Latin American Hydroelectricity Research :: essays papers

Latin American Hydroelectricity Research Financial Analysis of Latin America Opportunity The following is an illustration of the financial feasibility of a joint venture hydro electricity power plant project in Central America. Estimating the estimated costs of our proposed project, our group chose to use Commonwealth Edison as a comparison. Commonwealth Edison, a subsidiary of Unicom Corp, is used as an assessment of our hypothetical costs of providing electricity for Central America. Using Commonwealth Edison we feel provides a good measure of the validity of estimated costs our corporation would incur. Generally Accepted Accounting Principals (GAAP), used by all U.S. corporations, is the highest standard in the world in determining the validity of a corporation's financial statements. In the subsequent paragraphs, we will demonstrate costs of the joint venture project. Future growth rates in Central America market share for electricity will be projected as well. One of the benefits that our corporation will have in expansion to Central America is a lower cost of capital. A substantially larger pool of investors would provide a larger supply of loanable funds. Having a greater selection of borrowers in the international market will reduce the cost of starting our firm in Central America. Portfolio diversification is another advantage that our firm will attain, in regards to foreign investment in the financing of our project. The projections of the percentage of debt our firm will incur will be discussed in the following paragraphs. In looking at the average debt to equity ratio (D/E) of hydroelectric firms in the U.S., we feel that a 67% debt / 33% equity structure would be feasible to initially launch our firm in Central America. To use a comparison, Commonwealth Edison's plant and equipment assets total $28.245 billion. Com Ed provides electricity for over 6.5 million residents in Chicago, and other segments of Illinois. The total population of Central America - (Belize, Costa Rica, El Salvador, Guatemala, Honduras, Panama, and Nicaragua) total to 35.5 million. Taking account these statistics, plant and equipments costs for our firm providing the Central American region would cost $154.22 billion. Using this cost estimate, we would finance $103.33 billion though new market issuance in the U.S. 30 -year Treasury market. At a $100,000/ per U.S. Treasury bond face amount, we would need to have access to 1.03 million 30 yr bond contracts, at the prevailing market interest rate of 6.