โ Scribed by Willett, Robert E.
No coin nor oath required. For personal study only.
he first thing that stands out about proposed Latin American power arrangements is the risk, compared to U.S. power ventures. As Texaco's Craig McKnight observed, speaking about project financings in those countries: "In Latin America, obviously you have to have some type of bankable financial entity as your offtaker. The biggest problem with Latin America is that most of the big countries are not investment-grade.'' Additionally, the nature of project financing compounds the problem: There is no recourse to anything but the project itself, thus there is no government or major corporation on whose credit a venturer may rely.
Where there is risk, of course, there are companies that can be paid to bear that risk. However, as McKnight says, "A lot of times you can buy political coverage, but it's very expensive." Thus, companies try to avoid this coverage.
Over the years, two general approaches have developed that, if followed thoroughly, will generally avoid risk and avoid insurance costs. Both approaches require a project that makes sense and for which both gas supply and a customer (called an "off-taker" in this usage) are assured. Thus, both approaches require substantial investigation before they will be financed (or even proposed).
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