Benjamin C. Esty

Roy and Elizabeth Simmons Professor of Business Administration

Benjamin Esty is the Roy and Elizabeth Simmons Professor of Business Administration.  He served as Head of the Finance Unit (department) at Harvard Business School from 2009-2014.  Before that, he was the founding faculty chairman of the General Management Program (GMP), a comprehensive leadership program designed to create outstanding business leaders. Professor Esty currently teaches the introductory finance course in the first year of the MBA program, but has taught a variety of elective courses including advanced corporate finance and project finance. The project finance course, called Large-Scale Investment (LSI), analyzed how firms structure, value, finance and negotiate large capital investments. He also teaches in a variety of executive education programs and served as the faculty chairman for the Summer Venture in Management Program for 14 years (SVMP is a management training program for college students designed to promote educational diversity and opportunity--see the article describing the program). Professor Esty has received the Student Association Award for teaching excellence multiple times, the Charles M. Williams Award for contributions to student learning, the Apgar Award for teaching innovations, and the Greenhill Award for outstanding service to the school (twice).

His current research focuses on corporate finance, project and infrastructure finance, and financial strategy. His articles have been published in a variety of academic and practitioner-oriented journals. In addition, he has written more than one hundred case studies, technical notes, and teaching notes on project finance, financial strategy, mergers and acquisitions, leadership, and valuation issues. Collectively, HBS Publishing has sold more than a million copies of his cases, and nine of them are currently or have been classified as HBS "bestsellers" (most popular designation). The case studies and notes on project finance are contained in a book entitled Modern Project Finance: A Casebook (Wiley).  Formerly, he was an associate editor of the Journal of Financial Economics (JFE), Journal of Money, Credit & Banking (JMCB), Emerging Markets Review (EMR), Financial Management (FM), Journal of Financial Services Research (JFSR), and Journal of Project Finance (JPF).  He was also an editor of the on-line journal called Financial Educator: Courses, Cases, & Teaching Abstracts (part of the SSRN) which publicizes the newest ideas in teaching materials, approaches, and methods.

In addition to his academic research, Professor Esty has served as a consultant to and led training programs for investment banks, consulting firms, government agencies, and multi-national corporations on a broad range of investment, financing, valuation, and leadership issues. These activities have ocurred with firms or organizations on six different continents. In addition, he serves as an expert witness and consultant for litigation involving project finance, corporate finance, and complex valuation issues; was an independent trustee for the Eaton Vance family of mutual funds; and was a director of the Harvard University Employees Credit Union (HUECU).  He currently serves as a director and the chairman of the Audit & Risk Committee for Raymond James Financial, Inc. (NYSE: RJF), a diversified financial services holding company.

Professor Esty received his Ph.D. in Business Economics with a concentration in finance from Harvard University; his MBA with high distinction (Baker Scholar) from Harvard Business School; and his BA degree in Economics with honors and distinction from Stanford University.

Books

Journal Articles

  1. Creditor Rights, Enforcement, and Debt Ownership Structure: Evidence from the Global Syndicated Loan Market

    Benjamin C. Esty and William L. Megginson

    Keywords: Rights; Borrowing and Debt; Ownership; Markets; Global Range; Financing and Loans;

    Citation:

    Esty, Benjamin C., and William L. Megginson. "Creditor Rights, Enforcement, and Debt Ownership Structure: Evidence from the Global Syndicated Loan Market." Journal of Financial and Quantitative Analysis 38, no. 1 (March 2003): 37–59. View Details

Book Chapters

  1. Restructuring Bank Regulation

    B. C. Esty

    Keywords: Banks and Banking; Governing Rules, Regulations, and Reforms; Government and Politics; Business and Government Relations; Banking Industry;

    Citation:

    Esty, B. C. Comment on "Restructuring Bank Regulation." Restructuring Regulation and Financial Institutions, edited by J. R. Barth, R. D. Brumbaugh, and G. Yago, 79–84. Santa Monica, CA: Milken Institute Press, 2000. View Details

Working Papers

Cases and Teaching Materials

  1. Thomas Cook Group on the Brink

    Benjamin C. Esty, Stuart C. Gilson and Aldo Sesia

    Harriett Green, the newly appointed CEO of Thomas Cook Group, faces a daunting set of business and financial challenges at the 171-year old UK travel services company. The company has lost almost £600 million in the last three quarters; has seen its stock price fall from 230 pence to a low of 8.8 pence in the past two years; and had seen its bonds trade down to as little as 40% of face value. In just a few weeks the company's license to operate is to be reviewed by the United Kingdom's Civil Aviation Authority, competitors are publicly questioning the company's viability, and seasonal working capital needs are about to peak. With the company's very survival at stake, Green must devise a turnaround plan that will return the company to financial health. Any plan must address the company's high cost structure, raise substantial new capital, fix the balance sheet, create a profitable growth strategy, and build a more effective organization and culture. But achieving all of these objectives within the short time available will be a major challenge.

    Keywords: turnaround; corporate restructuring; change leadership; female ceo; Change Management; Communication Strategy; Borrowing and Debt; Cash Flow; Cost Management; Financial Liquidity; Financial Management; Executive Compensation; Leading Change; Crisis Management; Value Creation; Travel Industry; United Kingdom;

    Citation:

    Esty, Benjamin C., Stuart C. Gilson, and Aldo Sesia. "Thomas Cook Group on the Brink." Harvard Business School Case 215-008, August 2014. View Details
  2. An Overview of Project Finance and Infrastructure Finance—2014 Update

    Benjamin C. Esty, Carla Chavich and Aldo Sesia

    Provides an introduction to the fields of project finance and infrastructure finance, and gives a statistical overview of project-financed investments over the years from 2009 to 2013. Examples of project-financed investments include the Kashagan oil field development in Kazakhstan (1997), the $1 billion Port of Miami Tunnel (2007), the $54 billion Gorgon liquefied natural gas (LNG) project in Australia (2009), and the $6 billion Oyu Tolgoi copper mine expansion in Mongolia (2014). Globally, firms financed a record $415 billion of capital expenditures using project finance in 2013, and the use of project financed-investment has grown at a compound rate of 8% over the past 15 years despite several macroeconomic crises.
    This note focuses primarily on private sector investment in industrial and infrastructure projects and contains four sections. The first section defines project finance and contrasts it with other well-known financing mechanisms. The second section describes the evolution of project finance from its beginnings in the natural resources industry in the 1970s, to the U.S. power industry in the 1980s, to a much wider range of industry applications and geographic locations in the 1990s and 2000s, and most recently to infrastructure finance in the 2010s. The third section provides a statistical overview of project-financed investment over the last five years (2009 to 2013) and looks at industry, project, and participant specific data. The third section also provides recent data on infrastructure investments and public-private partnerships. The final section discusses current and likely future trends.

    Keywords: project finance; infrastructure; globalization; Capital expenditures; international finance; data; Financial history; economc development; corporate governance; contracts; industry analysis; banking; capital investments; municipal finance; Project Finance; Infrastructure; Investment; Projects; Trends;

    Citation:

    Esty, Benjamin C., Carla Chavich, and Aldo Sesia. "An Overview of Project Finance and Infrastructure Finance—2014 Update." Harvard Business School Background Note 214-083, June 2014. (Revised July 2014.) View Details
  3. Molycorp: Morgan Brother's Reverse Convertible Notes (C)

    Benjamin C. Esty and E. Scott Mayfield

    In August 2011, Morgan Brothers Bank was issuing a $2.5 million reverse convertible note with payoffs linked to the price of Molycorp's common stock. These financially engineered securities were just one of many kinds of structured notes available in the retail market. Investors must decide whether the notes were fairly priced and whether they offered a favorable risk-return trade-off.

    Keywords: structured products; reverse convertible notes; replication; option pricing; bond pricing; debt securities; financial engineering; Valuation; Metals and Minerals; Debt Securities; Finance; Investment; Mining Industry; Financial Services Industry; Canada; California;

    Citation:

    Esty, Benjamin C., and E. Scott Mayfield. "Molycorp: Morgan Brother's Reverse Convertible Notes (C)." Harvard Business School Case 215-002, August 2014. View Details
  4. Molycorp: Issuing the 'Happy Meal' Securities (B)

    Benjamin C. Esty and E. Scott Mayfield

    Molycorp, the Western hemisphere's only producer of rare earth minerals, was in the middle of a $1 billion capital expansion in its effort to become a vertically integrated supplier of rare earth minerals, oxides, and metals. After reporting lower than expected revenues and earnings for the second quarter of 2012, management needed to design a new funding strategy for the firm. In August 2012, Molycorp announced it would issue $120 million of equity and $360 million of convertible debt. To facilitate the issuance of convertible debt, the firm entered a "share lending agreement" with Morgan Stanley whereby Morgan Stanley would borrow shares from Molycorp in a transaction referred to as a "Happy Meal." The goal was to help convertible debt investors "hedge their respective investments through short sales." The challenge of the case is to understand why Molycorp used this financing strategy and what impact it would likely have on the firm, its prospects, and its stock price.

    Keywords: financial strategy; convertible debt; uncertainty; Startup; Growth; rare earth minerals; capital structure; valuation; mining; hedge funds; short selling; Equity Capital; Capital Structure; Financial Strategy; Valuation; Metals and Minerals; Equity; Capital; Debt Securities; Stock Shares; Financial Management; Mining Industry; Industrial Products Industry; Canada; California;

    Citation:

    Esty, Benjamin C., and E. Scott Mayfield. "Molycorp: Issuing the 'Happy Meal' Securities (B)." Harvard Business School Case 215-014, August 2014. View Details
  5. Molycorp: Financing the Production of Rare Earth Minerals (A)

    Benjamin C. Esty and E. Scott Mayfield

    Molycorp, the western hemisphere's only producer of rare earth minerals, was in the middle of a $1 billion capital expenditure project in its effort to become a vertically integrated supplier of rare earth minerals, oxides, and metals. Yet it had just reported lower than expected revenues and earnings for the second quarter of 2012. In response to the announcement, its stock price fell 29% (its stock price had fallen from $77 to $11 in the past 18 months). The weakening financial performance was due in large part to falling prices for rare earth minerals. With less internally-generated cash flow available to fund the project, management had to decide: how much capital to raise, what kind to raise, and when to raise it. These decisions would determine its capital structure, at least in the short term, as well as its ability to implement its business strategy.

    Keywords: financial strategy; convertible debt; uncertainty; competition; Startup; China; Supply & demand; Growth; rare earth minerals; capital structure; valuation; discounted cash flows; Vertical Integration; mining; payoff diagrams; option pricing; Capital Budgeting; Capital Structure; Cash Flow; Financial Strategy; Market Entry and Exit; Vertical Integration; Valuation; Metals and Minerals; Mining Industry; Industrial Products Industry; Canada; California;

    Citation:

    Esty, Benjamin C., and E. Scott Mayfield. "Molycorp: Financing the Production of Rare Earth Minerals (A)." Harvard Business School Case 214-054, June 2014. View Details
  6. The TELUS Share Conversion Proposal, Spreadsheet Supplement

    Lucy White and Benjamin C. Esty

    A proxy battle between a Canadian firm and a US hedge fund over a proposal to unify the firm's dual class share structure.

    Keywords: Telecommunications Industry; United States; Canada;

    Citation:

    White, Lucy, and Benjamin C. Esty. "The TELUS Share Conversion Proposal, Spreadsheet Supplement." Harvard Business School Spreadsheet Supplement 214-704, October 2013. (Revised May 2014.) View Details
  7. The TELUS Share Conversion Proposal

    Lucy White, Benjamin C. Esty and Lisa Mazzanti

    On February 21, 2013, TELUS announced a proposal to convert the firm's non-voting shares into voting shares on a one-to-one basis, thereby eliminating the firm's dual class structure. Shareholders were scheduled to vote on the proposal at the firm's annual general meeting (AGM) on May 9, 2013. Despite strong support from management, the board, two proxy advisory firms, and several large shareholders, the proposal was opposed by Mason Capital Management, a New York-based hedge fund. Mason, which controlled almost 20% of the voting shares and a large short position in the non-voting shares, had filed a dissident proxy circular recommending that shareholders vote against the proposal based on both procedural and substantive grounds. With the success of the vote in doubt, the board had to decide what to do. Should they proceed with the vote as planned, postpone the vote with the intention of re-introducing the proposal at some point in the future, or cancel the proposal for good? And what should they do with Mason, which management viewed as an "empty voter" in this matter?

    Keywords: proxy contest; proxy battle; proxy advisor; ISS; Glass Lewis & Co.; hedge fund; short selling; share lending; telecommunications; voting rights; corporate governance; empty voting; equity decoupling; share unification; dual class shares; Canada; exchange ratio; shareholder activism; shareholder votes; Investment Activism; Public Equity; Capital Structure; Investment Return; Corporate Governance; Corporate Finance; Ownership Stake; Business and Shareholder Relations; Valuation; Telecommunications Industry; Canada; British Columbia; United States; New York (city, NY);

    Citation:

    White, Lucy, Benjamin C. Esty, and Lisa Mazzanti. "The TELUS Share Conversion Proposal." Harvard Business School Case 214-001, October 2013. (Revised September 2014.) View Details
  8. Buffett's Bid for Media General's Newspapers

    Benjamin C. Esty and Aldo Sesia

    On May 12, 2012, BH Media Group, a subsidiary of Warren Buffett's Berkshire Hathaway, announced an offer to buy Media General's (MEG) newspaper division for $142 million in cash and provide debt financing to the struggling firm. Reactions from investors and industry analysts varied greatly: one called it a "great surprise", another wondered if Buffett was investing with his heart rather than his head (he was a paperboy as a child), and a third said it was a "feat of financial engineering." Virtually all of them wondered what the "Oracle of Omaha" saw in the declining U.S. newspaper industry that others did not. The question facing Media General's CEO Marshall Morton was whether to accept the offer or not. As the head of a highly leveraged company whose revenues had fallen 31% in the past four years, whose stock price was down more than 90% off its high, and whose falling profitability left it perilously close to violating key debt covenants, he had to move quickly.

    Keywords: valuation; Mergers & Acquisitions; bankruptcy; capital structure; Mergers and Acquisitions; Valuation; Capital Structure; Insolvency and Bankruptcy; Financial Strategy; Risk Management; Executive Compensation; Cash Flow; Business Exit or Shutdown; Media; Advertising; Restructuring; Media and Broadcasting Industry; Publishing Industry; United States;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "Buffett's Bid for Media General's Newspapers." Harvard Business School Case 213-142, June 2013. (Revised September 2014.) View Details
  9. The Kashagan Production Sharing Agreement (PSA)

    Benjamin C. Esty and Florian Bitsch

    When discovered in the 1990s, the Kashagan oil field was the second largest oil field in the world. The project sponsors (equity investors) signed a 40-year production sharing agreement (PSA) with the Kazakh government in 1997, with the expectation the field would be developed at a total cost of $57 billion and would be pumping oil by 2005. Unlike most contracts in the energy industry, the Kashagan agreement was a "flexible PSA" meaning the contractual terms—the allocation of risks and returns—depended on ex post realizations of such things as capital costs and profitability. The parties incorporated contingencies into the contract to make it fairer and more flexible, and to ensure it remain viable over the project's 40-year life.

    Due to a combination of problems and challenges, the project was still not done in mid-2007. At that time, the sponsors, led by the Italian energy company ENI, announced the project would not be completed until 2010 and the total cost was likely to be $136 billion. Although oil prices had risen dramatically between 1997 and 2007, thereby making the project worth considerably more, the Kazakh government indicated its desire to renegotiate key provisions of the contract. The sponsors had to decide whether to renegotiate the contract and, if so, which parts.

    Keywords: negotiation; contracts; oil & gas; project finance; Kazakhstan; Asia; ENI; risk management; economic development; capital budgeting; international finance; valuation; project management; expropriation; product sharing agreement; Negotiation; Agreements and Arrangements; Development Economics; Energy Sources; Capital Budgeting; International Finance; Valuation; Joint Ventures; Energy Industry; Asia; Kazakhstan; Italy;

    Citation:

    Esty, Benjamin C., and Florian Bitsch. "The Kashagan Production Sharing Agreement (PSA)." Harvard Business School Case 213-082, May 2013. (Revised September 2013.) View Details
  10. Creating the First Public Law Firm: The IPO of Slater & Gordon Limited

    Benjamin C. Esty and E. Scott Mayfield

    Slater & Gordon (S&G), a midsized Australian law firm with a high-growth consolidation strategy, had an initial public offering (IPO) scheduled for May 2007. Due to a series of regulatory changes in Australia in recent years, the IPO provided an opportunity for S&G to become the first publicly-traded law firm in the world. The firm and its underwriters had just issued a prospectus and were now in the process of lining up investors for the offering. Gloria Rosen, a portfolio manager at Freemantle Securities, was trying to decide whether to buy the stock for her small-cap growth fund. With only a few days left to place an order for the offering, she had to decide whether to invest and, if so, how much to invest. To make her investment decision, Rosen had to understand the value implications of the firm's business model and its growth strategy, as well as the relevant risks.

    Keywords: IPO; Mergers & Acquisitions; law firm; valuation; value drivers; growth strategy; revenue recognition; corporate governance; roll-up; consolidator; Initial Public Offering; Valuation; Consolidation; Mergers and Acquisitions; Financial Strategy; Growth Management; Corporate Governance; Business Strategy; Legal Services Industry; Financial Services Industry; Australia;

    Citation:

    Esty, Benjamin C., and E. Scott Mayfield. "Creating the First Public Law Firm: The IPO of Slater & Gordon Limited." Harvard Business School Case 213-019, October 2012. (Revised September 2013.) View Details
  11. An Overview of Project Finance and Infrastructure Finance--2009 Update

    Benjamin C. Esty and Aldo Sesia

    Provides an introduction to the fields of project finance and infrastructure finance and gives a statistical overview of project-financed investments over the years from 2005 to 2009. Examples of project-financed investments include the $1.4 billion Mozal aluminum smelter in Mozambique, $4 billion Chad-Cameroon pipeline, $6 billion Iridium global satellite telecommunications system, $900 million A2 Toll Road in Poland, $20 billion Sakhalin II gas field in Russia, and the $28 billion Dabhol power project. Globally, firms financed $240 billion of capital expenditures using project finance in 2009, down from $409 billion in 2008 as the financial crisis hit the Western markets. The use of project finance has grown at a compound rate of 0% over the last five years, 4% over the past 10 years, and 12% over the past 15 years. This note focuses primarily on private sector investment in industrial and infrastructure projects and contains four sections. The first section defines project finance and contrasts it with other well-known financing mechanisms. The second section describes the evolution of project finance from its beginnings in the natural resources industry in the 1970s, to the U.S. power industry in the 1980s, to a much wider range of industry applications and geographic locations in the 1990s, and most recently to infrastructure finance in the 2000s. The third section provides a statistical overview of project-financed investment over the last five years (2005 to 2009) and looks at industry, project, and participant specific data. The third section also provides recent data on infrastructure investments and public-private partnerships. The final section discusses current and likely future trends.

    Keywords: Project Finance; Infrastructure; Investment; Projects; Trends;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "An Overview of Project Finance and Infrastructure Finance--2009 Update." Harvard Business School Background Note 210-061, June 2010. (Revised September 2011.) View Details
  12. Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships

    Benjamin C. Esty and Albert Sheen

    After booming for more than five years, the global shipping (maritime) industry experienced a dramatic crash in late 2008 as the global financial system froze and the global economy slid into recession. Ship charter rates (revenue) fell by as much as 90% causing prices of used ships to fall by as much as 80%. As ship prices (values?) fell, ship owners began to default on loans and new purchase contracts while banks holding loans secured by ships faced the possibility of increasing defaults (violations of loan-to-value covenants), foreclosures, and write-offs. In the midst of this crisis, VHSS, the German Shipbroker's Association, introduced a proposal to value ships using discounted cash flow analysis (to determine a long-term asset value, LTAV) rather than market prices from comparable transactions. Thomas Rehder, the chairman of VHSS, argued this approach was necessary because market prices did not reflect fundamental values in the current environment. After announcing the alternative valuation methodology in September 2009, he must convince industry participants—ship owners, appraisers, and bankers—to adopt the new valuation methodology and bank regulators and auditing firms to approve its use.

    Keywords: Fair Value Accounting; Financial Crisis; Capital Markets; Financial Liquidity; International Finance; Globalized Markets and Industries; Valuation; Banking Industry; Shipping Industry; Germany;

    Citation:

    Esty, Benjamin C., and Albert Sheen. "Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships." Harvard Business School Case 210-058, June 2010. (Revised April 2011.) View Details
  13. Dow's Bid for Rohm and Haas

    Benjamin C. Esty and David Lane

    This case analyzes Dow Chemical Company's proposed acquisition of Rohm and Haas in 2008. The $18.8 billion acquisition was part of Dow's strategic transformation from a slow-growth, low-margin, and cyclical producer of basic chemicals into a higher-growth, higher-margin, and more stable producer of performance chemicals. Simultaneously, Dow had signed a joint venture agreement with Petrochemical Industries Company (PIC) of Kuwait, a deal that would generate $7 billion in cash that could be used to finance the all-cash offer to buy Rohm and Haas. Dow and Rohm announced the Rohm merger on July 10, 2008, just before the financial crisis in September 2008. The focus of the case is on what happened after the financial crisis turned into a global economic crisis. Dow, like all chemical producers, suffered as the global economy fell into recession during the second half of 2008 and as financial markets froze. To make matters worse, PIC cancelled the joint venture with Dow in December 2008. As a result, Dow was hurt on three fronts: first, it lost an important funding source for the proposed acquisition; second, Dow's financial condition and internal cash flow deteriorated dramatically (its stock price was down more than 70% during 2008); and third, Rohm's forecast sales, earnings, and value declined precipitously thereby reducing its attractiveness as an acquisition target. Given this confluence of events, Dow sued to cancel the merger agreement with Rohm in January 2009. Rohm responded with its own lawsuit to force consummation of the deal. As of February 2009, Dow's board of directors and its CEO Andrew Liveris have to decide what to do first and foremost about the Rohm acquisition and the pending lawsuits, but also about the firm's declining financial performance and the PIC joint venture.

    Keywords: Mergers and Acquisitions; Financial Crisis; Capital Structure; Financial Condition; Financial Management; Contracts; Lawsuits and Litigation; Risk and Uncertainty; Valuation; Chemical Industry;

    Citation:

    Esty, Benjamin C., and David Lane. "Dow's Bid for Rohm and Haas." Harvard Business School Case 211-020, November 2010. (Revised May 2014.) View Details
  14. Compass Maritime Services, LLC: Valuing Ships

    Benjamin C. Esty and Albert W. Sheen

    Tom Roberts, a founding partner of Compass Maritime Services, a New Jersey-based shipping research and consulting firm, has been asked by a new potential customer in May 2008 for advice on purchasing a capesize bulk carrier. After identifying a suitable ship with his colleague Basil Karatzas, they must determine an appropriate offer price for the ship and justify their recommendations.

    Keywords: Decision Choices and Conditions; Judgments; Price; Management Analysis, Tools, and Techniques; Negotiation Offer; Mathematical Methods; Ship Transportation; Valuation; Consulting Industry; Shipping Industry;

    Citation:

    Esty, Benjamin C., and Albert W. Sheen. "Compass Maritime Services, LLC: Valuing Ships." Harvard Business School Case 211-014, September 2010. (Revised December 2010.) View Details
  15. Dow's Bid for Rohm and Haas (CW)

    Benjamin C. Esty

    Spreadsheet Supplement for 211020.

    Keywords: Mergers and Acquisitions; Performance; Joint Ventures; Financial Crisis; Economic Slowdown and Stagnation; Financial Markets; Sales; Lawsuits and Litigation; Negotiation Deal; Governing and Advisory Boards; Cash Flow; Decisions; Chemical Industry; Kuwait;

    Citation:

    Esty, Benjamin C. "Dow's Bid for Rohm and Haas (CW)." Harvard Business School Spreadsheet Supplement 211-704, November 2010. View Details
  16. Compass Maritime Services, LLC: Valuing Ships (CW)

    Benjamin C. Esty and Albert W. Sheen

    Tom Roberts, a founding partner of Compass Maritime Services, a New Jersey-based shipping research and consulting firm, has been asked by a new potential customer in May 2008 for advice on purchasing a capesize bulk carrier. After identifying a suitable ship with his colleague Basil Karatzas, they must determine an appropriate offer price for the ship and justify their recommendations.

    Keywords: Acquisition; Decisions; Microeconomics; Finance; Price; Management Analysis, Tools, and Techniques; Market Transactions; Partners and Partnerships; Mathematical Methods; Valuation; Consulting Industry; New Jersey;

    Citation:

    Esty, Benjamin C., and Albert W. Sheen. "Compass Maritime Services, LLC: Valuing Ships (CW)." Harvard Business School Spreadsheet Supplement 211-702, September 2010. View Details
  17. Compass Maritime Services, LLC: Valuing Ships (TN)

    Benjamin C. Esty and Albert W. Sheen

    Teaching Note for 211014.

    Keywords: Partners and Partnerships; Research; Service Operations; Customers; Price; Shipping Industry; Consulting Industry; New Jersey;

    Citation:

    Esty, Benjamin C., and Albert W. Sheen. "Compass Maritime Services, LLC: Valuing Ships (TN)." Harvard Business School Teaching Note 211-015, September 2010. View Details
  18. Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V.: Valuing Ships (TN)

    Benjamin C. Esty and Albert W. Sheen

    Teaching Note for 210058.

    Keywords: Valuation; Economic Slowdown and Stagnation; Financial Crisis; Price; Financing and Loans; Contracts; Asset Pricing; Cash Flow; Management Analysis, Tools, and Techniques; Shipping Industry; Germany;

    Citation:

    Esty, Benjamin C., and Albert W. Sheen. "Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V.: Valuing Ships (TN)." Harvard Business School Teaching Note 211-009, August 2010. View Details
  19. Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships (CW)

    Benjamin C. Esty and Albert W. Sheen

    After booming for more than five years, the global shipping (maritime) industry experienced a dramatic crash in late 2008 as the global financial system froze and the global economy slid into recession. Ship charter rates (revenue) fell by as much as 90% causing prices of used ships to fall by as much as 80%. As ship prices (values?) fell, ship owners began to default on loans and new purchase contracts while banks holding loans secured by ships faced the possibility of increasing defaults (violations of loan-to-value covenants), foreclosures, and write-offs. In the midst of this crisis, VHSS, the German Shipbroker's Association, introduced a proposal to value ships using discounted cash flow analysis (to determine a long-term asset value, LTAV) rather than market prices from comparable transactions. Thomas Rehder, the Chairman of VHSS, argued this approach was necessary because market prices did not reflect fundamental values in the current environment. After announcing the alternative valuation methodology in September 2009, he must convince industry participants--ship owners, appraisers, and bankers--to adopt the new valuation methodology and bank regulators and auditing firms to approve its use.

    Keywords: Fair Value Accounting; Economic Slowdown and Stagnation; Capital Markets; Cash Flow; Financial Liquidity; Banks and Banking; Price; Price Bubble; Contracts; Crisis Management; Market Transactions; Valuation; Shipping Industry;

    Citation:

    Esty, Benjamin C., and Albert W. Sheen. "Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships (CW)." Harvard Business School Spreadsheet Supplement 211-701, July 2010. View Details
  20. BP Amoco (A): Policy Statement on the Use of Project Finance

    Benjamin C. Esty and Michael Kane

    Following the BP/Amoco merger in December 1998, CFO David Watson asked Bill Young to recommend when and under what circumstances the firm should use external project finance instead of internal corporate funds to finance new capital investments. As part of this assignment, Young and his team must review each firm's current policy regarding project finance and evaluate the various rationales used to justify its use. Following this review, his team created a new policy statement recommending that BP Amoco finance capital expenditures using corporate funds except in three special circumstances: mega projects, projects in politically volatile areas, and joint ventures with heterogeneous partners. Whether the general rule of using corporate funds and whether the specific exceptions to the rule are appropriate for the merged entity are subjects for class discussion.

    Keywords: Project Finance; Mergers and Acquisitions; Policy; Capital Budgeting;

    Citation:

    Esty, Benjamin C., and Michael Kane. "BP Amoco (A): Policy Statement on the Use of Project Finance." Harvard Business School Case 201-054, January 2001. (Revised May 2010.) View Details
  21. BP Amoco (B): Financing Development of the Caspian Oil Fields

    Benjamin C. Esty and Michael Kane

    British Petroleum and Amoco were the two largest members of the Azerbaijan International Oil Consortium (AIOC), an 11-firm consortium that was spending $10 billion to develop oil fields in the Caspian Sea. As of March 1999, AIOC had completed a $1.9 billion development project known as Early Oil. The two companies, however, had financed their shares of this project in different ways: BP used internal funds (traditional, on-balance sheet corporate finance), whereas Amoco was one of five AIOC partners that raised $400 million of project finance. Following the BP/Amoco merger in December 1998, managers in the combined firm's finance group had to reassess the Early Oil financing strategy and determine the best way to finance its share of the $8 billion Full Field Development Project. Should it use internal funds, project finance, or a mixture of the two?

    Keywords: Investment; Policy; Capital Budgeting; Project Finance; Emerging Markets; Mergers and Acquisitions; Financing and Loans; Financial Strategy; Mining Industry; Energy Industry; United Kingdom; Europe;

    Citation:

    Esty, Benjamin C., and Michael Kane. "BP Amoco (B): Financing Development of the Caspian Oil Fields." Harvard Business School Case 201-067, January 2001. (Revised May 2010.) View Details
  22. Project Finance Acronyms

    Benjamin C. Esty

    Contains two parts: Part I contains a list of more than 500 acronyms for official institutions and other project finance terms; Part II contains a description of various interest and debt coverage ratios used in the field of project finance.

    Keywords: Project Finance; Borrowing and Debt;

    Citation:

    Esty, Benjamin C. "Project Finance Acronyms." Harvard Business School Background Note 207-086, December 2006. (Revised May 2009.) View Details
  23. Banc One Corporation: Asset and Liability Management

    Benjamin C. Esty, Peter Tufano and Jon Headley

    Banc One's share price has been falling recently due to analyst and investor concern over the bank's heavy use of interest rate derivatives. Dick Lodge, chief investment officer in charge of the bank's investment and derivative portfolio, must recommend to the CEO a course of action to allay investors' fears and communicate to the market the reasons for Banc One's use of derivatives. The bank uses interest rate swaps to manage the sensitivity of its earnings to changes in interest rates and as attractive investment alternatives to conventional securities.

    Keywords: Credit Derivatives and Swaps; Financial Management; Interest Rates; Investment Portfolio; Governance Controls; Risk Management; Banking Industry;

    Citation:

    Esty, Benjamin C., Peter Tufano, and Jon Headley. "Banc One Corporation: Asset and Liability Management." Harvard Business School Case 294-079, February 1994. (Revised July 2008.) View Details
  24. An Overview of Project Finance & Infrastructure Finance - 2006 Update

    Benjamin C. Esty and Aldo Sesia

    Provides an introduction to the fields of project finance and infrastructure finance, and gives a statistical overview of project-financed investments over the years from 2002 to 2006. Examples of project-financed investments include the $4 billion Chad-Cameroon pipeline, $6 billion Iridium global satellite telecommunications system, $900 million A2 Toll Road in Poland, $1.4 billion Mozal aluminum smelter in Mozambique, and $20 billion Sakhalin II gas field in Russia. Globally, firms financed $328 billion of capital expenditures using project finance in 2006, up from $217 billion in 2001. The use of project finance has grown at a compound rate of 13% over the past 10 years. Focuses primarily on private sector investment in industrial and infrastructure projects, and contains four sections. The first section defines project finance and contrasts it with other well-known financing mechanisms. The second section describes the evolution of project finance from its beginnings in the natural resources industry in the 1970s, to the U.S. power industry in the 1980s, to a much wider range of industry applications and geographic locations in the 1990s, to infrastructure finance in the 2000s. The third section provides a statistical overview of project-financed investment over the last five years (2002 to 2006), and looks at industry, project, and participant specific data. In addition, provides recent data on infrastructure investments and public-private partnerships. The final section discusses current and likely future trends.

    Keywords: Project Finance; Infrastructure; Investment; Projects; Trends;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "An Overview of Project Finance & Infrastructure Finance - 2006 Update." Harvard Business School Background Note 207-107, April 2007. (Revised October 2007.) View Details
  25. Bankruptcy and Restructuring at Marvel Entertainment Group

    Benjamin C. Esty and Jason Auerbach

    Marvel Entertainment Group is the leading comic book publisher in the United States, with superheros like Spider-Man, the Incredible Hulk, the X-Men, and Captain America. It is also one of the leading manufacturers of sports and entertainment trading cards under the Fleer and Sky Box brand names. In the mid-1990s, it experienced sharp declines in both businesses, causing it to file for bankruptcy in December 1996. This case is set in late January 1997, shortly after Marvel filed its reorganization plan with the bankruptcy court and approximately one month before creditors will have to vote on the plan at the confirmation hearing. Two of the most prominent corporate raiders of the 1980s are pitted against each other for control of the company. On one side is Ronald Perelman, who controls Marvel through his MacAndrews & Forbes holding company. On the other side is Carl Icahn, who controls 25% of Marvel's public debt. Icahn and the other bondholders must decide whether to accept Perelman's plan, to reject it in favor of their own plan, or to sell their bonds before the confirmation hearing. Perelman must decide whether to change the plan in response to the debtholders' threats or to wait and see what happens at the hearing. A rewritten version of another case.

    Keywords: Restructuring; Decision Choices and Conditions; Borrowing and Debt; Insolvency and Bankruptcy; Governance Controls; Courts and Trials; Planning; Entertainment and Recreation Industry;

    Citation:

    Esty, Benjamin C., and Jason Auerbach. "Bankruptcy and Restructuring at Marvel Entertainment Group." Harvard Business School Case 298-059, September 1997. (Revised August 2007.) View Details
  26. Equator Principles, The: An Industry Approach to Managing Environmental and Social Risks

    Benjamin C. Esty, Carin-Isabel Knoop and Aldo Sesia

    In June 2003, 10 leading international banks adopted new voluntary guidelines, called the Equator Principles, to promote sustainable development in project finance. In recent years, nongovernmental organizations (NGOs) had raised issues about the lenders' responsibilities in projects that could harm the environment and/or society. Although many banks had environmental policies in place, a uniform industry standard did not exist. The principles, borrowed from and with the active support of the World Bank's International Finance Corp. (IFC), established guidelines to ensure that banks financed only projects that were "socially responsible and reflected sound environmental management practices." Some NGOs applauded the banks' efforts, others criticized the principles for reasons related to their scope, implementation procedures, and enforcement mechanisms. The Equator banks had to decide what to do next. They could try to recruit more banks (and export credit agencies), develop implementation procedures, or respond to the criticism directly.

    Keywords: Risk and Uncertainty; Competition; Corporate Social Responsibility and Impact; Social Issues; Environmental Sustainability; Policy; Project Finance; Standards; Projects; Commercial Banking; Non-Governmental Organizations;

    Citation:

    Esty, Benjamin C., Carin-Isabel Knoop, and Aldo Sesia. "Equator Principles, The: An Industry Approach to Managing Environmental and Social Risks." Harvard Business School Case 205-114, June 2005. (Revised January 2007.) View Details
  27. Chad-Cameroon Petroleum Development and Pipeline Project (A), The

    Benjamin C. Esty and Carrie Ferman

    On June 6, 2000, the World Bank's and IFC's board of directors was scheduled to vote on whether to approve funding for the $4 billion Chad-Cameroon Petroleum Development and Pipeline project. Although the project presented a unique opportunity to alleviate poverty in Chad, one of the poorest countries in the world, Chad had a president who had been labeled "warlord" and a history of civil war and oppression. This case describes the project, the setting, and the World Bank's reasons for participating in the deal--mainly an opportunity to alleviate poverty, enforce environmental standards, and minimize the impact on indigenous people. It also describes the very public and very ardent opposition to the project's environmental, social, and revenue management policies. Faced with a high-risk, but potentially high-return opportunity to improve conditions in Chad, students, as the directors, must decide whether to approve funding for the deal.

    Keywords: Risk Management; Negotiation; Ethics; Social Issues; Economic Sectors; Investment; Cost vs Benefits; Project Finance; Developing Countries and Economies; Corporate Finance; Mining Industry; Chad; Cameroon;

    Citation:

    Esty, Benjamin C., and Carrie Ferman. "Chad-Cameroon Petroleum Development and Pipeline Project (A), The." Harvard Business School Case 202-010, October 2001. (Revised March 2006.) View Details
  28. Acquisition of Consolidated Rail Corporation (A), The

    Benjamin C. Esty, Lori A. Flees and Mathew M Millett

    On October 15, 1996, Virginia-based CSX and Pennsylvania-based Consolidated Rail (Conrail), the first and third largest railroads in the eastern United States, announced their intent to merge in a friendly deal worth $8.3 billion. This deal was part of an industry-wide trend toward consolidation and promised to change the competitive dynamics of the Eastern rail market. Students, as shareholders, must decide whether to tender shares into the front-end of a two-tiered acquisition offer. To make this decision, they must value Conrail as an acquisition target and understand the structure of CSX's offer.

    Keywords: Valuation; Mergers and Acquisitions; Decisions; Contracts; Rail Industry; United States;

    Citation:

    Esty, Benjamin C., Lori A. Flees, and Mathew M Millett. "Acquisition of Consolidated Rail Corporation (A), The." Harvard Business School Case 298-006, April 1998. (Revised July 2005.) View Details
  29. Aluminium Bahrain (Alba): The Pot Line 5 Expansion Project

    Benjamin C. Esty and Aldo Sesia

    In September 2002, Aluminium Bahrain (Alba) needed to decide how to finance its proposed $1.7 billion pot line. The company's financial adviser, Taylor De-Jongh (TDJ), had recommended Alba employ a multisourced financing strategy using as many as five sources of debt from international, regional, and local capital pools. TDJ believed that the strategy would generate competition among the lenders which, in turn, would save Alba millions in financing costs. But the multisourced financing strategy went against the grain of typical project financings in the Middle East and was not without its risks. Alba management must decide how many financing sources to use, which ones, and how much to get from each one. If the market rejects the multisourced financing strategy, the project might become tainted, which could jeopardize Alba's long-term growth objectives.

    Keywords: Project Finance; Emerging Markets; Financing and Loans; Investment; Capital; Financial Strategy; Manufacturing Industry; Bahrain;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "Aluminium Bahrain (Alba): The Pot Line 5 Expansion Project." Harvard Business School Case 205-027, February 2005. (Revised July 2005.) View Details
  30. An Overview of Project Finance - 2004 Update

    Benjamin C. Esty and Aldo Sesia

    Introduces the field of project finance and provides a statistical overview of the project-financed investments over the last five years. Defines project finance and contrasts it with other well-known financing structures. Describes the evolution of project finance, from its beginnings in the natural resources industry in the 1970s to the U.S. power industry in the 1980s and to a much wider range of industry applications and geographic locations in the 1990s and 2000s. Provides a statistical overview of project-financed investments over the last five years (2000-2004), featuring industry, project, and participant data. Also discusses current and likely future trends and provides terminology and institutional details.

    Keywords: Project Finance; Investment; Projects; Trends;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "An Overview of Project Finance - 2004 Update." Harvard Business School Background Note 205-065, April 2005. (Revised April 2005.) View Details
  31. Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (B)

    Benjamin C. Esty and Aldo Sesia

    Supplements the (A) case.

    Keywords: Financial Services Industry;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (B)." Harvard Business School Case 204-094, January 2004. (Revised April 2005.) View Details
  32. International Rivers Network and the Bujagali Dam Project (A)

    Benjamin C. Esty and Aldo Sesia

    In the summer of 2002, the International Rivers Network (IRN), an environmental NGO located in Berkeley, California, was engaged in what appeared to be the last hours of a three year campaign to stop a $582 million dam and hydropower project at Bujagali Falls in Uganda. The final piece of the financing puzzle was about to be put in place as the World Bank was set to approve a $250 million loan guarantee for the project. Although the project would have some adverse environmental and social impacts, IRN contended that the power deal between the government of Uganda and AES was the real problem. As IRN saw it, the cost of the project was too high and Ugandans would bear most of the risk, which would add to the country's debt burden. However, without the power purchase agreement, which remained undisclosed despite requests for it to be made public, IRN had little economic data on the project to bolster its argument. Still, there were compelling reasons, such as economic development and poverty alleviation, for the Ugandan government to go ahead with the deal it had with AES, the project sponsor. AES, with its social mission and reputation for delivering low-cost energy to the world, seemed like the ideal sponsor.

    Keywords: Ethics; Corporate Disclosure; Project Finance; Investment; Environmental Sustainability; Projects; Developing Countries and Economies; Energy Industry; Uganda;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "International Rivers Network and the Bujagali Dam Project (A)." Harvard Business School Case 204-083, March 2004. (Revised April 2005.) View Details
  33. International Rivers Network and the Bujagali Dam Project (TN) (A & B)

    Benjamin C. Esty and Aldo Sesia

    Teaching Note to (9-204-083) and (9-204-139).

    Keywords: Environmental Sustainability;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "International Rivers Network and the Bujagali Dam Project (TN) (A & B)." Harvard Business School Teaching Note 204-115, June 2004. (Revised October 2004.) View Details
  34. Airbus A3XX: Developing the World's Largest Commercial Jet (A)

    Benjamin C. Esty and Michael Kane

    In July 2000, Airbus Industries' supervisory board is on the verge of approving a $13 billion investment for the development of a new super jumbo jet known as the A3XX that would seat from 550 to 1,000 passengers. Having secured approximately 20 orders for the new jet, the board must decide whether there is sufficient long-term demand for the A3XX to justify the investment. At the time, Airbus was predicting that the market for very large aircraft (VLA), those seating more than 500 passengers, would exceed 1,500 aircraft over the next 20 years and would generate sales in excess of $350 billion. According to Airbus, it needed to sell 250 aircraft to break even and could sell as many as 750 aircraft over the next 20 years. This case explores the two sets of forecasts and asks students whether they would proceed with the launch given the size of the investment and the uncertainty in long-term demand.

    Keywords: Risk and Uncertainty; Investment; Forecasting and Prediction; Capital Budgeting; Valuation; Government and Politics; Demand and Consumers; Product Development; Product Positioning; Air Transportation Industry; Manufacturing Industry;

    Citation:

    Esty, Benjamin C., and Michael Kane. "Airbus A3XX: Developing the World's Largest Commercial Jet (A)." Harvard Business School Case 201-028, November 2000. (Revised April 2004.) View Details
  35. Introduction to the Large-Scale Investment (LSI) Course at Harvard Business School

    Benjamin C. Esty

    Introduces students to the Large-Scale Investment (LSI) course taught at Harvard Business School. LSI is a case-based course about project finance that is designed for second-year MBA students. The course is about project finance, which involves creation of a legally independent project company financed with equity from one or more sponsoring firms and nonrecourse debt for the purpose of investing in a capital asset. In 2001, project-financed investment reached $217 billion worldwide. The LSI course describes what project finance is, why it creates value, and how to structure deals. In doing so, the course helps to sharpen and deepen students' understanding of corporate finance. This note describes the course's key themes, structure, and content. Additionally, there is a brief synopsis of each case study. The cases are available individually from Harvard Business School Publishing.

    Keywords: Value Creation; Project Finance; Investment; Projects;

    Citation:

    Esty, Benjamin C. "Introduction to the Large-Scale Investment (LSI) Course at Harvard Business School." Harvard Business School Background Note 204-093, October 2003. (Revised February 2004.) View Details
  36. Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A)

    Benjamin C. Esty and Aldo Sesia

    In June 1999, the Basel Committee on Banking Supervision announced plans to revise the capital standards for banks. The Basel Committee believed that project loans were significantly riskier than corporate loans and, therefore, warranted higher capital charges under the new proposal (known as Basel II). Bankers, fearing that higher capital charges would damage project lending by lowering profits and driving borrowers to nonbank competitors, formed a consortium to oppose the proposal by studying the actual default and loss characteristics of their combined portfolios of project loans. The study showed that project loans were not riskier than corporate loans. Armed with this data, the consortium sent a letter to the Basel Committee in August 2002 urging them to lower the proposed capital charges on project finance loans.

    Keywords: Risk and Uncertainty; Project Finance; Financing and Loans; Projects; Standards; Banks and Banking; Banking Industry;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A)." Harvard Business School Case 203-035, December 2002. (Revised January 2004.) View Details
  37. Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (TN)

    Benjamin C. Esty and Aldo Sesia

    Teaching Note for (9-203-035).

    Keywords: Project Finance; Financing and Loans;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (TN)." Harvard Business School Teaching Note 203-055, December 2002. (Revised June 2003.) View Details
  38. Nghe An Tate & Lyle Sugar Company (Vietnam), TN

    Benjamin C. Esty and Carrie Ferman

    Teaching Note for (9-202-054).

    Keywords: Developing Countries and Economies; Government and Politics; Price; Projects; Valuation; Financing and Loans; Problems and Challenges; Food and Beverage Industry; Viet Nam;

    Citation:

    Esty, Benjamin C., and Carrie Ferman. "Nghe An Tate & Lyle Sugar Company (Vietnam), TN." Harvard Business School Teaching Note 202-067, April 2002. (Revised June 2003.) View Details
  39. Contractual Innovation in the U.K. Energy Markets: Enron Europe, The Eastern Group, and the Sutton Bridge Project (TN)

    Benjamin C. Esty and Aldo Sesia

    Teaching Note for (9-200-051).

    Keywords: Utilities Industry; Energy Industry; United Kingdom;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "Contractual Innovation in the U.K. Energy Markets: Enron Europe, The Eastern Group, and the Sutton Bridge Project (TN)." Harvard Business School Teaching Note 203-085, June 2003. View Details
  40. Nghe An Tate & Lyle Sugar Company (Vietnam)

    Benjamin C. Esty, Frank J. Lysy and Carrie Ferman

    In September 1998, Paul Cooper, Tate & Lyle's finance director for international investments, asked the International Finance Corp. (IFC) to consider lending up to $45 million to finance a $90 million sugar mill in northern Vietnam. Ewen Cobban, an IFC agricultural specialist, was in charge of reviewing the proposal and making a loan recommendation to senior management. Cobban's main concerns were whether the plant was commercially viable and whether it had support from the government. He also feared that world sugar prices were falling and that sugar was a protected commodity. Before he could recommend approval, he had to determine whether they were temporary or permanent problems. Cobban also knew he would have to assess the project's developmental impact. The IFC only supported projects that contributed to sustainable development, and one of the key determinants of sustainability was the degree to which the project was "fair" to all parties involved. Thus, Cobban would need to assess not only the private returns, but also the social returns as measured by the project's economic rate of return (ERR). To do so, he would have to consider the various groups affected by the project and, where possible, quantify the impact on them.

    Keywords: Business and Government Relations; Food and Beverage Industry; Viet Nam;

    Citation:

    Esty, Benjamin C., Frank J. Lysy, and Carrie Ferman. "Nghe An Tate & Lyle Sugar Company (Vietnam)." Harvard Business School Case 202-054, April 2002. (Revised May 2003.) View Details
  41. Mobile Energy Services Company

    Benjamin C. Esty and Aldo Sesia

    When Al "Chainsaw" Dunlap became CEO of the Scott Paper Co., the company owned a large, vertically integrated production facility in Mobile, Alabama. Dunlap sold part of the production facility, a cogeneration power plant (later known as Mobile Energy Services Co.), to the Southern Co. for $350 million. This case is set in August 1995, when Mobile Energy Services Co. was trying to issue two bonds worth $340 million to refinance its acquisition bridge loans. Potential bond investors must consider the risks associated with an "inside the fence" energy complex. In particular, they must consider how the transformation from a vertically integrated to a vertically separated facility will affect the power plant's creditworthiness and whether the contractual agreements that bind the parties and govern the operations will be as effective as uniform ownership. Because of vertical separation, Mobile Energy Service's ability to service its debt obligation depends on the long-term viability of the energy supply contract it has with the mills.

    Keywords: Mergers and Acquisitions; Risk and Uncertainty; Contracts; Agreements and Arrangements; Investment; Projects; Vertical Integration; Energy Sources; Bonds; Ownership; Restructuring; Energy Industry; Alabama;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "Mobile Energy Services Company." Harvard Business School Case 203-061, February 2003. (Revised May 2003.) View Details
  42. An Overview of Project Finance-2002 Update

    Benjamin C. Esty and Irina L. Christov

    This case introduces to the field of project finance and provides a statistical overview of the project-financed investments over the last five years. It consists of four sections. The first section defines project finance and contrasts it with other well-known financing structures. The second section describes the evolution of project finance from its beginnings in the natural resources industry in the 1970s to the U.S. power industry in the 1980s and to a much wider range of industry applications and geographic locations in the 1990s and 2000s. The third section provides a statistical overview of the project-financed investment over the last five years (1998-2002) in terms of industry, project, and participant data. The final section discusses current and likely future trends. Besides providing an overview of recent trends, the note provides terminology and institutional details for readers unfamiliar with project finance.

    Keywords: Measurement and Metrics; Project Finance; Investment;

    Citation:

    Esty, Benjamin C., and Irina L. Christov. "An Overview of Project Finance-2002 Update." Harvard Business School Supplement 202-105, April 2002. (Revised May 2003.) View Details
  43. Why Study Large Projects?

    Benjamin C. Esty

    Explains why project companies in general and large projects in particular represent an interesting and managerially relevant subset of total capital investment and why they merit academic research and instruction. Serves as an introductory note for the Large-scale Investment course, a case-based course about project finance designed for second-year MBA students. In addition, provides empirical data on project-financed investment as a subset of total capital investment.

    Keywords: Management; Project Finance; Investment; Projects; Capital;

    Citation:

    Esty, Benjamin C. "Why Study Large Projects?" Harvard Business School Background Note 203-031, October 2002. (Revised May 2003.) View Details
  44. Financing the Mozal Project

    Benjamin C. Esty and Fuaad Qureshi

    It is June 1997, and a team from the International Finance Corp. (IFC) is recommending that the board approve a $120 million investment in a $1.4 billion aluminum smelter in Mozambique, known as the Mozal project. Four factors make the investment controversial: it would be the IFC's largest investment in the world, total investment is almost the size of Mozambique's gross domestic project (GDP), Mozambique had only recently emerged from 20 years of civil war, and several key contractual issues were still undecided. Because commercial bankers have refused to finance the deal unless the IFC is involved, the sponsors have requested IFC participation. Whether the IFC's board will agree that it is the right time and the right place to make such a large investment remains to be seen.

    Keywords: Investment; Capital Markets; Emerging Markets; Projects; Financial Management; Risk and Uncertainty; Developing Countries and Economies; Metals and Minerals; Financial Strategy; Government and Politics; International Finance; Infrastructure; Mozambique;

    Citation:

    Esty, Benjamin C., and Fuaad Qureshi. "Financing the Mozal Project." Harvard Business School Case 200-005, November 1999. (Revised April 2003.) View Details
  45. Poland's A2 Motorway

    Benjamin C. Esty and Michael Kane

    Autostrada Wielkopolska S.A. (AWSA) is a consortium of 18 firms that won a concession to build and operate Poland's first private toll road. In June 2000, AWSA's chief financial officer, Wojciech Gebicki, is preparing for a meeting with the projects' lead bankers to discuss concerns they have regarding the traffic forecasts and revenue projections. Based on their concerns, the bankers are asking the sponsors to inject an additional e60 to e90 million of equity into the deal, a sizeable increase given the projects' total cost of e934 million and the sponsor's current equity commitment of e235 million. This request presents a serious problem for Gebicki (AWSA) because the concession is scheduled to expire in six weeks if financing has not closed and because he has very few options available to address the problem. This case describes the deal structure and invites students to accept or dispute Gebicki's view that the major risks have been identified, assessed, and mitigated in such a way that the senior lenders are adequately protected without further equity support.

    Keywords: Risk Management; Cost vs Benefits; Project Finance; Projects; Construction Industry; Transportation Industry; Poland;

    Citation:

    Esty, Benjamin C., and Michael Kane. "Poland's A2 Motorway." Harvard Business School Case 202-030, December 2001. (Revised April 2003.) View Details
  46. International Investor, The: Islamic Finance and the Equate Project

    Benjamin C. Esty and Mathew M Millett

    Equate Petrochemical Co. (Equate) is a joint venture between Union Carbide Corp. and Petrochemical Industries Co. (PIC) for the construction of a $2 billion petrochemical plant in Kuwait. The sponsors began construction in August 1994, using a bridge loan, and are in search of permanent, nonrecourse finance. As part of the permanent financing, the sponsors want to use a tranche of Islamic finance--funds that are invested in accordance with Islamic religious principles known as Sharia. The sponsors hired Kuwait Finance House which, in turn, approached The International Investor (TII is a Kuwaiti investment bank) to assist in structuring and underwriting the Islamic tranche. The case is set in early December 1995, as members of The Institutional Investor's Structured Finance Group are deciding which Islamic structure to use, how to resolve various conflicts between the Islamic and conventional tranches, and how large a commitment to make on behalf of their investors.

    Keywords: International Finance; Project Finance; Religion; Investment; Finance; Mining Industry; Energy Industry; Kuwait;

    Citation:

    Esty, Benjamin C., and Mathew M Millett. "International Investor, The: Islamic Finance and the Equate Project." Harvard Business School Case 200-012, October 1999. (Revised April 2003.) View Details
  47. Iridium LLC

    Benjamin C. Esty, Fuaad Qureshi and William J Olson

    This case involves part of a module on financing large projects in the elective curriculum course entitled "Large-Scale Investment." It is set in August 1999, just after Iridium, a global communications firm, declared bankruptcy. Although the case describes Iridium's creation, development, and commercial launch, it concentrates primarily on the firm's financial strategy and execution as it raised more than $5 billion of capital. It describes the specific securities Iridium issued, the sequence in which it issued them, and the firm's financial performance prior to bankruptcy. Using analyst forecasts, students can value the firm prior to its bankruptcy, but will recognize how difficult it is to value technology start-ups given the uncertainty in demand.

    Keywords: Technology Industry;

    Citation:

    Esty, Benjamin C., Fuaad Qureshi, and William J Olson. "Iridium LLC." Harvard Business School Case 200-039, March 2000. (Revised April 2003.) View Details
  48. Chase's Strategy for Syndicating the Hong Kong Disneyland Loan (A)

    Benjamin C. Esty and Michael Kane

    In late 1999, the Walt Disney Co. and the Hong Kong government agreed to develop Hong Kong Disneyland, a HK$28 (U.S.$3.6) billion theme park and resort complex planned to open in late 2005. As part of the total financing package, the sponsors decided to raise HK$3.3 billion of non-recourse bank loans for construction and working capital, and selected Chase Manhattan Bank to underwrite and syndicate these facilities. This case concerns the process by which Chase successfully competed to lead this transaction. The key questions facing Chase were whether to bid at all, how to bid, and how to structure the syndication to meet the borrower's needs, its own profit objectives, and the market's expectation for an attractively priced credit. Includes a generic section about the process, participants, and economics of syndicated lending for students who are unfamiliar with syndicated lending. This is part of a module on Financing Projects in the Elective Curriculum (EC) course Large-Scale Investment (LSI). Although written for a course on project finance, it can easily be modified for courses on capital markets or financial institutions.

    Keywords: Working Capital; Project Finance; Relationships; Financing and Loans; Financial Strategy; Tourism Industry; Hong Kong;

    Citation:

    Esty, Benjamin C., and Michael Kane. "Chase's Strategy for Syndicating the Hong Kong Disneyland Loan (A)." Harvard Business School Case 201-072, March 2001. (Revised April 2003.) View Details
  49. Project Finance Research, Data, and Information Sources

    Benjamin C. Esty and Fuaad Qureshi

    Documents the major sources of project finance research and data. It is to be a reference guide for MBA students writing for the elective curriculum course, Large-scale Investment, and for others interested in the field of project finance.

    Keywords: Data and Data Sets; Project Finance; Research; Investment;

    Citation:

    Esty, Benjamin C., and Fuaad Qureshi. "Project Finance Research, Data, and Information Sources ." Harvard Business School Background Note 201-041, October 2000. (Revised April 2003.) View Details
  50. Contractual Innovation in the UK Energy Markets: Enron Europe, The Eastern Group, and the Sutton Bridge Project

    Benjamin C. Esty and Peter Tufano

    In December 1996, Enron Europe and The Eastern Group were on the verge of signing an innovative transaction in the utility industry. Eastern was going to buy a long-term option to convert natural gas into electricity from Enron, thereby giving it the economic right to operate a "virtual" power station. This structure was vastly different from the traditional independent power plant (IPP) structure, and the executives involved had to convince their superiors of its wisdom before they could proceed. This case was jointly written for Large-Scale Investment and Corporate Financial Engineering, and it covers topics related to both project finance and financial engineering. It illustrates a new paradigm in the electric power industry: the creation of virtual power stations backed by physical power stations with merchant exposure. It also illustrates how physical operations (constructing and operating a power plant) can be used to offset contractual obligations and trading exposures.

    Keywords: Project Finance; Infrastructure; Supply and Industry; Corporate Finance; Utilities Industry; Energy Industry;

    Citation:

    Esty, Benjamin C., and Peter Tufano. "Contractual Innovation in the UK Energy Markets: Enron Europe, The Eastern Group, and the Sutton Bridge Project." Harvard Business School Case 200-051, May 2000. (Revised April 2003.) View Details
  51. Financing PPL Corporation's Growth Strategy

    Benjamin C. Esty and Carrie Ferman

    PPL Corp., an electric utility in Pennsylvania, needs to finance $1 billion of peaking plants as part of its new growth strategy. In February 2001, Steve May, director of finance for PPL's Global Division, is responsible for recommending a finance plan. After considering all the options, May decides that a synthetic lease is the best option, but he must decide whether to recommend a traditional or a limited recourse synthetic lease and how to structure the specific terms. The limited synthetic lease, in contrast to the traditional structure, requires a smaller corporate guarantee on the assets and has greater off-credit treatment, which is important given the company's growth strategy and limited debt capacity. However, finding investors willing to accept greater project risk will cost more and take more time. Timing is an issue for May because if he doesn't close the financing within the next two months, PPL will lose a valuable option to buy turbines for its peaking plants. Failure to exercise the option could delay the company's construction schedule, something PPL wants to avoid given the nationwide race to build new generating plants.

    Keywords: Financial Management; Financial Instruments; Project Finance; Financial Strategy; Corporate Finance; Leasing;

    Citation:

    Esty, Benjamin C., and Carrie Ferman. "Financing PPL Corporation's Growth Strategy." Harvard Business School Case 202-045, December 2001. (Revised April 2003.) View Details
  52. Restructuring Bulong's Project Debt

    Benjamin C. Esty and Michael Kane

    Preston Resources, a small Australian gold mining company, bought the Bulong nickel mine for A$319 million in November 1998 and financed the acquisition by issuing a US$185 million (A$294 million) project bond. At the time, mining had been underway for several months, and construction of the processing plant was essentially complete. Almost from the beginning, however, a series of design and operating problems shut down production and required costly repairs. Although processing performance improved by late 2000, maintenance issues continued to plague the plant, and output remained significantly below forecast levels. This case, set in 2002, concerns the financial consequences of these problems, including a bond default in January 2000 and Preston's efforts to restructure the project debt.

    Keywords: Finance; Projects; Restructuring; Bonds; Borrowing and Debt; Business Startups; Insolvency and Bankruptcy; Valuation; Mining Industry; Australia;

    Citation:

    Esty, Benjamin C., and Michael Kane. "Restructuring Bulong's Project Debt." Harvard Business School Case 203-027, July 2002. (Revised March 2003.) View Details
  53. Chase's Strategy for Syndicating the Hong Kong Disneyland Loan (B)

    Benjamin C. Esty and Michael Kane

    Supplements the (A) case.

    Keywords: Working Capital; Project Finance; Relationships; Financing and Loans; Financial Strategy; Tourism Industry; Hong Kong;

    Citation:

    Esty, Benjamin C., and Michael Kane. "Chase's Strategy for Syndicating the Hong Kong Disneyland Loan (B)." Harvard Business School Case 201-086, March 2001. (Revised March 2003.) View Details
  54. Teaching Project Finance: An Overview of the Large-Scale Investment Course

    Benjamin C. Esty

    Large-Scale Investment is a case-based course about project finance for second-year MBA students. Project finance involves the creation of a legally independent project company financed with nonrecourse debt for the purpose of investing in a single-purpose industrial asset. In 2001, firms financed almost $220 billion worth of capital expenditures through project companies, an amount that has grown and will continue to grow rapidly in the years ahead. The central theme of the course is that "structure matters," which stands in sharp contrast to the neoclassical view of the firm as a "black box" production function and the assumption underlying Modigliani and Miller's first irrelevance proposition that financing and investment are separable and independent activities. Through this course, students learn how various aspects of project structure affect managerial incentives to create value and manage risk. Ultimately, students learn how to increase value through both investment and financing choices. This note describes the course's key themes, structure, and content. Designed for educators interested in teaching a course on project finance. The material described in this note can also be used to create a module in an existing course on corporate finance, international finance, or financial institutions or to create courses on emerging market corporate finance, risk management, and energy finance.

    Keywords: Projects; Financing and Loans;

    Citation:

    Esty, Benjamin C. "Teaching Project Finance: An Overview of the Large-Scale Investment Course." Harvard Business School Module Note 202-086, April 2002. (Revised February 2003.) View Details
  55. An Economic Framework for Assessing Development Impact

    Benjamin C. Esty, Frank J. Lysy and Carrie Ferman

    Discusses the differences between private and social returns and describes an economic framework for assessing a project's social return [known as the economic rate of return (ERR)]. The framework begins by analyzing the impact of a new project on private financiers [the private return known as the financial rate of return (FRR)]. The framework then identifies other stakeholders who might be affected, directly or indirectly, by the project and examines the project's impact on each group. Assumes readers have a working knowledge of cost-benefit analysis, microeconomics, and basic valuation mechanics.

    Keywords: Cost vs Benefits; Microeconomics; Investment Return; Framework; Projects; Business and Stakeholder Relations; Valuation;

    Citation:

    Esty, Benjamin C., Frank J. Lysy, and Carrie Ferman. "An Economic Framework for Assessing Development Impact." Harvard Business School Background Note 202-052, April 2002. (Revised February 2003.) View Details
  56. Australia-Japan Cable: Structuring the Project Company

    Benjamin C. Esty and Carrie Ferman

    In late September 1999, representatives from Telstri, Japan Telecom, and Teleglobe met to discuss the structure of the Australia-Japan Cable (AJC) project, a $520 million submarine cable system that would run from Australia to Japan. The sponsors, excited by the possibility of large returns, needed to move quickly to capitalize on the projected shortfall in Australia's broadband capacity. As telecommunications carriers, the sponsors needed additional capacity to serve their retail and wholesale customers. As cable system owners, they wanted to earn an appropriate return on their invested capital while mitigating ownership risks. The need to move quickly in the face of significant demand, competition, and technological uncertainty made it particularly risky to invest at this time.

    Keywords: Technology Networks; Cooperative Ownership; Organizational Structure; Investment; Ownership; Capital; Corporate Governance; Management Teams; Communication Technology; Projects; Compensation and Benefits; Corporate Finance; Telecommunications Industry; Australia; Japan;

    Citation:

    Esty, Benjamin C., and Carrie Ferman. "Australia-Japan Cable: Structuring the Project Company." Harvard Business School Case 203-029, August 2002. (Revised January 2003.) View Details
  57. Calpine Corporation: The Evolution from Project to Corporate Finance

    Benjamin C. Esty and Michael Kane

    In early 1999, Calpine Corp.'s CEO Pete Cartwright adopted an aggressive growth strategy with the goal of increasing the company's aggregate generating capacity from approximately 3,000 to 15,000 megawatts (MW) by 2004. He believed there was a fleeting opportunity to repower America given the inefficiency and age of current generating capacity as well as the recently granted ability to compete in wholesale power markets. To achieve the new goal, Calpine will have to build or acquire as many as 25 power plants at a total cost of $6 billion (approximately $500,000 per 1,000 MW). For a company with assets of $1.7 billion, a subinvestment grade debt rating, a debt-to-capitalization ratio of 79%, and an after-tax cash flow of $143 million in 1998, raising this much money was going to be a formidable challenge.

    Keywords: Technology; Cost of Capital; Project Finance; Adaptation; Profit; Financial Strategy; Corporate Finance; Energy Industry; United States;

    Citation:

    Esty, Benjamin C., and Michael Kane. "Calpine Corporation: The Evolution from Project to Corporate Finance." Harvard Business School Case 201-098, May 2001. (Revised January 2003.) View Details
  58. Chad-Cameroon Petroleum Development and Pipeline Project (A) and (B), The TN

    Benjamin C. Esty

    Teaching Note for (9-202-010) and (9-202-012).

    Keywords: Energy Industry; Mining Industry; Chad;

    Citation:

    Esty, Benjamin C. "Chad-Cameroon Petroleum Development and Pipeline Project (A) and (B), The TN." Harvard Business School Teaching Note 202-032, October 2001. (Revised January 2003.) View Details
  59. Basel II: Assessing the Default and Loss Characterisrics of Project Finance Loans

    Benjamin C. Esty and Aldo Sesia

    Spreadsheet to (9-203-035). Download only.

    Keywords: Project Finance; Financing and Loans;

    Citation:

    Esty, Benjamin C., and Aldo Sesia. "Basel II: Assessing the Default and Loss Characterisrics of Project Finance Loans." Harvard Business School Spreadsheet Supplement 203-702, November 2002. View Details
  60. Australia-Japan Cable: Structuring the Project Company

    Benjamin C. Esty

    Spreadsheet to (9-203-024). Download only.

    Keywords: Projects; Customers; System; Capital; Competition; Investment Return; Risk and Uncertainty; Telecommunications Industry; Australia; Japan;

    Citation:

    Esty, Benjamin C. "Australia-Japan Cable: Structuring the Project Company." Harvard Business School Spreadsheet Supplement 202-746, July 2002. (Revised August 2002.) View Details
  61. Iridium LLC TN

    Benjamin C. Esty

    Teaching Note for (9-200-039).

    Keywords: Financing and Loans; Risk and Uncertainty; Technology; Insolvency and Bankruptcy; Financial Strategy; Performance; Valuation; Forecasting and Prediction; Demand and Consumers; Communications Industry;

    Citation:

    Esty, Benjamin C. "Iridium LLC TN." Harvard Business School Teaching Note 200-050, June 2000. (Revised March 2002.) View Details
  62. International Investor, The: Islamic Finance and the Equate Project TN

    Benjamin C. Esty and Mathew M Millett

    Teaching Note for (9-200-012).

    Keywords: Investment; International Finance; Middle East;

    Citation:

    Esty, Benjamin C., and Mathew M Millett. "International Investor, The: Islamic Finance and the Equate Project TN." Harvard Business School Teaching Note 200-013, October 1999. (Revised March 2002.) View Details
  63. Petrolera Zuata, Petrozuata C.A.

    Benjamin C. Esty and Mathew M Millett

    Petrozuata is a proposed $2.5 billion oil-field development project in Venezuela. The case is set in 1997 as the project sponsors, Conoco and PDVSA (Venezuela's national oil company), are planning to meet with various development agencies and rating agencies regarding the proposed financial structure. The sponsors hope to raise a portion of the $1.5 billion debt in the capital markets, which will require an investment-grade rating. The key questions are whether the project will achieve an investment-grade rating and, if not, how to finance the project. Describes what turned out to be an extremely well-crafted financial transaction, one that was named "Deal of the Year" in 1997 by virtually every journal covering project finance.

    Keywords: Risk Management; Valuation; Project Finance; Capital Markets; Investment; Projects; Mining Industry; Energy Industry; Venezuela;

    Citation:

    Esty, Benjamin C., and Mathew M Millett. "Petrolera Zuata, Petrozuata C.A." Harvard Business School Case 299-012, September 1998. (Revised March 2002.) View Details
  64. Overview of the Project Finance Market, An

    Benjamin C. Esty, Suzanne I. Harris and Kathleen G. Krueger

    This case introduces the field of project finance and supplies a statistical overview of the project finance market as of the mid=to late 1990s. It consists of four sections. The first section defines project finance and contrasts it with other well-known forms of financing. The second section describes the evolution of project finance from its origins in the 13th century in the mining industry, to the U.S. electric power industry in the 1970s and 1980s, and then to a much wider range of applications and locations in the 1990s. The third section provides a statistical overview of the project finance market as it exists today in terms of industry, project, and participant data. The final section discusses current and likely future trends. There is also an appendix that describes sources of industry data and other project finance information.

    Keywords: Markets; Investment; Projects; Project Finance;

    Citation:

    Esty, Benjamin C., Suzanne I. Harris, and Kathleen G. Krueger. "Overview of the Project Finance Market, An." Harvard Business School Background Note 200-028, December 1999. (Revised January 2002.) View Details
  65. Airbus A3XX: Developing the World's Largest Commercial Jet (A) and (B) TN

    Benjamin C. Esty and Michael Kane

    Teaching Note for (9-201-028) and (9-201-126).

    Keywords: Aerospace Industry;

    Citation:

    Esty, Benjamin C., and Michael Kane. "Airbus A3XX: Developing the World's Largest Commercial Jet (A) and (B) TN." Harvard Business School Teaching Note 201-040, December 2000. (Revised August 2001.) View Details
  66. Acquisition of Consolidated Rail Corporation, The (A and B) TN

    Benjamin C. Esty and Mathew M Millett

    Teaching Note for (9-298-006) and (9-298-095).

    Keywords: Mergers and Acquisitions; Rail Industry;

    Citation:

    Esty, Benjamin C., and Mathew M Millett. "Acquisition of Consolidated Rail Corporation, The (A and B) TN." Harvard Business School Teaching Note 298-087, June 1998. (Revised May 2001.) View Details
  67. Acquisition of Consolidated Rail Corporation (B), The

    Benjamin C. Esty, Lori A. Flees and Mathew M Millett

    Eight days after CSX announced it was going to buy Consolidated Rail (Conrail) for $88.65 per share, Norfolk Southern made a hostile $100 per share bid for Conrail. Over the next several months, the potential acquirers upped their bids while exchanging criticism in the popular press, prompting analysts to call this one of the nastiest takeover battles of the 1990s. The case is set in January 1997, just before Conrail shareholders are scheduled to vote on the proposed deal with CSX. It analyzes the trend toward consolidation in the U.S. railroad industry, the bidding war for Conrail, and the various provisions in Pennsylvania's anti-takeover laws, which restrict the market for corporate control. It also explores the strategic and financial implications of a bidding war and challenges the assumption that failure to acquire is a zero net present value endeavor. Finally, it examines the nature of and economic basis for regulating the market for corporate control.

    Keywords: Law; Valuation; Rail Transportation; Bids and Bidding; Governance Controls; Mergers and Acquisitions; Business Strategy; Corporate Finance; Rail Industry; United States;

    Citation:

    Esty, Benjamin C., Lori A. Flees, and Mathew M Millett. "Acquisition of Consolidated Rail Corporation (B), The." Harvard Business School Supplement 298-095, April 1998. (Revised May 2001.) View Details
  68. Introduction to Islamic Finance, An

    Benjamin C. Esty, Fuaad Qureshi and Mathew M Millett

    Provides a basic introduction to the principles of Islamic finance. Examines the religious background and legal foundations of Islamic finance. Also discusses the development of Islamic financial institutions and the financial instruments they use. Concludes with a discussion of recent developments and future challenges for this growing segment of the global financial system.

    Keywords: Financial Institutions; Financial Instruments; Globalization; Growth and Development; Lawfulness; Problems and Challenges; Religion; Financial Services Industry;

    Citation:

    Esty, Benjamin C., Fuaad Qureshi, and Mathew M Millett. "Introduction to Islamic Finance, An." Harvard Business School Background Note 200-002, August 1999. (Revised February 2000.) View Details
  69. Exercises in Option Pricing and Real Option Analysis

    Benjamin C. Esty

    Contains five problems, one each on basic option pricing, abandonment value, the value of waiting to invest, contingent claims analysis (equity as a call option), and strategic decision making in an option framework. The goal is for students to recognize option value and to understand how it relates to corporate applications using relatively simple numerical examples. The problems are designed to minimize the complexities inherent in real applications, which can be discussed in the context of case discussions that follow this problem set.

    Keywords: Stock Options; Price;

    Citation:

    Esty, Benjamin C. "Exercises in Option Pricing and Real Option Analysis." Harvard Business School Exercise 298-053, September 1997. (Revised February 2000.) View Details
  70. Note on the Caspian Oil Pipelines

    Benjamin C. Esty and Mathew M Millett

    The Caspian region may become one of the world's next major energy producers. Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan-all former Soviet republics--hold vast and largely undeveloped reserves of oil and gas, but the region's export infrastructure is nearly nonexistent. The Note provides background on Azerbaijan and Kazakhstan-the region's major oil producers-including economic and oil sector data. Also in A, it discusses major options to the surrounding region; B. Covering the advantages and weaknesses of each of the options.

    Keywords: Economics; Non-Renewable Energy; Investment; Government and Politics; Infrastructure; Outcome or Result; Projects; Natural Environment; Azerbaijan; Kazakhstan; Uzbekistan;

    Citation:

    Esty, Benjamin C., and Mathew M Millett. "Note on the Caspian Oil Pipelines." Harvard Business School Background Note 299-044, April 1999. View Details
  71. Atlantic Energy/Delmarva Power & Light (A)

    Benjamin C. Esty, Mathew M Millett and Tracy Aronson

    Delmarva Power & Light and Atlantic Energy are neighboring electric utilities based in Delaware and New Jersey, respectively. In early 1996, they entered into merger negotiations, but were unable to reach an agreement on price because they could not agree on what impact deregulation would have on Atlantic. In the currently regulated electricity market, Atlantic was profitable even though it was one of the high-cost power producers in the region. But in a deregulated environment, where prices would surely fall, Atlantic might become unprofitable and, therefore, worth significantly less. The key issues are to determine how much to pay for Atlantic and how to structure a deal that will bridge the disagreements over value. Unlike certain situations where hedging can resolve uncertainty, there is no way to hedge either the speed of deregulation or the magnitude of price declines due to competition.

    Keywords: Valuation; Negotiation Offer; Government Legislation; Risk and Uncertainty; Mergers and Acquisitions; Contracts; Utilities Industry; Delaware; New Jersey;

    Citation:

    Esty, Benjamin C., Mathew M Millett, and Tracy Aronson. "Atlantic Energy/Delmarva Power & Light (A)." Harvard Business School Case 298-034, February 1998. (Revised December 1998.) View Details
  72. Gillette's Launch of Sensor

    Pankaj Ghemawat and Benjamin C. Esty

    The introduction of the Sensor Shaving System, one of the biggest product launches ever, forced Gillette to reevaluate its strategy in its shaving and non-shaving business. It had to decide whether to go ahead with the launch and if so, at what scale. Permits analysis of the margins and volumes the Sensor is likely to achieve, and issues of sustainability and flexibility.

    Keywords: Product Launch; Technological Innovation; Innovation Strategy; Business Strategy; Marketing Strategy; Measurement and Metrics; Consumer Products Industry;

    Citation:

    Ghemawat, Pankaj, and Benjamin C. Esty. "Gillette's Launch of Sensor." Harvard Business School Case 792-028, September 1991. (Revised November 1997.) View Details
  73. Hostile Bid for Red October, The

    Benjamin C. Esty and Alan Bigman

    Manatep Bank, a Russian investment bank, has just announced the country's first hostile tender offer for Red October, a confectionery company located in Moscow. As the chief financial officer of the target company, Yuri Yegorov must decide how to respond, how much his company is worth, and what to recommend to the board of directors. The context of the case, the nascent Russian financial system, raises a variety of interesting and complex valuation issues such as determining discount rates in countries with high inflation and unstable governments, uncertain property rights, and poor financial information. The absence of financial and institutional infrastructure provides a stark contrast to financial markets and takeovers in more developed countries.

    Keywords: Capital Markets; Cash; Governance Controls; Financial Condition; Investment Banking; Financial Markets; Trade; Valuation; Financial Management; Food and Beverage Industry; Moscow;

    Citation:

    Esty, Benjamin C., and Alan Bigman. "Hostile Bid for Red October, The." Harvard Business School Case 296-084, June 1996. (Revised July 1997.) View Details
  74. USG Corporation

    Benjamin C. Esty and Tara L. Nells

    In 1988, USG was the world's largest gypsum producer and one of the world's largest building-products companies. On May 2, 1988, USG's board of directors announced a proposed leveraged recapitalization plan to thwart a hostile cash tender offer by Desert Partners. With only one week remaining before the tender offer was scheduled to expire, shareholders must decide whether to tender their shares or wait and vote in favor of the recapitalization plan.

    Keywords: Capital Structure; Mergers and Acquisitions; Corporate Governance; Valuation; Cash Flow; Leveraged Buyouts; Restructuring; United States;

    Citation:

    Esty, Benjamin C., and Tara L. Nells. "USG Corporation." Harvard Business School Case 297-052, December 1996. (Revised July 1997.) View Details
  75. Note on Value Drivers

    Benjamin C. Esty

    Presents a framework for analyzing strategic decisions. Takes as given the practice of value-based management whereby managers use value as a primary criterion when making financial, strategic, or investment decisions. Through a simple valuation model, it shows how equity value is related to three value drivers profitability, advantage horizon, and reinvestment. Also presents a numerical example to illustrate the model as well as empirical evidence to support the relation between value creation and the value drivers.

    Keywords: Decisions; Equity; Financial Strategy; Investment; Profit; Framework; Growth Management; Value Creation;

    Citation:

    Esty, Benjamin C. "Note on Value Drivers." Harvard Business School Background Note 297-082, April 1997. View Details
  76. Service Corporation International

    Benjamin C. Esty and Craig F Schreiber

    The CFO of a high-growth company in the low-growth and fragmented funeral services industry must decide how to optimize capital structure and earnings growth while maximizing the company's market value.

    Keywords: Financial Management; Value Creation; Business Growth and Maturation; Consolidation; Industry Growth; Capital Structure; Expansion; Service Industry; United States; North and Central America;

    Citation:

    Esty, Benjamin C., and Craig F Schreiber. "Service Corporation International." Harvard Business School Case 296-080, March 1996. (Revised July 1996.) View Details
  77. Dividend Policy at FPL Group, Inc. (A)

    Benjamin C. Esty and Craig F Schreiber

    A Wall Street analyst has just learned that FPL (the holding company for Florida's largest electric utility) may cut its dividend in several days despite a 47-year streak of consecutive dividend increases. In response to the deregulation of the electric utility industry, FPL has substantially revised its competitive strategy over the past several years. The analyst must decide whether a change in dividend policy will be a part of FPL's financial strategy in this deregulated environment.

    Keywords: Investment Return; Corporate Strategy; Policy; Competitive Strategy; Financial Strategy; Fluctuation; Energy Sources; Emerging Markets; Utilities Industry; Energy Industry; Florida;

    Citation:

    Esty, Benjamin C., and Craig F Schreiber. "Dividend Policy at FPL Group, Inc. (A)." Harvard Business School Case 295-059, March 1995. (Revised December 1995.) View Details
  78. Shawmut National Corporation's Merger with Bank of Boston Corporation (A)

    Benjamin C. Esty

    Presents the merger negotiations between Bank of Boston (BOB) and Shawmut National Corp. (SNC), two of the country's largest bank holding companies and requires students to value BOB's current offer for SNC. Provides an overview of recent events and trends in the commercial banking industry including the rise of interstate mergers and bank failures.

    Keywords: Mergers and Acquisitions; Banks and Banking; Ethics; Negotiation; Valuation; Management; Banking Industry; United States;

    Citation:

    Esty, Benjamin C. "Shawmut National Corporation's Merger with Bank of Boston Corporation (A)." Harvard Business School Case 294-119, May 1994. (Revised November 1995.) View Details
  79. Dividend Policy at FPL Group, Inc. (B)

    Benjamin C. Esty and Craig F Schreiber

    FPL's dividend policy and the reaction of the financial markets are examined.

    Keywords: Earnings Management; Stocks; Financial Markets;

    Citation:

    Esty, Benjamin C., and Craig F Schreiber. "Dividend Policy at FPL Group, Inc. (B)." Harvard Business School Supplement 295-106, March 1995. (Revised November 1995.) View Details