Minimizing Project Risk Through Financing Strategies

Abstract

One of the major barriers to greater corporate investment in energy conservation, cogeneration and alternative energy projects is the level of risk associated with these investments. Potential risks include technical malfunction of the equipment and/or energy systems, miscalculation of equipment, service or repair costs, and unexpected modifications in energy prices, tax benefits or alternative opportunities (i.e. discount rates).

This paper will describe ways in which companies can reduce or eliminate their risks on energy investments. Topics include: 1. procedures for evaluating project risk, 2. strategies to minimize risk, including financing options that transfer risk from the building owner to a third party investor, and 3. guidelines for evaluating corporate tradeoffs between minimizing risk and maximizing monetary benefits.