Depending on the financial base of a company, different companies adopt different methods of financing. The choice of a particular financing method depends on the company’s financial plan and the analysis results of the company capacities of financing. Usually a company turns to one or more methods of financing. The methods mainly available for company financing are the financing from the internal and the external means of financing.
Internal financing is a key feature for a company financial capacity and a parameter through which financiers from external source are able to asses the financial base of a company. Internal financing involves finances from profits which are unallocated, allocations for clearance of stock, deposits and debts as well as income acquired from the transfers of company assets. External financing on the other hand involves credit grants to companies by financial firms such as banks. Eternal financing usually operates in various forms such as advance financing and credit refinancing. This type of financing mainly involves manufacturing companies which pays for the production process. Another form of external financing is the financing of product stock and the financing of company needs after delivery.
This paper addresses the aspect of company financing used by the Beijing Jingneng Clean Energy Co., Limited. The method of finance used by Beijing Jingneng Clean Energy Co., Limited is analyzed as well as the advantages and disadvantages of using this method of financing in company financing. The roles and functions played by Goldman Sach in the company financing are also analyzed. An insight into how the observed roles and functions may relate to the specific cases of company financing is given. Also given in this paper is an Evaluation of the given financing method.
Financial methods used by Beijing Jingneng Clean Energy Co. Limited
In the contemporary world financial position of an organization plays an instrumental role in influencing development, attainment of the established strategies as well as capacity to compete favorably in the current competitive market. In addition, the finances of a corporation dictate the capacity of a business entity to expand and explore new markets in diverse areas of enterprise. However, the current time of economical crisis in various parts of the globe financial position of corporations tend to hamper consistent development as well as capacity to expand business operations in respective parts. Moreover, decline in economic development in the recent past adversely affect financial distribution as well as availability to meet the established strategic plans. In response to financial constrains coupled with the need to diversify sources of finance to boost the level of productivity as well as achieve the operational cost of an organization, various financial avenues have emerged. In this case corporation are in the fore front of endorsing diverse mechanisms to accumulate finances to boost productivity, expansion and other financial obligation of the company. Considering the method of finance deployed by Beijing Jingneng Clean Energy Co, Limited various options and avenues are noticeable. The various financial methods used by the company in meeting its financial obligation are based on external and internal sources in line with corporation’s ambitions to tap and maximize its market share in the industry. Notably, diversification of financial method plays significant role in minimizing risks that can emanate from deploying sole method in meeting financial obligations.
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Beijing Jingneng Clean Energy Co, Limited deploys mainly external financial methods to meet its financial obligations as well as accumulating resources to facilitate meeting fundamental objectives of the company. The external financial methods deployed by the company are geared affiliating the company with various financial institutions as sponsors as well as venturing into opportunities on joint entities. Sourcing financial resources from banking sector facilitates gradual growth of an organizations as well as receiving additional financial advice aimed at an entity to greater heights. The company is affiliated to global coordinators on joint grounds aimed at meeting its financial obligations as well as establishing a commercial based relation with various financial institutions not only in Beijing but also in the globe. This poses as one of the core method deployed by the company in financing its projects as well as restructuring its operations to reflect innovations in the industry. For instance Goldman Sachs plays a significant role in facilitating joint global coordination to Beijing Jingneng Clean Energy Co, Limited (Lee, V & Ho, P 2011, Para 2). Through the scheme coordination of finances from banking institutions actively involved in providing financial support is realized. In addition, Beijing Jingneng Clean Energy Co, Limited has sponsors especially from the financial institutions where various company projects are financed or financial demands are met.
Notably, new ventures in line with the area of expertise of the company can emerge however due to financial constrains attributed by economical crisis as well as inadequate capital investment exploitation can be compromised. On this ground Beijing Jingneng Clean Energy Co, Limited receives sponsorship from financial institutions in order to propel particular energy project to reality. The sponsors are mounted on financial aids or lending in order to kick start a huge assignment projected not only to resolve energy crisis but also a potential source of economic stimulus. Through the established platform with the Sponsors the project poses to be of great benefit to both parties. On this ground mutual benefit based on the project’s scope of viability is realized and energy solutions are achieved from an environmentally friendly perspective. The role played by the sponsors is not limited to providing financial supports in order to leap from the completed project but also to conserve and promote appropriate measure to resolve energy crisis. This highlights the capacity of the company to deploy appropriate corporation relationships in meeting its financial obligation as well as boosting development in various innovative projects. Also, the sponsorship notion facilitates innovative designs as well as unleashing the commercial potential of the organization in the current competitive world. Joint global coordination coupled with sponsors plays central role in supporting the company financial demands as well as ensuring the laid down strategic plans are achieved within the stipulated time frame. The financial demands and capacity to meet them plays a significant role in achieving the established strategic plans on an organization in the current competitive world.
Beijing Jingneng Clean Energy Co, Limited in the recent past introduced avenues to create initial public offer (IPO) in order to finance its operations as well as gather financial resources from the public. The IPO was geared towards facilitating ownership of the company by the public through buying of its shares. Based on the percentage to be purchased by the public in the IPO, funds can be generated to finance the various activities as well as tasks of the company (Investors.com, 2011, 4). The company was in the fore front of selling a particular percentage of its value to the public through the scheme not only to accumulate financial resources but also overcome the financial constrains the company can be subjected to. This method of funding the company aims at enabling the company accomplish financial obligation based on various factors as well as an organizational relationship with public. Therefore, order to achieve the laid down objectives comprehensive evaluation on reputation as well as profit margins are crucial. However, Beijing Jingneng Clean Energy Co, Limited has the capacity not only to achieve funds from IPO but also to meet the public expectations in investing in the company.
Advantages of external company financing
There are various benefits of a company adopting the external company financing means to cater for its financial obligations. Some of the obvious benefits of getting an external financing include; External Company financing is an immediate source of capital for a company growth. This is mostly regarded as an important means of facilitating the growth and expansion of a company. An external finance provides necessary loan facility that effectively caters for diverse financial needs of a company. It would have been extremely difficult for companies to expand without external financial funding that is currently available at companies Disposal.External Company financing is a flexible means of expanding the company’s financial capacity. Through external company financing, it is possible for companies to achieve every set financial requirement to meet its expanding needs in terms of assets and other growth parameters. External company financing is reliable as the company does not rely on its own financial capacity as is the case for internal financing which is unreliable incase the company encounters losses. External company financing has unlimited volume of financial provision as the company ability of settling the financial credit is the main determinant of the finance volume rendered.
For a company to access external company financing, the financial provider may require to asses the credit worthiness of a company of which the beneficial company may not be comfortable with. Company financing through external financiers such as banks usually tends to be expensive due to the interest incurred in the financing provisions such as loans. This results in the option being uncomfortable to companies as they consider incurring unnecessary costs through interest charges by financial institutions. External financial providers mostly require companies to forfeit s their right of ownership to an extent for them to obtain financing. Depending on loan requirement a company is seeking, the level of a financial provider control in a company’s ownership may be some how substantial. The financial firm is likely to gain significant control in the undertakings of a company and may certainly guarantee the company management to it through contracts. The company’s control can also be lost incase the external financier is through public offers. The public acquisition of large shares in a company may subject the control of the company to a large group of financiers.
Golden Sachs Company
This is a great international company that is involved with trading of banking and securities for firms that invest in banking, and offers services such as securities, management of investments and other financial services to its clients. It is important to note that the company only trades with institutional clients. In order for the company to be in a position to facilitate these services, there are several activities that the company has to participate which include underwriting, provision of mergers and acquisitions, brokerage of assets as well as management. In this article, the roles of Goldman Sachs group of companies are evaluated towards the Chinese company, Beijing Jingneng Clean Energy Co. limited. The company played three great roles in the company when the company was making its financial sourcing. There roles included acting as joint global coordinators, joint sponsors and joint bookrunners and lead managers.
The global coordinator is responsible for the coordination of different underwriters in the share market process for the companies seeking financial support. As can be seen, the Beijing Company was sourcing for finances via eIPO and therefore had enlisted the services of Goldman Sachs Company. At this capacity, the company was working as a joint global coordinator of various regions where there were different underwriters involved in the marketing of shares owned by the company. It is worth noting that it was a joint exercise because Goldman Sachs was not alone in this but was doing it in collaboration with other global entities such as UBS, BOC international and Barclays Capital. It is important to understand that in this kind of an exercise, several companies open underwriting processes at the same time and therefore the great need of the coordination globally since the simultaneous sales open at different countries and it becomes hard for the underwriters to follow it. By employing the use of an organization such as the Goldman Sachs to perform these tasks, the company ensures that all transactions are directed to one central location (Roberts, 2008.p121).
The other role that is also equally important to the Beijing energy firm is the role of Goldman Sachs participating as a joint sponsor to the project. The company in Beijing is sourcing for funds and finances to help it to continue with its operations and this is being done in the international platform. Since the company is not known by the other companies that wish to get into the venture, to make a surety that the company cannot sink and thus lead to a loss of the money by the investors, the company uses Goldman as the joint sponsor. This means Goldman enters in an agreement that incase the company may fail to work out; Goldman Sachs is responsible for payment and all the liabilities that the company may incur. Being a global company with great network, it is easier for the Beijing Company now to attract sales of its IPO since clients will have faith in Goldman Company although this may not be the case with the Beijing Company where very little of it may be known (Espinasse P. , 2011.para.6). To increase the trust and improve on sales of the IPO, the company has different global companies, and therefore forms a joint sponsor system. These companies are also the same ones that form the joint global coordinators and include Goldman Sachs, BOC international and Barclays Capital.
Finally, Goldman Company also has another role in the financing process of Beijing Jingneng Clean Energy Co. Limited. This is the role of joint bookrunners and that of the joint lead managers in the eIPO. Since this is a venture that involves the sales of debts and equity, Goldman and other companies that are willing to take the risk of financing the debts for the energy company in Beijing participate as book runners jointly. This means that all the companies in the debt and equity deal are involved in checking and running books for the company under leverage so that they may control the risks that they have subjected themselves to by participating in this business. It is important to mention that a company such as the Beijing energy company seeks finances to fund its operations and prevents it from sinking into debts and collapse, but in so doing take debts to these companies and therefore transferring all the risks to the financiers. It is thus important that these companies take control of the book running to avoid any failure (Espinasse, 2011. p.34). Goldman Sachs are joint bookrunners in this exercise with other companies including the other two that are also joint global coordinators and joint sponsors of the company. However, it is worth mentioning that there is another company that enters the picture in this role. This company is MacQuire that has not participated in any other exercise in this company.
Significance of these roles
One may wonder the need for one company participating in all these roles in the same company since logically it would be taking too many risks from the same business. However, this is a securities deal and the company has more to gain when it has taken all these roles rather than when it has only one role. Since this is the case, Goldman Sachs Company has as much chance of great success as the risks in the deal. Additionally, having taken all the roles, the company has a great capacity to make decisions on behalf of the company as well as the control of the books. Furthermore, it is worth mentioning that with Goldman company taking such roles have great potential for attracting investors to the business and therefore there is high possibility that the company will gain the necessary finances it requires and reverse its situations faster, meaning that Goldman Sachs company will begin making profits sooner than expected. To make a conclusion from the situation, it is worth mentioning that the company has more potential to grow and trade in securities of the Beijing Company when it has more control of the company than when this is not the case.
Company financing is an important feature of a company prospects as it provides the main avenue for a company growth and expansion. Internal and external forms of company financing are the main platforms through which companies finance their financial duties. In regard to the Beijing Jingneng Clean Energy Co. Limited external form of company financing has been extensively utilized to finance its financial obligations. The company has enlisted the financial services of Goldman Sachs, UBS, BOC international and Barclays Capital to cater for its financial needs. External Company financing entails a number of benefits as well as some remarkable demerits. Goldman Sachs group of companies is taken as a significant source of companies external resources including financial provision and therefore provide an insightful account into the entire aspect of company financing.