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Internationa project finance law - Essay Example

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International Project Finance Law Economy in Malaysia: The economy of Malaysia shows a rising trend and it is comparatively on open, state-oriented, and a recently industrialized market economy. The condition plays a significant role other than a declining function in leading economic activities in macroeconomic plans…
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Download file to see previous pages In 2010, the gross domestic product per capita of Malaysia was about US$14,700. In the year 2009, the nominal gross domestic product (GDP) was around $383.6 billion, and the nominal GDP per capita was about us$8,100. “The IMF, in its September 2011 World Economic Outlook Report, lowered its forecast for 2012 global growth to 4 per cent, down from 5.1 per cent it had forecasted earlier. By early January 2012, its chief economist had announced that the IMF would on 24 or 25 January 2012 makes a "fairly substantial" cut to its forecast for global economic growth this year”2 Power Purchase Agreements in Malaysia: Power Purchase Agreements are agreements between two parties, the one who creates electricity for the cause of sale and the one who is seeks to purchase electricity. There are different kinds of power purchase agreements. They include the source of energy harnessed from solar power, wind, etc. Financing the project is defined in the agreement, which also identifies applicable dates of the project coming into consequence, when the project starts marketable operations, and an execution date for which the agreement can be abandoned or renewed. Every sale of electrical energy is metered, to provide the buyer and the seller with the exact data regarding the amount of electricity created and bought. The electricity charges are decided upon the agreement between the aforementioned two parties, to give an economic enticement of being a Power Purchase Agreement. “In Malaysia, the power generation sector is principally dominated by three integrated power producer companies: Tenaga Nasional Berhad (TNB), Sabah Electricity Sdn Bhd (SESB) and Syarikat SESCO Berhad (SESCO). TNB and SESB fall under the jurisdiction of the Energy Commission (EC), whilst SESCO is under the jurisdiction of the Sarawak State Government. TNB is the main electricity supplier for Peninsular Malaysia while East Malaysia is covered by SESB (Sabah) and SESCO (Sarawak)”3 In the year1992, Independent Power Producers (IPPs) were permitted to enter the national power generation division, to move the problem of power plant financing from government owned electricity principles to the private sector. The motivations for the IPP programme too came from the prevailing then set back in power generation capability. The openings of five IPP licences were awarded to huge business units. The tariffs for first generation IPPs were as well especially more than those for subsequent IPPs, which helped capital market financing for the initial waive of IPP savings, with the auspicious risk distribution of IPP connected risks. The enduring power purchase agreement (PPA) in which generation facility is sold to TNB insulates the IPP from fuel cost and demand cost risks. Subsequent PPAs have featured lesser tariffs, and an additional balanced distribution of risks with necessary availability targets, and various quantify of demand risk sharing. The strong credit profiles of most of the issuers from this division carry on to be supported by their stable and predictable cash flow generation. “ ...Download file to see next pagesRead More
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