Investments in Pinus elliottii Engelm. Plantations: Real Options Analysis in Discrete Time

Background: The commonly used methods for the financial evaluation of plantation forest investment projects do not incorporate uncertainties and ignore the value related to flexibility. The real options analysis makes it possible to capture these values in investment projects, increasing their value and return. Despite this, studies involving real options in forest investment projects are scarce, specifically those related to Pinus spp. Therefore, this study aimed to: (a) analyze whether the real options analysis adds value to investment projects of Pinus elliottii Engelm. plantations; and (b) make the real options analysis more accessible to forest managers and potentially increase its use in the investment projects of Pinus spp. plantations. Methods: We evaluated two investment projects in P. elliottii plantations in southern Brazil, which differed in the way of obtaining the land for planting: with lease or purchase of land on a planning horizon of 21 years. In the real options analysis, we used deferral, expansion, and abandonment. Results: Individually, the deferral, expansion, and abandonment options add value to investment projects in Pinus elliottii plantations. The option to expand the forested area is one that adds the most value to the investment project with land lease. In the investment project with land purchase, it is abandonment. Conclusions: Investment projects in Pinus elliotti plantations that contemplate the land purchase analyzed through the real options analysis present higher financial returns than those that consider land lease, inverting the result provided by the traditional analysis.

(Not So) Stranded: The Case of Coal in Poland

This paper provides an evaluation of the stranding risks of coal in Poland. Combining an industrial organization and financial analysis approach, we assess the current economic situation of companies operating within the coal industry and draft forecasts for the future. Based on the global economic outlook for coal, we claim that phasing-out coal will take at least two decades, due to the slow transformation of the energy sector and increasing energy demand. The financial evaluation of coal-dependent companies revealed sound financial conditions due to favorable trends in coal prices in international markets. Therefore, instead of prioritizing a rapid phasing-out of coal, we pledge to make more technological investments that would make burning coal less harmful for the planet and thus efficiently mitigate the negative effects of climate change.

Financial Evaluation of the Use of Reclaimed Water in Agriculture in Southeastern Spain, A Mediterranean Region

In a global context where agriculture is the major consumer of water, there is a pressing need to look for alternative water resources. In light of there being a lack of studies that compare the use of diverse water alternatives in different crops, the overall objective of this research is to evaluate the impact generated by the use of tertiary water from an economic and financial perspective and compare it with groundwater and desalinated water. To reach this objective, a detailed study of the cost structure of greenhouse investment has been developed. Furthermore, the most traditional indicators for investment profitability have been calculated for the three different water alternatives: tertiary water, groundwater and desalinated water. The cost analyses demonstrate the relative short reach that the price of water has in an area of greenhouse agriculture exploitation, which provides a margin of increasing water costs while still allowing for economic profit. Taking into account the three water resources considered, evidence shows that the use of tertiary water is not only financially and economically viable but is also the best alternative water resource above desalinated water in terms of profitability and sustainability.

A Staged Approach for Energy Retrofitting an Old Service Building: A Cost-Optimal Assessment

Office buildings built before the pre-1960 age constitute a relevant group for analyzing the energy performance of the Portuguese building sector. A dynamic energy simulation was used to assess the energy performance of an existing office building located in the town of Bragança, Portugal. By using a staged renovation approach, two passive technologies applied to the building envelope and an efficient domestic hot water system were selected and a financial evaluation through the net saving (NS) method was undertaken to choose the best efficiency measures/packages for improving the building’s energy performance. Real discount rates of 3% and 1% were used in the financial evaluation. Considering the real discount rate of 3%, the results showed that only two out seven retrofit options had a positive financial return. By using the real discount rate of 1%, all retrofit options were found to be financially efficient. The results of the study corroborated those of earlier works that found that the financial profitability of energy renovation investments is very sensitive to the discount rate used in the analysis. The results of the study also suggested that the staged renovation approach used in the analysis is economically feasible, and that this approach is an alternative to one-step renovation approach to help to achieve the country´s energy and climate targets by 2030. Suggestions for future research conducted for office buildings in the different climate zones and other age groups in Portugal are proposed.

Yield Curve And Its Impact On Discount Rates In The Financial Evaluation Of A Project- Application case in Argentina

This paper introduces some theories that attempt to explain the behavior of the “Temporary Structure of Interest Rates” (TSIR), which observe the correlation between various variables of the economy and projected interest rates, which will later serve as a reference for the determination of the discount rates of the projected flows in the economic-financial evaluation of a productive investment project. The empirical analysis focuses on evaluating the required returns on Sovereign Bonds issued in the Argentine Republic in dollar currency, which determine a yield curve that shows high levels of projected inflation expectations, such as high levels in the definition of rates discount of projected flows. Resumen El presente trabajo introduce algunas teorías que intentan explicar el comportamiento de la “Estructura Temporal de las Tasas de Interés” (ETTI), que observan la correlación entre diversas variables de la economía y las tasas de interés proyectadas, que servirá luego como referencia para la determinación de las tasas de descuentos de los flujos proyectados en la evaluación económico financiero de un proyecto de inversión productiva. El análisis empírico se centra en evaluar los rendimientos exigidos en los Bonos soberanos emitidos en la República Argentina en moneda dólar, que determinan una curva de rendimientos que pone en evidencia niveles altos de expectativas de inflación proyectada, como niveles altos en la definición de las tasas de descuento de los flujos proyectados.