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The question is whether or not the production to be unitised will be there or not, but that is what your job is all about.

If a project is 'bankable' then it is 'unitisable', but the converse is not necessarily true.

Clearly, the same issues of governance and quality control will apply in both enterprise models, but I suspect that in a partnership enterprise model the necessary agreements will be an order of magnitude simpler.

Which may not appeal to everybody involved.

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

by ChrisCook (cojockathotmaildotcom) on Sun Jan 3rd, 2010 at 01:31:12 PM EST
[ Parent ]

 I suspect that in a partnership enterprise model the necessary agreements will be an order of magnitude simpler.

My professional opinion is that it will be the exact opposite. There are very good reason for the complexity, which comes from a thorough analysis of possible risks, available mitigation strategies, and eventual allocation.

And I say that as someone who has had to live with the complex project documentation I negotiated and was happy to enjoy its resilience most times.


f a project is 'bankable' then it is 'unitisable', but the converse is not necessarily true.

Again, my professional opinion is that it is the exact opposite. See my last point about agency roles. Dispersed "ownership" makes for decisions not to be taken when required.


In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 3rd, 2010 at 02:24:41 PM EST
[ Parent ]
And yet 'dispersed ownership' will be the inevitable result of the technology we are using now. Have you not seen it in action already?

You, as a banker, provide a service - certainly in the analysis of risk, and, to a certain extent, the actuarial strategies. But from a societal POV, you are using the same methodology as would be used for a new sausage factory. The fact that the product you finance is 'good' is a coincidence. Or is it?

Putting together a movie or a TV series requires at least the same effort, disappointments, crassness, documentation, late night intensive sessions, and celebration of completion. We all work hard.

I've suffered the problems of 'dispersed ownership' in my dealings with Swedish companies. It CAN be exasperating. But it is also invigorating. It ensures that all views are heard.

Many of these 'views' are difficult to include. We elitists dismiss these views as anecdotal or irrelevant. They are, agreed, rarely fully informed. But they are the views of people who will be affected by the decisions taken.

It has been - prior to 1995 - possible to ignore the views of those who question the top-down nature of society and its subset, business. No longer.

Can I also add that you don't seem to read what people write. Chris Cook emphasised several times that air miles should be easy to understand as a meme, not that what he was proposing was equivalent to air miles. But no. Your argument was about the about the misfit of the analogy.

The technology that allows a French energy banker to start a very intelligent blog/forum is the same technology that will allow 'dispersed ownership'.

You can't be me, I'm taken

by Sven Triloqvist on Sun Jan 3rd, 2010 at 03:55:11 PM EST
[ Parent ]

The fact that the product you finance is 'good' is a coincidence.

That's the only part of all the above that I agree with.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 3rd, 2010 at 04:23:20 PM EST
[ Parent ]
Well, naturally ;-)

You can't be me, I'm taken
by Sven Triloqvist on Sun Jan 3rd, 2010 at 04:45:02 PM EST
[ Parent ]
Jerome a Paris:
See my last point about agency roles.

There is no principal and no agent in a partnership relationship.

Jerome a Paris:

Dispersed "ownership" makes for decisions not to be taken when required.

The ability to share risk and reward within a partnership framework enables the rights and obligations of the property relationship thought of as 'ownership' to be distributed simply and effectively in new ways.

Having been involved among many other interesting projects, in:

(a) drafting and implementing the detailed contract rules of a successful global energy exchange;

(b) clearing house provisions relating to default;

(c) cross border clearing relationships;

(d) the creation of a globally applicable market user agreement in the context of a 'Dot Com'; and

(e) detailed development of new market products and trading mechanisms;

I have some idea about complexity and resilience in contractual relationships.

I also have getting on for ten years' experience of developing simpler consensual ways of contracting which may not yet be familiar to you, but which are entirely familiar (say) to any Japanese businessman.


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

by ChrisCook (cojockathotmaildotcom) on Sun Jan 3rd, 2010 at 04:48:22 PM EST
[ Parent ]
is that you do markets, that trade something that exists. Everybody is in the same position with respect to the underlying unit being traded.

The problem with projects not yet built is that they may end up not being built, or may end up being more expensive than expected. Someone needs to put up the money to build it, and someone may need to put up more money to get the project done. And production may be lower or higher than expected.

In other words, you don't actually know what you're going to be owning, and you don't know when you'll have it, and you need to know who will be taking decisions, and how, in the meantime.

Tell me who takes decisions in your mechanism, and how, during construction phase. Tell me who bears the consequences of such decisions.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 3rd, 2010 at 05:25:09 PM EST
[ Parent ]
I have dozens of times on ET distinguished between the risks during development, and the risks inherent in developed flows of production and/or revenues. I do not have - and have never claimed - anything approaching your experience in development finance, but I do have enough experience to appreciate a class act when I see one and am always pleased to give credit where it is due.

More power to your elbow, say I.

I have been involved in several partnerships involving the development of intellectual property, and have a couple ongoing in 'real' property (ie land development), with agreement in writing from a major municipality that they will invest 1.5 acres of prime land in what will be a multi-million pound development - if it comes to fruition..... I also have several potential 'proof of concept' partnerships in energy all small scale and most at a very early stage.

But that is irrelevant.

My point - which I made up-thread, again - is that the real prize lies in refinancing - through unitisation - existing developed assets, with a view to releasing equity in 'Rental Pools' and 'Energy Pools'

This unitisation and the resulting debt/quasi-equity swap is what will change the game, and create new asset classes - which is my thing, of course, as you observe above, but unfortunately you do not follow through on that observation.

Unitisation of your completed projects is capable of giving you more ammunition for your project financing.

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

by ChrisCook (cojockathotmaildotcom) on Sun Jan 3rd, 2010 at 06:01:33 PM EST
[ Parent ]

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