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To the extent that people who build infrastructure are not willing (or able) to accept "Equity" (ie proportional shares) in the outcome, then investors of risk capital are necessary, of course.

I've been involved in a couple of those, particularly a film, where we needed "Capital Partner" punters to pay for lights, cameras and pizza. Which they did, for a 20% "Equity Share" in the revenues (if there are any).

Once a project is complete, then these risk-friendly investors may exit by selling to risk averse investors. Just like PFI. But a non-toxic version.

The other mechanism available to raise some or all of the necessary investment is to raise finance by selling production forward to investors - possibly stakeholders interested in hedging purchases - in "Pool" funds structured as LLC's or LLP's.

These are essentially "exchange traded commodity" funds, with the difference that the return of investment will be denominated in (say) energy units or land rental units (themselves exchangeable for other value).

I believe that it is possible for (say) Qatar to refinance existing LNG debt by selling part of their production forward to stakeholder investors (eg the Japanese or Chinese), and for this (interest-free) finance then to be used for further LNG infrastructure etc.

The result would be what is essentially an energy pool ( a tradable liquidity pool, moreover, without the fragmentation of monthly futures prompt dates) of fungible energy-based "value units" - ie "carbon dollars" based on energy content of carbon, not some nonsensical price based upon the entirely unrealistic trading in carbon emissions.

These value units are essentially undated and ungeared futures contracts. A bit like Redeemable Preference shares in the LLP but without an income, and with a return of capital in kind instead. ie market participants who have bought such units as a "hedge" could present them, instead of conventional $ to a seller in settlement for physical energy bought through the Pool.

The market price of LNG is the price at which LNG is sold into and out of the pool, and investors - by definition - would not participate in that market auction price.

Anyway, I'm hoping that The Gulf Research Center (www.grc.ae ) will be publishing a fairly long article on the subject shortly in their journal (they said they would).

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 28th, 2007 at 11:40:43 AM EST
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