Long Term Contracts a Model for Assessing Their Importance in Financing Natura
Long Term Contracts a Model for Assessing Their Importance in Financing Natura
John E Parsons
The book Long Term Contracts a Model for Assessing Their Importance in Financing Natura was written by author John E Parsons Here you can read free online of Long Term Contracts a Model for Assessing Their Importance in Financing Natura book, rate and share your impressions in comments. If you don't know what to write, just answer the question: Why is Long Term Contracts a Model for Assessing Their Importance in Financing Natura a good or bad book?
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Using this price to calculate the NPV for the LNG project when the full capacity is sold on a short-term basis yields a project NPV of $0, 642 billion as shown in Table 2. That is $547 million or 46% less than the NPV expected from development under long- term contracts. [Insert Figure 1 and Table 2] It is the security against this worsened bargaining position and lowered price that motivates the use of long-term contracts. The $547 million difference in project NPV is secured to the developer ...through the decision to use long-term contracts and to make the installation of capacity contingent upon their successful negotiation. This is what we call the 'strategic value' to the use of long-term take-or-pay contracts for the Australian project. To this point we have not provided the model with which we calculated the shift in price distributions displayed in Figure 1. However, our example illustrates the idea that we want our model to capture. When a corporation decides to make the development of a field contingent upon the successful completion of long-term contracts or when a bank or other source of finance makes the use of its funds contingent upon the negotiation of long-term, contracts then they are implicitly assessing the magnitude of this price shift to be large.
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