Investment Vehicles

Privatization has opened enormous opportunities for foreign investors. In overseas energy projects, companies which in the past had generally avoided equity commitments have now begun to take financial stakes in projects. Some of the world's major construction companies and electrical generation equipment companies have taken equity stakes (in lieu of payment for services) in power generation projects brought on by privatization, albeit these stakes, have generally amounted to a small share of the total capital commitment. Some commonly used means of taking direct stakes in newly-privatized foreign energy projects follow.

Independent Power Producers

Independent power producers are playing an important and growing role in providing for the world's future power generation needs. Independent power producers are generally producers of electricity that are separate from franchised electric utilities. In several cases, U.S. utilities have formed independent power-producing subsidiaries as a vehicle of entry into non-utility electricity generation investments, both in the United States and overseas. Other industries, such as oil companies and natural gas transmission companies, have also set up independent power-producing subsidiaries. Among U.S. companies, independent power producers have been among the most active in seeking overseas energy project investments.

Build, Operate, and Transfer Investments

One innovative financing method growing in popularity involves the building of a power plant by a foreign investor, operating it for a prescribed period of time, and then transferring it to the host company. This has been a popular means of encouraging foreign investment in power projects in underdeveloped and developing nations.

Joint Ventures

In several former Communist countries, along with a handful of Latin American countries, most foreign investment commitments have been restricted to a joint venture with a domestic company. In some cases, such as in Russia, the government has also allowed foreign companies to purchase a limited stake in domestic petroleum companies.