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Financing renewable energy: La Esperanza Hydroelectric Project

Mauricio Jenkins (INCAE Business School, Alajuela, Costa Rica)
Leo Miguel Guevara (INCAE Business School, Alajuela, Costa Rica)

Management Decision

ISSN: 0025-1747

Article publication date: 14 October 2014




This is a teaching case to be used in courses on funding and execution of renewable-energy projects, sustainable development, project finance or management of financial institutions. The case has been successfully used in courses at the graduate level as well as in executive education. The purpose of this paper is to achieve the following specific objectives. First, to illustrate the adjusted present value (APV) methodology to value investment projects in a project finance setting. Second, to show how APV methodologies can be used to value investment projects with subsidized financing and temporary fiscal incentives. Third, to understand how financial institutions use debt service coverage ratios to measure the capacity of projects to repay debt obligations.


The primary source of information for the study case came from in-depth interviews with senior officials from E+Co and project sponsors. Documents from E+Co's loan approval process and investment committee minutes were also consulted. Also a site visit was performed.


The case is quite interesting along several dimensions. To begin with the case deals with an important (and somewhat difficult decision) the general manager of a financial institution has to make. From a technical point of view, the case involves an APV analysis and requires the estimation of the value added (or destroyed) by several collateral effects of debt in the capital structure of the project (something seldom treated in formal courses or standard finance textbooks). In addition, even though standard financial analysis would probably have led to select on alternative course of action, the authors know the protagonist of the case actually decided to do something different based on an additional analysis (a nice postscript for the case, therefore).

Research limitations/implications

Been a case study, the findings may be quite particular of the particular situation and context. However, the case provides good insight into the difficulties and problems entrepreneurs face in developing economies as well as in funding small renewable energy projects around the world.

Practical implications

The case provides a number of important lessons and learning opportunities for sponsors of renewable energy power projects and managers of financial institutions.


Please refer to the findings section above.



Jenkins, M. and Miguel Guevara, L. (2014), "Financing renewable energy: La Esperanza Hydroelectric Project", Management Decision, Vol. 52 No. 9, pp. 1724-1749.



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