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  • January 2001 (Revised May 2010)
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BP Amoco (A): Policy Statement on the Use of Project Finance

By: Benjamin C. Esty and Michael Kane
  • Format:Print
  • | Pages:19
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Abstract

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.)
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About The Author

Benjamin C. Esty

Finance
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Related Work

    • January 2001 (Revised May 2010)
    • Faculty Research

    BP Amoco (B): Financing Development of the Caspian Oil Fields

    By: Benjamin C. Esty and Michael Kane
Related Work
  • BP Amoco (B): Financing Development of the Caspian Oil Fields By: Benjamin C. Esty and Michael Kane
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