nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2016‒05‒14
six papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Networked by design: Can policy requirements influence organisations’ networking behaviour? By Rossi, Federica; Caloffi, Annalisa; Russo, Margherita
  2. Undermined by adverse selection: Australia’s Direct Action abatement subsidies By Paul J. Burke
  3. For the Pure-Play Firm: Find the True Cost of Capital for Your Capital Projects By Schmal, Tom
  4. From Global Savings Glut to Financing Infrastructure: The Advent of Investment Platforms By Rabah Arezki; Patrick Bolton; Sanjay Peters; Frederic Samama; Joseph Stiglitz
  5. An Economic and Stakeholder Analysis for the Design of IPP Contracts for Wind Farms By Sener Salci; Glenn P. Jenkins
  6. Towards the massification of broadband internet access in Brazil: an application of alternative dispute resolution settlement of administrative proceedings. By Charlita de Freitas, Luciano; Fagundes Ferreira, Flávio; Bernardes da Silva Júnior, Osmar; Azevedo Marques Mello da Silva, João Marcelo; Vilas Boas de Freitas, Igor

  1. By: Rossi, Federica; Caloffi, Annalisa; Russo, Margherita
    Abstract: An important, but under-researched, question in relation to policies funding networks of innovators is: what kind of innovation networks should be supported, if the policy objective is not just to sponsor successful innovation projects, but also to encourage the participants to form networks with desirable characteristics? Focusing on a set of policy programmes implemented by the regional government of Tuscany, in Italy, between 2002 and 2008, aimed at funding networks of collaborating organisations, we investigate whether the imposition of requirements on the composition of the networks that would be eligible for funding – in particular, the demand that networks should comply with minimum size and heterogeneity thresholds – influenced the participants’ networking behaviour in the context of successive policy interventions. Our results show that these requirements immediately affected the size and composition of the project networks that applied for funding, although not always in the intended direction. However, these effects did not extend to the successive periods, when those requirements were no longer in force. This suggests that the imposition of policy requirements, per se, is unlikely to induce persistent changes in organizations’ networking behaviour. Other approaches such as implementing outreach actions in order to encourage new organisations to participate in existing innovation networks and to form new ones, and additional measures designed to foster learning opportunities for the participants, might be more effective tools to influence the networking behaviour of participating organisations.
    Keywords: Innovation networks, innovation policy, policy requirements, networking behaviour, behavioural effects of policy
    JEL: O31 R5
    Date: 2015
  2. By: Paul J. Burke (Arndt-Corden Department of Economics, The Australian National University)
    Abstract: This paper examines economic challenges faced by Australia’s Direct Action abatement subsidy scheme. Introduced in 2014, the scheme operates by reverse auction, funding projects voluntarily proposed by the private sector. Because the government cannot know true project counterfactuals, the lowest auction bids are likely to often be non-additional “anyway” projects. The scheme is hence likely to exhibit a systematic skew toward low-quality abatement. The paper presents a model of the adverse selection problem and describes the early experience with Direct Action. A discussion of a way forward is also provided.
    Keywords: abatement subsidy; adverse selection; emissions; climate; Australia
    JEL: Q58 Q52 D82
    Date: 2016–05
  3. By: Schmal, Tom
    Abstract: Approving capital projects can be one of management’s toughest calls. One reason is while a project's return can be presented quantitatively, eg., IRR, its risks have no comparable metric. The author addresses the problem by showing how to use a Monte Carlo simulation to measure your project’s risk and how to use that risk to find its true, risk-adjusted, cost of capital. In this system, risk is determined by variation in free cash flow. Since every project in your company’s pipeline will have a forecasted free cash flow, every project, including those with financial leverage, can be evaluated using the same economic yardstick. Other benefits include better value projects, better presentation and accurate discount rates for NPV.
    Keywords: cost of capital, IRR, NPV, cash flow, Monte Carlo, capital project economics, risk-adjusted return, M-P5, variability, pure play, leverage, hurdle rate.
    JEL: D81 G32
    Date: 2015–11–26
  4. By: Rabah Arezki; Patrick Bolton; Sanjay Peters; Frederic Samama; Joseph Stiglitz
    Abstract: This paper investigates the emerging global landscape for public-private co-investments in infrastructure. The creation of the Asian Infrastructure Investment Bank and other so-called “infrastructure investment platforms” are an attempt to tap into the pool of both public and private long-term savings in order to channel the latter into much needed infrastructure projects. This paper puts these new initiatives into perspective by critically reviewing the literature and experience with public private partnerships in infrastructure. It concludes by identifying the main challenges policy makers and other actors will need to confront going forward and to turn infrastructure into an asset class of its own.
    Keywords: Infrastructure, public private partnership, long-term investors, savings, and investment policy
    JEL: H49 H54 G30 G38
    Date: 2016
  5. By: Sener Salci (Department of Economics, Queen’s University, Kingston ON, Canada and University of Birmingham, Birmingham, UK); Glenn P. Jenkins (Queen’s University, Canada and Eastern Mediterranean University, North Cyprus)
    Abstract: In this paper we introduce a method for quantifying the benefits and costs of implementing a grid-connected onshore wind project that is owned and operated by an independent power producer (IPP). The proposed policy analysis tool is applied to the appraisal of a wind farm in Santiago Island, Cape Verde. The policy analysis is conducted from the perspectives of the electric utility, the country’s economy, the government and the private sector investor. The key question is whether the design of the power purchase agreement (PPA) will yield a high enough rate of return to the project to be bankable, while at the same time yielding a positive net financial and economic present value to the electric utility and the country respectively. The PPA results in a negative outcome for the economy of Cape Verde in almost all circumstances. In contrast the owners of the IPP are guaranteed a very substantial return for their modest investment under all circumstances.
    Keywords: electricity, wind power, power purchase agreement, public-private partnership, Santiago Island (Cape Verde)
    JEL: D61 E22 Q42 L94 O55
    Date: 2016–05
  6. By: Charlita de Freitas, Luciano; Fagundes Ferreira, Flávio; Bernardes da Silva Júnior, Osmar; Azevedo Marques Mello da Silva, João Marcelo; Vilas Boas de Freitas, Igor
    Abstract: In 2012, the Brazilian Telecommunications Regulatory Agency (Anatel) ruled the Conduct Adjustment Commitment (TAC). It refers to an alternative dispute resolution mechanism that allows shifting pecuniary penalties into infrastructure investments. This case study approaches the setting up of strategic investment projects and the definition of a methodology framework set to maximize the benefits of resource allocation. To reach its objective 5,565 municipalities were divided in clusters and ranked according to priority destination for investments. Results include a short list of preferential projects focused on enhancing broadband infrastructure, encouraging the competition and to enhance quality of services performance. Outputs of the methodology suggest that municipalities located at the outskirt of metropolitan regions, evenly distributed throughout the country, with relative lower HDI and higher demographic density are the top ranked destination for investment.
    Keywords: Alternative dispute resolution settlement; enforcement proceedings; cluster analysis; broadband infrastructure investment; TAC; Telecomnuicações; Brazil.
    JEL: K23 L5 L96 O2
    Date: 2016–02–01

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