PT - JOURNAL ARTICLE AU - Charles Tooman TI - Measuring Opportunity and Risk in Global Energy Investments AID - 10.3905/jsf.2004.62 DP - 2004 Apr 30 TA - The Journal of Structured Finance PG - 62--73 VI - 10 IP - 1 4099 - https://pm-research.com/content/10/1/62.short 4100 - https://pm-research.com/content/10/1/62.full AB - In the coming years, the most robust growth in demand for natural gas and electricity will come from the countries of the developing world, which will require enhancements to existing energy infrastructure, including distribution systems, plants, and generation facilities. International investment from U.S. multinational corporations has been, and will continue to be, a critical component of developing countries' ongoing economic liberalization, development, and sustained growth. Opportunities for targeted international investment undoubtedly will be a core component of many U.S. energy companies' overall strategic capital allocation programs going forward. Those companies will require consistent strategies for determining how best to allocate scarce capital among the universe of alternative international investment opportunities. In international energy, this requires a multifaceted financial analysis that includes derivation of a distribution of potential cash flows associated with the project and applying a discount rate that includes a measure of political risk. The impact of an ineffective investment assessment and capital allocation process is real and potentially adverse. A process that is too strict may result in under-investment, with companies effectively leaving returns “on the table,” while a process that is not strict enough may result in over-investment and the inability to generate returns sufficient to cover the cost of capital.