (48) sampled firms covering the periods of 2012 to 2019. The hypotheses were tested using the Robust Fixed effect (RE) regression model after conducting some diagnostics tests like Pearson correlation, Variance Inflator Factor, Heteroscedasticity and Hausman Specification. The results show that firm growth (FG) and firm size (FS) have a significant positive effect on market price of shares (MPS) of quoted non-financial firms in Nigeria for the period under review. The study recommends among others, that the management of non-financial firms in Nigeria should put the growth level of their firms into consideration by ensuring a consistent increase in the value of their revenues yearly to attract more investments from the equity investors in the capital market. Their five-year growth rate should also be provided to all the stakeholders in their financial statements. Also, the non-financial firms should consolidate their firms to form a large capital base that would make them take advantage of large scale production to attract more equity investors to their firms in Nigeria.
Keywords: Corporate Information; Equity Investors; Decision Making; Non-Financial Firms
Looking back in time for benchmarking - developing countriesSokrates advisors
Due diligence benchmarks often involve the identification of reasonably similar situations in the past to compare and evaluate future outcomes. An application to telecom due diligence in developing countries in general and sub-Saharan Africa in particular.
A Study on the Performance of Mutual Fund Scheme in IndiaIJAEMSJORNAL
A mutual fund is a trust that encompasses the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus, Mutual Fund is one of the most effective instruments for the small & medium investors for investment and offers opportunity to them to participate in capital market with low level of risk. It also provides the facility of diversification i.e. investors can invest across different types of schemes. Indian Mutual Fund has achieved a lot of popularity since last two decades. For a long time UTI enjoyed the monopoly in mutual fund industry. But with the passage of time many new players came in the market and thus the mutual fund industry faces a lot of competition. Now a day this industry has become the major player of the financial system. Therefore it becomes important to investigate the mutual fund performance at continuous basis. The wide variety of schemes floated by these mutual fund companies gave wide investment choice for the investors. Among wide variety of funds equity, diversified fund is considered as substitute for direct stock market investment. In present paper an attempt has been made to investigate the performance of the open ended, growth oriented, equity diversified schemes on the basis of return and risk evaluation. The analysis was achieved by assessing various financial tests like Average Return, Standard Deviation, Beta, Coefficient of Determination (R2), Alpha, Sharpe Ratio and Treynor Ratio whose results will be useful for investors for taking better investment decisions. The data has been taken from various websites of mutual fund schemes and from amfiindia.com. The analysis depicts that majority of funds selected for study have outperformed under Sharpe Ratio as well as Treynor Ratio.
The Influence of Good Corporate Governance Mechanisms, Liquidity, Firm Size, ...AJHSSR Journal
ABSTRACT : This study aims to determine the effect of Good Corporate Governance Mechanisms,Liquidity,
Firm Size, and Impact of Covid-19, on Firm Value with Financial Performance as a mediating variable. This
study uses secondary data from 35 sample banking companies listed on the Indonesian Stock Exchange for the
2017-2021 period. Sampling using purposive sampling technique. The research data analysis method uses SPSS
v.26 software. The results of this study are the Good Corporate Governance Mechanism (board of directors),
liquidity, and financial performance hava a significant effect on firm value. Meanwhile, the indirect effect of
firm size and impact of covid-19 has a significant effect on financial performance (mediation variable). From
the calculation of the sobel test and direct or indirect effect, its found that financial performance cannot mediate
form the GCG mechanisms, liquidity, firm size, and the impactof Covid-19 on firm value.
KEYWORDS : Good Corporate Governance Mechanisms, Financial Performance, Liquidity, Firm Value,
Firm Size
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Similar to JNNSM reverse auction : A rational explanation for irrationally low hurdle rates (20)
List channelpartners sp_jnnsm(02072013)madhavanvee
List of channel partners ( Not for NABARD programme)
Accredited by the Ministry for Off - Grid and Decentralized
Solar Applications under JNNSM as on 01 .07.2013 Solar Photovoltaic-System Integrator
The article written by me can be found at Page 49 of the magazine. Other contributors include Mr. Subramanya, CEO of Tata BP Solar, Shaji John, Chief - Solar Initiatives, Hari Chereddi, MD of Sujana Energy
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
I Will leave The telegram contact of my personal pi vendor, if you are finding a legitimate one.
@Pi_vendor_247
#pi network
#pi coins
#money
NO1 Uk Divorce problem uk all amil baba in karachi,lahore,pakistan talaq ka m...Amil Baba Dawood bangali
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
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Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
JNNSM reverse auction : A rational explanation for irrationally low hurdle rates
1. Charles Donovan 1
IE Business School
Discussion Paper Series on Asset Pricing:
Renewable Energy in Growing Economies
This is the second in a series of three discussion papers. The first paper addressed two aspects of
project discount rates for renewable energy investments: zero beta and downside risk. Both
concepts push at the edges of mainstream investment evaluation, but are nonetheless firmly rooted
in the logic of portfolio theory and the Capital Asset Pricing Model (CAPM). As CAPM is a well
installed program in the minds of current and aspiring CFOs, we argued that the model would
become increasingly relevant to investors and policymakers in this emerging sector.
In this paper, we take the opposite approach by looking for a better way to describe how investors
arrive at their financial return expectations. We explore self-reported perceptions about risk from a
range of investors in India’s renewable energy market and consider the influence of strategic options
on investment hurdle rates.
1. Analysis on required return on equity
The slew of recent investments in India’s fledgling solar PV market challenge traditional notions of
market efficiency and investor rationality. Over the past year, the Government of India has secured
commitments from private sector investors to plow roughly $1 billion into new solar power
generation facilities. What’s surprising is how little financial incentive was ultimately needed to
induce this investment.
The first round of bidding in India’s National Solar Mission (NSM) yielded bids well below
expectations. Prices for delivering solar PV power to the electric grid went below 11 Rs/kWh
($0.24/kWh)1, leading many commentators to raise “an open question how and when these projects
will be realized” (European Commission, 2011). Yet in the second round, concluded in December
2011, bid prices were even lower. Accepted bids ranged from a low Rs 7.5 to a high of 9.5/kWh
($0.16 - $0.21/kWh). In just 12 months, developers shaved 20-30% off bid prices, despite more
stringent pre-bid qualification criteria and rising debt rates.
The auctions tell a fascinating story about not just falling PV panel prices, but also investment hurdle
rates. Taking into account ongoing reductions in solar PV equipment costs, it appears that firms
sanctioned investments at IRRs of between 10% and 12%2. Given the high cost of debt in India,
levered return on equity (ROE) for those same projects would be in the range of 11-15%. Both
levered and unlevered rates are well below what would be expected from “rational” investors.
The risk-free rate in India (10 year GOI bond) has been at least 8% during all of 2011. The equity risk
premium for solar PV investment would therefore be in the range of 2-4%, less than the premium
observed in well developed markets such as the US and far below the premium typically ascribed to
emerging markets. The comparisons are even more striking when considering the illiquidity of solar
PV project investments relative to other classes of risky assets.
1
Rs45/USD
2
I am grateful to Madhavan Nampoothiri, Managing Director of RESolve (India), for valuation expertise
2. Charles Donovan 2
IE Business School
Our past research on a proxy portfolio of 19 renewable energy companies indicated that a downside
risk-adjusted CAPM would predict that investors demand an unlevered ROE in the range of 15-
19%%. Various snapshots of ROE for Indian firms as a whole, such as analysis by The Economist in
Figure 1, show that average ROE has not been below 15% for the last decade. As the average firm in
the BSE 100 is less indebted than the typical solar PV project, it makes the industry-to-industry
comparison even more striking. The Government of India set auction reserve prices with the
intention of providing investors with a levered project ROE of approximately 22%3, a rate
presumably high enough to entice investors in to a seemingly risky, unproven sector.
Figure 1. Return on Equity as reported by The Economist (Nov 2011)
Compared to numerous metrics, India’s solar auctions appear to have landed investors at rates much
lower than would be expected from “rational” investors. The results are particularly confounding
given the conventional wisdom that firms typically set project hurdle rates above their cost of capital
to correct for over-optimism. Especially in the area of clean technology investing, there is a widely
held presumption that investors require a premium to invest in sectors without proven track
records. Without a reliable means of measuring objective risk, it is often presumed that the “gut
instincts” of investors lead them to set higher thresholds for project IRRs. In the words of one
prominent bank, “just because an area is unknown, there is a human tendency to assume that risks
in that area are higher than they really are.”4
2. Revisiting Risk and Return
We carried out our interviews in November 2011, just before winning bids were announced in from
the second NSM auction. The interviews were semi-structured conversations based around a series
of questions exploring organizational procedures for risk assessment, strategic logic, and individuals’
3
Shrimali, G. (2011). The Solar Auctions in India: What Can We Learn from the Telecom Auctions?
Unpublished Manuscript. Indian School of Business, Hyderabad.
4
International Finance Corporation (IFC), 2011. Public Private Partnerships: Accelerating the Growth of
Climate Related Private Equity Investment. World Bank Group: Washington, DC.
3. Charles Donovan 3
IE Business School
perceptions about market risk. Twenty-one individuals, each representing a unique company
participated. A summary of the participant profiles is shown below.
Figure 3. Participants by Job Title
19%
43% CEO/COO/CFO
19% Managing Director
19% Director
Manager
n=21
Figure 4. Participants by Type of Firm
IPP
19%
33% Private Equity Firm
14% Consulting Firm
14% 19% Conglomorate
Investment Bank
n=21
Figure 5. Participants by Company Headquarters
24%
38%
US / EU
India
38% Other Asia
n=21
4. Charles Donovan 4
IE Business School
The interviews explored various aspects of the firms’ investment decision-making processes and
investigated individuals’ beliefs about renewable energy technologies, markets and governmental
policies.
Several themes emerged from our conversations:
a. Market Evolution. Nearly all interviewees touched upon an idea that the renewable energy
market in India was “evolving” with respect to investment risk. Their collective emphasis on
this idea raises new questions: Towards what is the market evolving? What evolutionary
mechanism would best describe the current state of the market? Our sense from listening to
investors was that an equilibrium state was still many years away. When we asked investors
to describe the risk/return tradeoff in solar PV power project investing relative to other
types of investment, we heard a wide range of opinions. Even from this small sample, we
did not gain from participants a stable set of descriptions about the level of risk or return
available from the market. Risk/return expectations appeared widely dispersed.
Additionally, we noted diversity in the way firms were approaching the task of asset pricing.
Overall there seemed to us a lack of quantitative precision in setting risk-adjusted hurdle
rates. Investment decision rules were commonly linked to achieving a levered IRR target
set in isolation from project risk assessment.
b. Expectations about High Growth. Despite recent setbacks in the headline growth rate,
general confidence about India’s economy remains relatively high. When we asked
investors about growth prospects for solar power, investors returned time and again to the
linkage between economic growth and electric power demand. Many participants remarked
that an “uncoupling” was occurring in market structure that would allow solar power to
escape the ongoing turmoil of insolvency amongst state distribution companies. Looking
towards prospects for further falls in PV module prices and escalating prices/availability of
imported fossil fuels, many investors saw a scenario whereby solar power could enter a new
phase of growth in off-grid, commercial/light industrial, and utility-scale markets. Many
investors expect India to have an endless need for new sources of electric power. Amongst
our sample there was a growing belief that imported coal and natural gas will not be
available to meet that demand. Higher power prices and a bright future for solar seemed, to
them, inevitable.
c. Declining Policy Uncertainty. As in many markets, the single greatest risk issue was related
to government policy. There was a generalized concern that the government could leave
early investors stranded if/when new solar PV power installations become more affordable.
Yet overall, we noted a feeling amongst most investors that policy uncertainty was resolving,
rather than increasing. For project developers working in certain states such as Gujarat,
there was a notable level of confidence about regulatory actors and their assurances to
investors. In discussions of state/national policy risks, only rarely did they make references
to past historical occurrences, expected probabilities, or quantitative ratings. We suspect
that there is a collective belief in the market that policy uncertainty has crossed some peak,
triggering anticipation that with additional time it will decline further. In the words of one
5. Charles Donovan 5
IE Business School
investor, renewable energy policy-making had “turned a corner.” When pressed for details
about the reduction in uncertainty, most participants did not mention specific events but
rather a change in the general sentiment and pointed again to the “learning process.”
3. A rational explanation for irrationally low hurdle rates
Our focus on non-quantitative elements of the decision-making process was motivated by a
behavioral view of asset pricing that recognizes subjectivity in the risk assessment process. While it
seems self-evident to most corporate finance practitioners that individuals’ beliefs play a role in
investment decision-making, mainstream financial theory does not recognize a psychological
foundation of asset pricing. Where pricing anomalies as shown to exist, these are often dismissed as
short-run phenomenon attributable to irrational agents, or “noise traders”.
In the traditionalist view, the discount rate is derived from observed levels of objective risk. The
measured amount of risk determines the compensation required by investors in excess of a
“certainty-equivalent”, or risk-free, rate. In instances where risk is unquantifiable, firms invest under
conditions of uncertainty. Over time, uncertainty may be reduced as investors learn from new
information that allows them to make clearer forecasts of future states of the world. Learning
within the system promotes a gradual reduction in perceived uncertainty.
The standard view is well represented by the chart below, taken from a US Department of Energy
report, whereby the discount rate is a function of time and a measure of product commercialization
(e.g. cumulative sales).
6. Charles Donovan 6
IE Business School
Figure 6. Evolution of the Project Discount Rate5
In conditions of economic equilibrium, where by supply and demand relationships are stable the
stable,
cost of capital within an industry is seen to reduce gradually towards the certainty
certainty-equivalent rate.
And while the ideas of dislocation discontinuities, and non-linearity are hardly new to economics –
islocations,
Joseph Schumpeter recognized these in the early 1930’s – it adds considerable complexity to
economic thinking. Perhaps for this reason, these concepts have hardly touched mainstream
.
corporate finance practices.
There is no shortage of academic and practitioner research advancing a more sophisticated view of
markets. Every hour of every day, investors make money from inefficient market pricing. Yet to
.
date, nearly all of this work has been focused on behaviors within financial markets – the trading of
f
stocks, bonds, commodities and derivates. The new models have not been m
These much help in
understanding the seemingly c chaotic patterns of capital allocation within firm
firms. It seems the
“internal capital markets” of firm (i.e. capital budgeting) are too different from tradable securities
firms
exchanges to be of much use in explaining the apparent paradoxes of investment patterns
patterns.
No matter whether one’s focus is internal or external capital markets, a common question in both
external
arises as to what extent economic actors behave rationally. In the behavioral school, rational agents
are people that do things which are, for them, sensible. This differs from the traditionalists’ sstrict
economic interpretation of rationality as the maximization of personal utility. Sensible people given
ensible people,
the situation presented to them make decisions in their best interest. The key difference is that
them,
“best interests” cannot always be represented in monetary terms. Not assigning a monetary value
terms.
5
National Renewable Energy Laboratory (NREL). 2003. Bridging the Valley of Death: Transitioning from Public
to Private Sector Financing. NREL/MP
REL/MP-720-34036. May 2003.
7. Charles Donovan 7
IE Business School
to one’s preferences poses a tremendous challenge to economics based on individuals’ marginal
utilities.
Accepting that investment decision-makers are not always be rational does not mean that they can’t
be understood. As an alternative to rationality, we can pursue insights about in which ways there
are sensible. Adopting sensibility as our mental frame, our goal becomes understanding how
individual decision-makers approach the issue of investment risk. We want to know how they make
sense of risk and return. These are the psychological foundations of investment decision-making.
But we need not steer too far from traditional economics to find space for a sensible explanation of
low ROEs in solar PV project investments. Many observations of mispricing are more accurately
characterized as “near rational” than irrational, owning to the fact there is frequently wide latitude
for deviating from full optimization without incurring significant losses.6 We suggest that a key to
understanding differences in observed hurdle rates among investors is recognition that risk is not
perceived uniformly by investors.
Conventional wisdom is that regulatory risk typically leads firms to exploit their option to delay.7 By
waiting an extra time period, a firm can narrow the range of probabilities and reduce the chances of
making a negative NPV investment. But in many situations, such as those involving highly regulated
industries or involving rapidly advancing technology, uncertainty is endemic to the investment
decision. While uncertainty may be reduced, complete elimination of uncertainty will never occur.
In these cases, delay becomes counterproductive. In these situations, it may be more productive to
invest uncertainty is still high. For example, a recent study of the German power-generation
industry indicated that some firms accelerate investment decisions under regulatory uncertainty.
The sensible reasons are to secure competitive resources, to leverage complementary resources,
and to alleviate institutional pressures8. We see many of the same dynamics at work in the Indian
solar PV sector.
4. Real Options in Technology Investing and Their Impact on Investment
Learning within individual firms occurs with a set of collective thought about how to compete and
survive. Building the capability to compete and extract rents from new business areas is as
important as observing specific decision rules. We propose that firms respond in different ways to
the uncertainty presented to them. For some, uncertainty is reason to delay and or others a reason
to move faster. What matters most in determining waves of investment is not the absolute level of
uncertainty, but rather the amount of uncertainly relative previous levels9. Declining uncertainty can
be a powerful trigger an ecosystem-wide response to accumulate resources.
6
Akerlof, G. and Yellen, J. 1987. Rational Models of Irrational Behaviour. The American Economic Review,
Vol. 77, No. 2, May 1987.
7
Dixit A. and Pindyck, R. 1994. Investment Under Uncertainty.
8
Hoffmann, V., Trautmann, T., and Hamprecht, J. 2009. Regulatory Uncertainty: A Reason to Postpone
Investments? Not Necessarily. Journal of Management Studies, 181, 2009.
9
Pastor, L. and Veronesi, P. 2005. Rational IPO Waves. Journal of Finance, Volume 60, Issue 4, pages 1713–
1757, August 2005
8. Charles Donovan 8
IE Business School
Not all actors perceive such an opportunity in the same way. Some firms will be willing to pay a real
option premium to establish a new position, while others, given their resources at hand, prefer to
wait. This diversity in how firms respond to uncertainty becomes a source of heterogeneity in the
discount rate used to evaluate new investments.
In an emerging industry, the opportunity for accumulation of new skills and know-how will prompt
some investors to invest in prospects promising returns below the industry-average ROE. In
neoclassical economics there is one equilibrium discount rate. But viewed from the perspective of
the firm, it may be very sensible to adjust investment hurdle rates below expected return thresholds
in order to pursue new sources of sustainable economic rent.
And while it seems evident that the discount rate reduces over time as an industry matures, we
contend that the curve is not gradually sloping downward. Rather, the availability of real options
lead some firms to break from the pack. In instances where a sub-group of firms sensibly invest for
lower returns, the observed discount rate will be substantially lower than the equilibrium discount
rate. Adopting a strategic view of firm behavior, we could anticipate that in mature industries, the
dispersion of hurdle rates used by firms would be relatively low. Conversely, we should expect a
wide range of hurdle rates for industries, such as renewable power generation, characterized by
technological change and fluctuation perceptions of uncertainty.
Figure 7. Firm Hurdle Rates Relative to an Industry Average
High Dispertion
Low Dispertion
In a fast moving industry where opinions are still forming and new actors are entering, we maintain
that there will be a wide variety of factors to discourage (and encourage) learning investments.
These factors act upon on the project cost of capital. And while we the upward revisions of hurdle
rates by firms are well documented, there are logical reasons for downward revisions as well.
To the potential criticism that the evidence from India is nothing more than a short-term
phenomenon, we point out that the solar PV business has been in existence for more than 30 years,
the last 10 of those as a global, multi-billion dollar industry. Yet private sector hurdle rates continue
to deviate from purely rational expectations.
9. Charles Donovan 9
IE Business School
5. Implications for policymaking
A strategic view of firm behavior will lead to very different conclusions approach about optimal
renewable energy investment policy than one based on a static view of the industry cost of capital.
Heterogeneity in the discount rate would call into serious question many current regulatory
approaches to promoting investment. It seems that renewable energy policy has been clouded by
viewing environmental investments through the lens of pollution abatement. In an investment
landscape characterized by accelerating resource scarcity and high rates of growth in consumption,
conventional wisdom no longer holds. So what is the possibility that the Government of India has
gotten its policy mix of feed-in tariffs and auctions just right? Has is uncovered a magical recipe for
capturing the renewable power at the lowest cost for consumers?
While auctions carry with them a certain degree of additional risk, they are a powerful and under-
used tool for stimulating investment in renewable power. Auctions capitalize upon the fact that the
risk judgments of firms are not homogenous, nor are they static. Instead of relying upon the
expertise of government planners and outside experts, auctions allow prices to be set through a
competitive process amongst investors.
We are at the very beginning of a shift in how policymakers react to environmental investment
problems. Most policymaking still takes the view of technology choice from the point of view of
generic levelized costs. A better approach would be to acknowledging the risk factors associated
with each technology and the market structure created by policies. The effect will be to “re-order”
technology attractiveness10.
Traditional economic policy making assumes that the equilibrium discount rate is representative of
all investors. For that reason, two policy instruments providing the same amount of average
subsidy are expected to deliver similar outcomes. But with a proper consideration of investment risk
and the motives of the firm, we see strong preferences emerge for one instrument as compared to
another11. For example, if the volatility of expected cash flows from renewable energy certificates is
high, then investment risk will be higher relative to a project with a low expected cash flow variance.
A straightforward conclusion is that renewable energy investors facing feed-in tariffs will have lower
project hurdle rates than those gaining revenue subsidies from tradable certificate markets.
Yet the preferences of investment decision-makers are not just tied to objective risk measurements.
They are also influenced by subjective evaluations of investment risk. We believe options thinking,
despite the extensive math that has been proposed to value real options, is most often a qualitative
process. Only in very rare cases, can real option be valued precisely. Nonetheless, they appear to
weigh heavily in the minds of investment decision-makers.
Behavioral aspects of corporate finance practices have been poorly explored in the debate around
policy instrument choice. Every form of subsidy involves some form of future uncertainty:
10
Gross, R. and Blyth, W. and Heptonstall, P. 2010. Risks, revenues and investment in electricity generation:
Why policy needs to look beyond costs. Energy Economics 32 (2010), 796–804.
11
Wüstenhagen, R. and Menichetti, E. 2012. Strategic choices for renewable energy investment: Conceptual
framework and opportunities for further research. Energy Policy 40, January 2012, 1-10.
10. Charles Donovan 10
IE Business School
perceptions about the amount of long-term government support, the potential for retroactive policy
changes, and unforecastable supply and demand factors. And just as each type of subsidy carries
with it a different level of objective risk, so do certain policy and market conditions lead to differing
perceptions of risk. Hunches based on perceptions of risk usually can’t be quantified, but that
doesn’t stop them from being followed.
5. Looking Forward
To this point, we have been concerned with judgments that have are solely related to the potential
consequences of the investment decision. In the third and final discussion paper in this series, we
will dedicate more time to the topic of subjective assessments and explore the intrinsic motivations
of investors.
We welcome your feedback. Please send comments and questions to
solarinvestmentrisk@gmail.com
Discussion Paper No. 3 will be sent by the end of February 2012.