Glycosidic Bond Definition and Examples

A glycosidic bond is a covalent bond that joins a carbohydrate to another functional group or molecule. A substance containing a glycosidic bond is termed a glycoside. Glycosides may be categorized according to elements involved in the chemical bond. Glycosidic Bond Example An N-glycosidic bond connects the adenine and ribose in the molecule adenosine. The bond is drawn as a vertical line between the carbohydrate and the adenine. O-, N-, S-, and C-glycosidic Bonds Glycosidic bonds are labeled according to the identity of the atom on the second carbohydrate or the functional group. The bond formed between the hemiacetal or hemiketal on the first carbohydrate and the hydroxyl group on the second molecule is an O-glycosidic bond. There are also N-, S-, and C-glycosidic bonds. Covalent bonds between the hemiacetal or hemiketal to  -SR form thioglycosides. If the bond is to SeR, then selenoglycosides form. Bonds to -NR1R2 are N-glycosides. Bonds to -CR1R2R3 are termed C-glycosides. The term aglycone refers to any compound ROH from which a carbohydrate residue has been removed, while the carbohydrate residue may be referred to as the glycone. These terms are most commonly applied to naturally occurring glycosides. ÃŽ ±-  and  ÃŽ ²-glycosidic Bonds The orientation of the bond may be noted, too.  ÃŽ ±-  and  ÃŽ ²-glycosidic bonds are based on the  stereocenter furthest from saccharide C1.  An ÃŽ ±-glycosidic bond occurs when both carbons share the same stereochemistry. Î’-glycosidic bond forms when the two carbons have different stereochemistry.

Dam and Damn - Commonly Confused Words

The words dam and damn are homophones: they sound the same but have different meanings.The noun dam refers to a barrier that holds back water. As a verb, dam means to hold back or confine. As a verb, damn means to criticize or to condemn as bad or inferior. As an interjection, damn is used to express anger, frustration, or disappointment. As an adjective, damn serves as a shorted form of damned. Examples Are you that little Dutch  boy with the finger in the dam trying to prevent the wall from coming down and the water from flooding your valley?  (Jeanette C. Morgan, The Voice That Must Be Heard. Tate, 2010)The Boers were unsuccessful in their efforts to dam up the Klip River in order to flood the town.Damn them, he cursed inwardly, years of bitter resentment welling up inside him. Damn them for laughing, damn the driver for swearing at him! Damn the whole town.(James Herbert, The Fog. Pan Macmillan, 1999) Practice The man could be concealing the fact that his stones were enchanted by black magic, helping to _____ the person who used them.  (Piers Anthony, On a Pale Horse. Del Rey Books, 1983)Waves were crashing against the _____ in front of us, and we were drenched by the wild spray.There was a treaty that said the Indians could always fish the falls. But the government wanted to build a _____ to generate electricity for the cities and store water for the farmers.  (Craig Lesley, Winterkill. Houghton Mifflin, 1984) Answers to Practice Exercises The man could be concealing the fact that his stones were enchanted by black magic, helping to  damn  the person who used them. (Piers Anthony,  On a Pale Horse.  Del Rey Books, 1983)Waves were crashing against the  dam  in front of us, and we were drenched by the wild spray.There was a treaty that said the Indians could always fish the falls. But the government wanted to build a  dam  to generate electricity for the cities and store water for the farmers.   (Craig Lesley,  Winterkill. Houghton Mifflin, 1984)

Quotes From Hemingways The Sun Also Rises

The Sun Also Rises brought Ernest Hemingway fame and fortune. The novel became one of the most well-known books of the lost generation. The story was largely based on the lives of Hemingway and his friends in Paris following World War I. Here are a few quotes from this famous book by Ernest Hemingway. Quotes From the Epigraph Through Chapter Five of The Sun Also Rises You are all a lost generation. I rather liked him and evidently she led him quite a life. Nobody ever lives their life all the way up except bull-fighters. Listen, Robert, going to another country doesnt make any difference. Ive tried all that. You cant get away from yourself by moving from one place to another. Theres nothing to that. This was Brett that I had felt like crying about. Then I thought of her walking up the street and stepping into the car, as I had last seen her, and of course in a little while I felt like hell again. It is awfully easy to be hard-boiled about everything in the daytime, but at night is another thing. Quotes From Chapter Six Through Chapter Ten of The Sun Also Rises Youre not a moron. Youre only a case of arrested development. Dont have scenes with your young ladies. Try not to. Because you cant have scenes without crying, and then you pity yourself so much you cant remember what the other persons said. We all ought to make sacrifices for literature. Look at me. Im going to England without a protest. All for literature. [S]he took great pride in telling me which of my guests were well brought up, which were of good family, who were sportsmen, a French word pronounced with the accent on the men. The only trouble was that people who did not fall into any of those three categories were very liable to be told there was no one home, chez Barnes. This wine is too good for toast-drinking, my dear. You dont want to mix emotions up with a wine like that. You lose the taste. I was a little ashamed, and regretted that I was such a rotten Catholic, but realized there was nothing I could do about it, at least for a while, and maybe never, but that anyway it was a grand religion, and I only wished I felt religious and maybe I would the next time. I have never seen a man in civil life as nervous as Robert Cohn--nor as eager. I was enjoying it. It was lousy to enjoy it, but I felt lousy. Cohn had a wonderful quality of bringing out the worst in anybody. I was blind, unforgivingly jealous of what had happened to him. The fact that I took it as a matter of course did not alter that any. I certainly did hate him. Quotes From Chapter Eleven Through Chapter Nineteen of The Sun Also Rises Youre an expatriate. Youve lost touch with the soil. You get precious. Fake European standards have ruined you. You drink yourself to death. You become obsessed by sex. You spend all your time talking, not working. You are an expatriate, see. You hang around cafà ©s. For one who had aficion he could forgive anything. At once he forgave me all my friends. Without his ever saying anything they were simply a little something shameful between us, like the spilling open of the horses in bull-fighting. It was like certain dinners I remember from the war. There was much wine, an ignored tension, and a feeling of things coming that you could not prevent happening. Under the wine I lost the disgusted feeling and was happy. It seemed they were all such nice people. I thought I had paid for everything. Not like the woman pays and pays and pays. No idea of retribution or punishment. Just exchange of values. You gave something up and got something else. Or you worked for something. You paid some way for everything that was any good. Enjoying living was learning to get your moneys worth and knowing when you had it. That was morality; things that made you disgusted afterward. No, that must be immorality. The things that happened could only have happened during a fiesta. Everything became quite unreal finally and it seemed as though nothing could have any consequences. It seemed out of place to think of consequences during the fiesta. I hate his damned suffering. Oh, darling, please stay by me. Please stay by me and see me through this. In  bull-fighting  they speak of the terrain of the bull and the terrain of the bull-fighter. As long as a bull-fighter stays in his own terrain he is comparatively safe. Each time he enters into the terrain of the bull he is in great danger. Belmonte, in his best days, worked always in the terrain of the bull. This way he gave the sensation of coming tragedy. Because he did not look up to ask if it pleased he did it all for himself inside, and it strengthened him, and yet he did it for her, too. But he did not do it for her at any loss to himself. That seemed to handle it. That was it. Send a girl off with one man. Introduce her to another to go off with him. Now go and bring her back. And sign the wire with love. That was it all right. [T]he  end  of the line. All trains finish there. They dont go on anywhere. You know it makes one feel rather good deciding not to be a bitch. Isnt it pretty to think so?

The Hitchhikers Guild Of The Galaxy - 2606 Words

The Hitchhikers Guild to The Galaxy follows Arthur Dent, an earthling, paired with his alien friend Ford Prefect. The two manages to escape the earth before it is demolished to build an intergalactic freeway and set upon their journey. Hitching a ride on a Vogon spaceship the two start their adventure. Unfortunately, the Vogons don t like hitchhikers, so Arthur and Ford get thrown out of the spaceship to die in the cold void of interstellar space, where not even Starbucks exists. Meanwhile, Ford s semi-cousin Zaphod Beeblebrox and his human companion Trillian steal the Heart of Gold spaceship, which has an amazing engine that can do all sorts of improbable things, such as get through LA without dealing with traffic. Also on the spaceship†¦show more content†¦Where both films suggest that the Hero’s act upon their own freewill; true freewill does not exist but is a synthesis constructed by the ego of their companion character. This creates justifications for any crime or action taken by the Hero characters as they act in â€Å"the name of justice† and believe they are acting freely. Both the Hitchhikers Guild to The Galaxy and The Matrix has Myth Criticism complexes in nature. They follow a hero that must fulfill a quest to discover himself and woo a female interest. In either case the universality of their stories are evident as they are conflicted by the same dilemmas. Carl Jung suggests that regardless of culture or historical period a part of the human mind contains a collective unconscious shared by all members of the human species, a sort of universal, primal memory. Myth Criticism considers this within its teachings by explaining that all stories follow a universal trend called the Hero Cycle. Within this cycle the hero of the story follows each of the steps to fulfilling his/her task. Along with the Hero Cycle, Myth Criticism explains there are archetypes found in each piece of literature or art that are universal in nature. Overall, it is found that the Myth Criticism base is used frequently as we as humans find solace in the comforts of the Cycle, as it is familiar to us. In The Hitchhikers Guild to The Galaxy, the Hero is portrayed as Arthur Dent. He is set into this role at the

Mentoring Relationships An Analysis Free Essays

Mentoring is defined as a form of teaching where one guides without leading and basically teaches by example. In essence, it’s about helping to learn how to achieve something. Mentoring can be applied to a variety of fields and specialties, including business, the academe, healthcare, and government. We will write a custom essay sample on Mentoring Relationships: An Analysis or any similar topic only for you Order Now For this case study, the focal point of interest as to learning experiences in mentoring will be Dr. Rachel Lindsay. It can be said that Dr. Lindsay has had many different types of mentoring relationships in the course of her professional career. Currently a professor of nursing, her original intent was to be a physician. However, her first mentor became responsible for altering this course of action. This mentor is none other than her own mother, who happened to be a nurse as well. The influence her mother had played a large role in her decision to become a nurse instead, after seeing the work her mother did and eventually becoming comfortable with it. The next major mentoring relationship she had afterwards was when she became a nurse consultant to a dentist who worked with chronically ill people. Her work with the dentist allowed her to gain an intimate perspective of the lives of the chronically ill and affected. Subconsciously, her experiences laid the foundation for her even deeper concern for the welfare of others, especially after being party to the various sufferings and vulnerabilities of the patients who came while she was under the tutelage of the dentist. However, while her experiences thus far with the mentoring process had been successful and beneficial towards her overall development as an individual, there were also times when the system let her down. When given the task of having to deliver a course for nurses who work in nursing homes, Dr. Lindsay immediately discovered a problem with the course in question. Hoping to rectify the situation, she approached her dean, whom she looked up to, in the hopes of him becoming her mentor and help her revise the course to make it a better one. Unfortunately, the dean did not honor this request and only disappointed her. This became her first experience at being let down by a possible mentor in her life. This was further proven when she discussed her career plans, only to find that he was against nurses with advanced degrees. Disillusioned, Dr. Lindsay turned to a nurse practitioner only to be disappointed again; her new mentor only seemed content with discussing procedural knowledge but not abstract changes. These happenings turned out to be for the better however because it signaled her return to the hospital setting, where she would later handle staff development classes and meet another mentor in her life, Bob the HR director. Under him, she learned many new things, not just about the profession itself, but with dealing with others and outside pressures as well. It would not be long before she became satisfied enough to move on to another job. Dr. Lindsay eventually ended up in the academe, where another mentor emerged in the form of her division chair. Just like her other mentors, this one did not seem threatened or impressed that much with her degrees or experience, thus their working relationship became very good indeed. This relationship would soon be tested because of a case of plagiarism of one of Dr. Lindsay’s students, and it can be said that neither Dr. Lindsay nor the subject chair in question saw eye to eye on how best to treat the student. In summary, after all her experiences with different mentors, Dr. Lindsay’s mentoring tool kit should include the knowledge she has gained through her many years in formal education, plus the knowledge she gained through her various experiences. This, combined with the many years she spent under various mentors will help her to become the most effective mentor possible. References Gibson, S. K. (2004). Being mentored: The experience of women faculty. Journal of Career Development, 30(3), 173-188. Stewart, B., Krueger, L. (1996). An evolutionary concept analysis of mentoring in nursing. Journal of Professional Nursing, 12, 311-321. Veenman, S., Denessen, E. (2001). The coaching of teachers: Results of five training studies. Educational Research and Eva How to cite Mentoring Relationships: An Analysis, Essay examples

Policy Statement free essay sample

The British Petroleum Company p. l. c. (BP) and Amoco Corporation (Amoco) had a long history of competitive encounters. This rivalry continued into the 1990s in a variety of locations ranging from the United States to the North Sea to, more recently, the Caspian Sea—a region that had opened up to exploration by Western oil companies following the breakup of the Soviet Union in 1991. In describing this rivalry, one analyst wrote: Azerbaijan was an early battleground for BP and Amoco as these two companies competed for the oil riches of this newly independent country. During the period from 1990 until 1994, BP and Amoco were the two major players in the Azerbaijan oil rush. This competition extended to their respective governments, each of which was trying to support its country’s commercial interests via BP and Amoco. 1 Despite their historic rivalry, BP and Amoco agreed to a $48 billion merger in August 1998. Following shareholder approvals in December, they began the process of integration, which involved placement decisions for hundreds of executives and creation of a new organizational structure. Within the Finance Group, BP’s John Buchanan and David Watson retained their positions as chief financial officer and treasurer, respectively. Bill Young, a 20-year Amoco veteran, became head of a unit known as Specialized Finance with responsibility for advising the company’s business units on project structuring, project finance, leasing, and other asset-backed transactions. Shortly after the merger, in March 1999, Da vid Watson asked Bill Young to prepare a recommendation on when and in what circumstances the firm should use external project finance instead of its own internal, corporate funds to finance new investments. One challenging aspect of this assignment was the perception that BP and Amoco had somewhat different philosophies regarding project finance. To some observers, particularly those outside the firm, Amoco was viewed as more willing to use project finance than BP. Young isagreed with this characterization, though he acknowledged that he had little information on BP’s financial policies prior to the merger. Only well-capitalized firms that are big enough to afford the time, money, and risk required to play in this poker game can hope to thrive. Because the stakes are so high, finding that â€Å"elephant† of an oilfield has become the industry’s obsession. 3 Besides the need for scale, analysts cited potential cost savings of $2 billion annually and complementary commercial strengths—BP in upstream operations and Amoco in downstream operations—as reasons for the merger. In addition, executives highlighted â€Å"sustainable long-term growth† and â€Å"strongly competitive returns† as corporate objectives. In terms of financial polices, they said the new firm would have a target debt-to-capitalization ratio of 30% and a target pay-out ratio of 50% of mid-cycle earnings. 5 As a result of the merger, BP Amoco became one of the world’s three â€Å"super-majors† along with Exxon and Shell (see Ex hibit 3). Integrating the Finance Group Shortly after consummating the merger, management began the process of integrating the two companies. Both companies had highly centralized finance functions, although BP did have regional finance offices in Asia and the United States. Both companies also tended to separate investment and financing decisions, and had organizational structures that reflected this approach. The business units valued proposed investments using the corporate weighted-average cost of capital (WACC), while the Finance Group determined the best way to finance proposed investments and executed approved transactions. Management decided to retain the centralized finance structure because it provided better cash management, risk management, and financial execution. One of the perceived disadvantages of this centralized structure was that decisions impacting financing opportunities were often made at a business unit level before the Finance Group had an opportunity to provide input, thereby creating on occasion the potential for missed opportunities and sub-optimal financing solutions. Given this structure, the Finance Group had two distinct groups of customers for its services, the business units and senior management/shareholders. To achieve the benefits of centralization without creating too much of an information gap between the business units and the Finance Group, management retained BP’s central office in London to service the business units in Europe, Africa, the Middle East, and the Former Soviet Union. BP’s existing office in Singapore would provide financial services and support for business units in Asia/Pacific while the U. S. -based finance staffs were consolidated in Amoco’s Chicago headquarters with responsibility for supporting business units in the Americas. CFO John Buchanan and Treasurer David Watson ran the Finance Group, which consisted of three major divisions (Exhibit 4 shows the organization chart for the new Finance Group). Treasury Operations handled cash management, including short-term debt. Corporate Services managed all debt and equity at the parent level, as well as shareholder relations. Business Services had five major responsibilities: financial skills 3 This document is authorized for use only by Ashok Kumar Malhotra until August 2012. Copying or posting is an infringement of copyright. [emailprotected] harvard. edu or 617. 783. 7860. 201-054 BP Amoco (A): Policy Statement on the Use of Project Finance (training), business insurance, financial engineering, banking projects, and specialized finance. Bill Young, head of Specialized Finance, led a team of nine finance professionals based in London. Similar teams existed in Singapore and Chicago. All maintained close contact with the business units in the geographic areas and helped shepherd transactions through the headquarters approval process, financial negotiation, and closing. The Assignment As part of the integration process, David Watson asked Bill Young to review existing policy and recommend when and in what circumstances the firm should use project finance to fund new capital investments. Young knew this request was not just a matter of intellectual curiosity because the company invested heavily in fixed assets. In fact, BP and Amoco together had spent more than $10 billion per year on capital expenditures in each of the last three years. Expenditures of this magnitude were common among the major oil companies because their key assets, oil and gas reserves, were continually depleting (see Exhibit 5). By one estimate, total capital spending on exploration and development for the entire industry could reach $1. 4 trillion in the decade leading up to 2005. 6 This assignment was also important because project finance was a well-established financial structure in the oil and gas industry, and many firms had used it successfully in the past. Knowing the importance of the assignment, Young sought assistance from Mike Wrenn from the America’s Finance Group in Chicago and Adam Wilson from Specialized Finance Group in London (see Exhibit 4). The team began by defining project finance: Project finance is the financing of a project which is arranged in such a way that lenders are totally reliant on the assets and cash flows of that project for interest and loan repayment, as opposed to â€Å"corporate finance,† where the lenders are not reliant upon any one project and can rely on the cash flows and financial strength of the entire corporate entity. While this definition was not perfect, because there was often some form of partial or temporary recourse to the project’s sponsors such as a completion guarantee, it captured the critical distinction between corporate finance and project finance. Exhibit 6A presents a typical corporate transaction while Exhibits 6B and 6C present possible project finance structures. Exhibit 6B shows an incorporated joint venture, which was more common in petrochemical and power projects. The unincorporated joint venture structure shown in Exhibit 6C was more common for BP Amoco’s upstream businesses (i. . exploration and production projects). Under the project finance structure, a special purpose entity with limited liability borrowed funds directly and pledged its assets and cash flows to support the loan. With few exceptions, the lenders had no recourse to the project’s beneficial owners, often called sponsors. The use of internal funds, on the other hand, implied the use of the corporation’s balance sheet to obtain the debt and equity needed to finance its share of a project. It also implied that all corporate assets and cash flows could be used to repay debt. The next step in the process was to limit the scope of the assignment by considering the types of investments that could utilize project finance. Although BP Amoco could use project finance in any of its divisions, it used project finance most frequently in the downstream businesses, particularly for petrochemical plants and power generating facilities. Project finance was more often appropriate for power plants because they were discrete, non-core assets; had, at least historically, cash inflows and outflows set by long-term contracts; and had lenders familiar with project finance. According to Adam Wilson: This document is authorized for use only by Ashok Kumar Malhotra until August 2012. Copying or posting is an infringement of copyright. [emailprotected] harvard. edu or 617. 783. 7860. BP Amoco (A): Policy Statement on the Use of Project Finance 201-054 The market expects developers to use project finance for power projects, and you can’t underestimate the importance of pr ecedent. The existence of investor clienteles familiar with power plants tends to improve their valuation. The project finance structure also facilitates a sell-down of our position if and when we choose to do so. With regard to the upstream businesses, the focus would be on production rather than exploration assets because banks were reluctant to lend on a project basis until reserves were proven and capable of production. After defining project finance and bounding the scope of their assignment, the team conducted a series of meetings with executives from both organizations to understand their positions on project finance. Historically, BP had used project finance only sparingly based on a belief that the disadvantages in terms of costs, time, and rigidity outweighed the advantages in terms of risk management. Young’s interviews led him to believe this position remained an accurate assessment of the views held by most BP executives. BP executives recalled only limited applications of project financing in recent memory. Examples included the financing of the North Sea Forties Field in the early 1970s. This deal, however, was more of a corporate financing because BP remained obligated to the lenders for all interest and principal, but could use the project financing structure as a tool for reshaping debt repayment obligations in line with project economic performance. Another example was the Kaltim Prima Coal Mine project in Indonesia. Here BP chose to use project finance as a way to manage Indonesian exposure. More recently, BP, as the operator of the Cusiana and Cupiagua oil fields in Colombia, had worked with partners to create a financial structure that facilitated project financing for the export pipeline. Ecopetrol, the state oil company, and some of the other sponsors, subsequently used this structure to raise project funds for the pipeline. BP, nevertheless, chose to fund its share of the pipeline using internal funds. According to Young, Amoco also preferred corporate finance even though it had used project finance on occasion. In the early 1980s, Amoco used project finance for the $1 billion Ok Tedi gold and copper mine in Papua New Guinea. It also used project finance for a variety of international joint ventures in the petrochemicals industry to accommodate partners who were unable to finance their shares through corporate borrowings. More recently, Amoco and others had financed the $1 billion Atlantic Liquified Natural Gas (LNG) plant in Trinidad and Tobago on a project basis because certain critical partners did not want to have such a large investment on their balance sheets. In contrast, Amoco, which was investing $600 million of internal funds to develop the offshore gas fields that would eventually supply the plant with natural gas, was prepared to finance its share of the LNG plant entirely with internal funds. The Atlantic LNG financing was widely syndicated in the bank loan market, and perhaps this fact accounted for the perception that Amoco was an advocate of project finance. The New Policy Statement on Project Finance Following these meetings, the team concluded that BP and Amoco shared a common preference for using internal funds to finance capital expenditures, and that the combined firm should prefer internal funds as well. To justify this recommendation, the team carefully assessed the costs and benefits of using project finance they had discussed with their colleagues. This document is authorized for use only by Ashok Kumar Malhotra until August 2012. Copying or posting is an infringement of copyright. [emailprotected] harvard. edu or 617. 783. 7860. 201-054 BP Amoco (A): Policy Statement on the Use of Project Finance The Costs of Using Project Finance When asked to describe the merits of project finance, Bill Young jokingly replied, â€Å"The only people who prefer project finance are the ones who’ve never done a deal using project finance. Without much hesitation, he cited four disadvantages of project finance: it cost more, took longer to arrange, restricted managerial flexibility, and required greater disclosure. To begin with, non-recourse project debt cost more than otherwise equivalent corporate debt due in part to greater risk and in part to greater leverage. Lenders typically demanded up-front fees ranging from 50 to 200 basis points of the amount financed and interest rate spreads ranging from 100 to 400 basis points over LIBOR de pending on project type, location, and maturity. In contrast, BP Amoco would expect to pay slightly less than LIBOR for short-term borrowings under bank lines or through commercial paper programs, or 80 to 120 basis points over equivalent maturity treasuries for long-term, fixed-rate bonds (including fees). The ability to raise cheaper corporate funds was the direct result of having a strong balance sheet and lots of excess debt capacity. Prior to the merger, BP and Amoco had senior unsecured debt ratings of AA and AAA, respectively. Besides the direct financial costs, project finance involved substantial third-party costs. Financial advisors, selected to help structure the financing, charged advisory fees on the order of 50 to 100 basis points of the amount eventually raised. Sponsors also had to pay for engineering reports certifying the quality of project design, the feasibility of the project schedule, and, in the case of oil and gas projects, the existence of hydrocarbon reserves. In addition, they had to pay legal fees incurred in structuring operating contracts and crafting loan documentation. While some of these costs would also be incurred in a corporate deal, the incremental cost associated with project finance could add an additional 100 basis points or more in fees, according to Mike Wrenn. Structuring a project-financed deal, particularly a multi-party deal, took considerably longer than structuring a comparable corporate-financed deal. Decisions that could be made internally in a matter of days by only a handful of people, took significantly longer in a project-financed deal because more independent parties were involved in the process. Adam Wilson estimated that using project finance added a minimum of our to six months to a deal, and considerably more if one of the multilateral lending agencies was involved. Incremental time not only reduced a project’s NPV, it could also result in a missed opportunity. A third disadvantage of project finance was the loss of managerial flexibility. The loan documentation imposed an extensive set of operating and reporting r equirements on borrowers. These provisions restricted the sponsors’ ability to change design, admit new partners, dispose of assets, or respond to any number of contingencies that invariably arose over the course of a project’s life. As Young put it, â€Å"I think of corporate finance as a way to avoid the inflexibility associated with project finance. When you sign a project finance deal, you have to live with a giant stack of documents full of provisions that hinder your ability to respond to a changing environment. † A final factor weighing against the use of project finance was the occasional need to disclose proprietary information to lenders. For example, there could be tax or royalty reductions, or commitments to ancillary infrastructure investments intended to support the project that neither the owners nor the host governments wanted in the public domain. Yet lenders needed this information to make credit decisions. Depending on the size of the deal, there could be scores of lenders involved, many of whom would have banking relations with BP Amoco’s competitors. Despite the use of confidentiality agreements, the potential for leakage was troublesome. 6 This document is authorized for use only by Ashok Kumar Malhotra until August 2012. Copying or posting is an infringement of copyright. [emailprotected] harvard. edu or 617. 783. 7860. BP Amoco (A): Policy Statement on the Use of Project Finance 01-054 The Benefits of Using Project Finance The basic assumption behind the team’s analysis was that BP Amoco was a portfolio of exploration, development, refining, and marketing assets. With less than perfect correlation among its various assets, it was able to eliminate idiosyncratic risks through diversification. Because it was particularly skilled at assessing business risks, had a strong balance sheet, and had a vertically in tegrated business model, it was more efficient to hold the assets collectively than individually. However, there might be instances in which it made sense to finance investments individually on a project basis. In these instances, project finance created value by improving risk management. Whereas risk management could take several forms—risk sharing, direct risk reduction, hedging (reducing a risk by giving up the opportunity for a gain), and insurance (reducing a risk by paying a premium)—the benefits were typically associated with risk sharing and risk reduction. In terms of risk sharing, the project structure limited BP’s exposure to downside risk. In essence, BP exchanged downside exposure for a price in the form of higher interest rates and loan fees. According to Wilson, using project finance was tantamount to buying a â€Å"walk-away† or put option for the project. Exhibit 7 presents this framework: the combination of holding an underlying asset (a project) and buying a put option on that asset created a payoff function that resembled a call option on the underlying asset. When BP Amoco used corporate finance, the firm was exposed to the full range of outcomes (NPVs); when it used project finance, it sacrificed some of the upside in exchange for truncating the downside. Such downside protection could be extremely valuable in certain settings. Whether the benefits of risk sharing outweighed the incremental structuring costs was the real question. In deciding whether to make this exchange, BP had to consider both the price of the walk-away option and its willingness to exercise the option. For investments in its core businesses, BP was better equipped than most lenders to assess and bear the risks. As a result, it was not likely to get favorable, or even fair, pricing on the put option. Unlike a financial option with continuous prices, the downside scenarios in the investment business tended to be discrete events with highly uncertain, if not unknown, distributions. In these instances, history did not give you a good indication of the magnitude of potential losses or the probability of occurrence. Valuing such an option was not easy, and even informed parties could disagree on how much it was worth. The value of the walk-away option also depended on BP Amoco’s ability and willingness to exercise it. Prior to project completion, the ability to walk away from a loan could be constrained by support obligations and completion guarantees. Only after an independent third party certified completion, usually defined in terms of both financial and operational characteristics, did the loan become non-recourse to the sponsors. Although BP Amoco could walk away at this point, it might be reluctant to do so for several reasons. For example, it might not be wise to abandon a project that was an integral part of a larger development, thereby turning over a key asset to a bank group. Alternatively, a sponsor might be reluctant to abandon a proprietary asset. Would the Walt Disney Company really abandon a theme park and let project lenders control Mickey Mouse and other Magic Kingdom characters? Finally, default could tarnish the firm’s reputation and jeopardize important relationships with host governments, international agencies, and bankers. Such actions could preclude the firm’s ability to gain access to or finance future projects. To the extent BP was either unwilling or unable to walk away, the put option had no value. In addition to risk sharing, project finance had other benefits even though Young believed most of them were illusory or non-existent, at least for BP Amoco. Five such benefits came to mind. Some argued that project debt, particularly when accounting rules did not require project assets or liabilities to appear on the sponsor’s balance sheet, expanded a firm’s debt capacity. Of course, this 7 This document is authorized for use only by Ashok Kumar Malhotra until August 2012. Copying or posting is an infringement of copyright. [emailprotected] harvard. edu or 617. 783. 7860. 201-054 BP Amoco (A): Policy Statement on the Use of Project Finance assertion was true only to the extent that investors and rating agency analysts did not â€Å"see through† the financial statements and recognize continuing obligations to pay. Another supposed benefit of project finance was that it generated additional interest tax shields because projects had a igher leverage ratios than sponsoring firms: the typical project had a debt-tovalue ratio of 70% compared to 30% for a firm like BP Amoco. The difference in leverage existed, in part, because firms, but not projects, needed the flexibility and excess debt capacity to invest whenever attractive opportunities arose. Yet BP Amoco viewed its investments and payment obligations on a consolidated basis even if they were pro ject financed. Thus, the decision to finance a given asset with 70% debt simply displaced corporate borrowing capacity. As a result, the total amount of debt did not depend on particular financial structures. Besides, equivalent debt tax shield benefits could be obtained by careful choice of project ownership vehicles and intra group financing structures. In those instances where the firm could take on more leverage using the project finance structure, the incremental interest expense (and potential distress costs) usually outweighed the incremental interest tax shields, which meant that using project finance could reduce firm value. That said, there were other debt-related factors such as tax arbitrage, risk transfer, or managerial incentives that could easily off-set the benefits of incremental interest tax shields. Third, there might be tax benefits associated with reduced rates or tax â€Å"holidays† that made particular transactions attractive—host governments were often more willing to make one-off concessions to project companies than to make full-scale policy changes. Yet these benefits usually had a greater influence on site selection than on the choice between corporate and project finance. Fourth, some argued that the project resulted in better risk allocation among the various parties to a deal. This argument rested on the assumption that you could not replicate or get pricing credit for the same allocation of responsibilities in a corporate-financed deal. Except for political risk—one of the key exceptions discussed below—this assumption appeared untrue. For example, BP could sign a fixed-price, turnkey construction contract, thereby transferring completion risk to an experienced contractor, regardless of how it financed the deal. Finally, some firms used project finance for high-risk projects such as first-time investments in new industries, markets, or technologies. Here, project finance created value by introducing an added level of discipline to the process and by providing access to partners with greater or different previous experience. With the exception of investments in new countries, this rationale was not a major consideration for BP Amoco. Instead, it relied on its accumulated experience and largely restricted its investments to core assets, thereby limiting the technological and markets risks associated with new projects. The Exceptions Based on the team’s assessment of these costs and benefits, they were recommending that BP Amoco use internal corporate funds to finance new projects except in three very particular circumstances: 1) mega projects; 2) projects in politically volatile areas; and 3) joint ventures with heterogeneous partners. While other companies might weigh the costs and benefits differently and, therefore, reach different conclusions, the costs clearly outweighed the benefits in most situations for BP Amoco. This document is authorized for use only by Ashok Kumar Malhotra until August 2012. Copying or posting is an infringement of copyright. [emailprotected] harvard. edu or 617. 783. 7860. BP Amoco (A): Policy Statement on the Use of Project Finance 201-054 Exception #1: Mega Projects Mega projects were those that were large enough to cause â€Å"material† harm to the company’s earnings, debt rating, and, in the extreme, survival. Quantifying material harm was not easy to do. Instead, it was a more qualitative concept. Wilson defined mega as the size â€Å"†¦where senior management begins to feel uncomfortable about the size a nd the level of risk. † Prior to the merger, Amoco viewed investments of $2 billion and up as potential candidates for project finance; executives from BP estimated the number at closer to $3 billion. The key issue here was one of relative size and the firm’s ability to hold a diversified portfolio, a concept that would surely change following the merger. In deciding whether a project qualified as mega, it was important to define it correctly. Many oil and gas developments proceeded in phases over several years. Whereas the first phase might not exceed a given threshold, the total investment across all phases could. In the event BP Amoco elected to use project finance, it would require a much smaller and more diversifiable investment (compare the $400 million investment in Exhibits 6A to the $160 million investment in Exhibits 6B and 6C). Exception #2: Projects in Politically Volatile Areas Projects exposed to a high degree of political risk, broadly defined as war, strikes, sabotage, lack of property rights, direct or â€Å"creeping† expropriation, or currency inconvertibility, were candidates for project finance because they benefited from the presence of outside lenders. The logic was that host governments would be less likely to take or tolerate hostile action against the project because such action could jeopardize access to future credit from the international financial community. In the most risky countries, commercial lenders would not even consider lending unless one of the multilateral lending agencies (MLA’s) or an Export Credit Agency (ECA) was involved in the deal. Given their roles as development lenders and as lenders of last resort to highly-indebted countries, MLAs such as World Bank Group, the European Bank for Reconstruction and Development (EBRD), and the Asian Development Bank (ADB) helped deter sovereign interference. Thus, they reduced the level of risk by reducing the probability of default. For this reason, MLA participation was said to confer a â€Å"halo effect† on projects. Even in high-risk countries, however, relative size remained a critical factor in deciding whether to use project finance. According to Adam Wilson: The threshold for what constitutes mega in the United States or Cana da is much higher than the threshold in an emerging country. For big projects in developed countries, we would prefer to use internal funds or to share the project with a wellcapitalized partner before using use project finance. At the same time, we would prefer to finance small and medium-sized projects in even the riskiest places using our own corporate funds. The problem with using project finance was that outside lenders often required some form of political risk insurance (PRI), and the market for PRI in high-risk markets was very thin. As a result, it was expensive to buy, which created another factor arguing against the use of project finance. Exception #3: Joint Ventures with Heterogeneous Partners In certain joint ventures, BP Amoco might find it necessary to use project finance, even if unjustified on other criteria, as a way to manage the financial needs of partners with weaker credit capabilities. For example, host governments or their agencies sometimes wanted to participate in 9 This document is authorized for use only by Ashok Kumar Malhotra until August 2012. Copying or posting is an infringement of copyright. [emailprotected] harvard. edu or 617. 783. 7860. 201-054 BP Amoco (A): Policy Statement on the Use of Project Finance projects, yet did not want to use or did not have large amounts of funds available. At other times, partners with weaker balance sheets could not raise the required amounts on their own. In these instances, the project structure became the price of admission for BP Amoco to participate in the project. In other cases, BP Amoco might participate in a project financing so that it could negotiate with lenders rather than letting weaker partners negotiate for the group as a whole. Because BP Amoco’s ability to make decisions could be compromised by partner debt covenants, it wanted as much say in the negotiations as possible. Project Evaluation If a particular project met one or more of these criteria, then it would be a candidate for project finance. Because the internal finance organizations and project approval processes were similar at both firms prior to the merger, they decided to retain a similar system in the new organization. The new process was designed to quantify the incremental costs and benefits of using project finance. After a business unit determined a project had a positive NPV using the pre-determined corporate WACC assuming a debt-to-capitalization ratio of 30% (the â€Å"investment† NPV), it would forward the project to the Specialized Finance team, which would then assess various financing structures using an incremental cost analysis. They estimated the incremental, after-tax cash flows associated with fees, interest, and principal payments, and discounted these cash flows at the firm’s marginal cost of debt for a comparable maturity. This â€Å"financing† NPV was typically negative. But when combined with the â€Å"investment† NPV a nd other possible benefits described above, the result could be positive. In these instances, the Finance Group could recommend using project finance and seek approval for the chosen structure. Conclusion: Preparing for the Presentation As he put the finishing touches on his presentation, Young wondered why the public perception of differences between the BP and Amoco existed. In particular, he thought of a recent comment made by an analyst at the Center for Global Energy Studies in London shortly after the merger. At the time, both companies were participating in the Azerbaijan International Operating Company (AIOC), an 11-firm joint venture created to develop oil fields in the Caspian Sea. The analyst wrote, â€Å"The BP-Amoco merger consolidates the ownership of AIOC a little bit†¦ The two will be speaking with one voice, whereas perhaps they haven’t always been in the past. 8 Bill Young saw things differently: â€Å"Contrary to the public view that we were on opposite ends of the project finance/corporate finance spectrum, we discovered that we really were reasonably wellaligned in our views and philosophies. † His team, and the colleagues with whom he had discussed his recommendations, seemed to concur with the idea that BP Amoco should use corporate funds to finance new investments except in very special circumstances. Elaborating, he said: It’s likely that project finance will continue to be used sparingly at BP Amoco.

Financial Strategies of Blackmore Company Sample for Students

Question: Give a Breif Introduction of Blackmore Company. Answer: Introduction of Blackmores Company Blackmores is one of the leading natural health companies that are based in Australia (Blackmores.com 2017). The Founder of Blackmores, Maurice Blackmore was passionate regarding natural health as well as used to inspire people for taking control and devote in their welfare. Blackmores offers products as well as services that bring natural approach to wellbeing on the knowledge in minerals, herbs, nutrients and vitamins. Financial Strategies of Blackmores Company From the annual report on Blackmores in Australia, it can be noted that Directors reports an increase in sales that amounts to $341.4 Million as it is reviewed by the auditor (Blackmores.com 2017). Blackmores in Australia had involved in use of various financial strategies for gaining continued sales growth in and across the segments that leads to operational leverage as well as progressing the delivery of given strategic priorities (Pratt 2013). Blackmores in Australia uses various strategies and some of these are as follows: Consumer Centricity- Blackmores majorly believes in supporting the Australia business as well as improving the connectivity to customers through expansion of digital presence (Henderson et al. 2015). Growth- Blackmores made strategy for increasing the level of investment in and across the region so that they bring sustainable continuing enlargement for the Group as a whole (Blackmores.com 2017). Product Leadership- Blackmores believes in leveraging the knowledge so that they drive product leadership as well as innovation in order to get recognized as Authoritative Voice in Natural Health (Hoskin, Fizzell and Cherry 2014). Operational Effectiveness- Blackmores believes in improving the operational effectiveness as well as leveraging the size into scale (Deegan 2013). Blackmores in Australia sales for the year 2016 was $237.6 Million with 73% increase in the EBIT (Blackmores.com 2017). For the country Australia, Blackmores works best for the enhancing the performance as it reflects strong relationships with the retail partners as well as focusing on consumer connectivity as a whole. Blackmores balance sheet shows a healthy financial situation with a cash exchange rate at 112%, working capital at $46 Million as well as operating cash flow at $60 Million after comparing to the previous time. Net debt shows positive cash flow at $23 million with a net awareness cover with 50 times in comparison to 21 times as it was recorded in the previous period. This company has high presentation in Asia counterbalance as it has the possible collision of the weaker Australian dollar for making the purchase of raw materials that supports $0.5 Million net benefit on foreign exchange (Weil, Schipper and Francis 2013). References Blackmores.com. 2017.Blackmores vitamins and supplements- Australia's most trusted. [online] Available at: https://www.blackmores.com [Accessed 28 Mar. 2017]. Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia. Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU. Hoskin, R.E., Fizzell, M.R. and Cherry, D.C., 2014. Financial Accounting: a user perspective. Wiley Global Education. Pratt, J., 2013. Financial accounting in an economic context. Wiley Global Education. Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.