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HUMANITIES SCIENCE POLITICS

Science, People & Politics ISSN 1751-598X

CONTINUED FROM PAGE 13 | ENERGY SPECIAL | 14

INTEREST
Interest in EBITDA is on combined long, medium and short term loans. This is the term where
increasing operating profit by good science could make lending attractive for infrastructure.

Let's imagine, for example, your country specifically wants to extend its grid, is there anything
science and politics can do that makes attractive an alteration in the length of time over which
existing loans are repaid? These loans might be those which financed earlier work on the elec-
tricity grid or gas pipelines your country now wants to extend so that more people access
modern, efficient energy for refrigeration, heating etc... The aim is to restructure interest so that
the lender earns back everything it was agreed in the first place would be paid.

Undertake this exercise irrespective of whether an overwhelming case for debt relief exists
because of unpredictable events which even the most diligent could not have guarded against.

One way to justify altered interest rate structure on a suite of loans would be to shift increases
in operating profit into a large (as large as possible) early repayment of interest on the principal.
Get ahead of yourself in paying interest, while paying back the principal at the same steady
rate. The financial institution can put early interest repayment to work, and the next year you go
back to the agreed interest payment on the principal. In parallel the Ministry for Power is plan-
ning, say, a mini-grid to reach good sized pockets of population without access to power.

A year or possibly more after your early repayment of interest you take out another loan equal
to the size of your early interest repayment, plus some of the interest which the lending body
earned with your early interest repayment. The financial institution gets to keep the rest of what-
ever interest it earned from your early repayment. Overall the bank is not loosing interest,
makes a profit, and the principal is being paid back at a steady rate.

SCIENCE AND POLITICS CONTRIBUTES

The operating profit increase fuelling this loan restructuring could come about because science
identified transmission or generation loss reductions. Politicians could legislate to ensures utility
companies are paid for power sold. So ideas in blogs and the literature might help. Just make
sure they are read!

Circumstance could mean a financial body cannot responsibly absorb large early repayment of
interest. Even knowing a deal might be in the offing could make commercial banks vulnerable.
Are there reasons the World Bank cannot remain stable through significant varied cash flows?

TAX AND DIPLOMACY
If interest restructuring were agreed with financial institutions, law would have to allow transfer
of extra profit directly into early loan repayment, rather than additional tax revenue. Tax payers
or shareholders might not like the idea. But if future tax receipts resulting from market expan-
sion are predicted, then not getting a windfall tax one year might be ok. As well as expanding a
future economy, a mini grid, for example, electrifying a new part of the country, could meet the
humanitarian goal of reducing energy poverty. That might enhance political stability, and even
remove causes of local unrest, or possible civil War. Then again, certain groups might not like
that peaceful prospect. Hence the need for science to cede to politics.

CONTINUED ON PAGE 15 .................................................................................................................................14

Issue 1 (Jan-Mar), 2017............................................Science, People & Politics ISSN 1751-598X print and online


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Published Friday 24th February, 2017,
nominally.
Completed 9th April, 2017.

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