TY - JOUR T1 - Estimating Risk Parameters for Water and Power Utilities in China JF - The Journal of Structured Finance SP - 6 LP - 20 DO - 10.3905/jsf.2003.320296 VL - 8 IS - 4 AU - Ian Miller AU - Jennifer Zhang Y1 - 2003/01/31 UR - https://pm-research.com/content/8/4/6.abstract N2 - This article uses historical share price return performance for benchmark water and power sector utility companies together with local stock market return histories from Chinese stock exchanges to estimate individual company risk parameters and industry sector average beta coefficients. The authors also calculate equity risk premia and the cost of equity for each company using the capital asset pricing model (CAPM). The purpose of these calculations is provide up-to-date information concerning key elements of the weighted average cost of capital (WACC) that is used as a hurdle rate in development funding decisions for utility infrastructure projects in China. While WACC calculations are company specific, in some instances key elements of the WACC may be adapted from other empirical studies that 1) may be out of date, and/or 2) are the next best estimates given the time and resources available to the project financial advisors and consultants. The information provided herein is meant to assist sponsors and project financiers in providing benchmarks and reference points for project-specific calculations. For example, industry or sector-specific betas can be applied in determining the cost of equity for a utility that does not possess market data (and therefore does not have a beta). For these situations, the industry sector beta can be used as a proxy for the utility company's own beta. ER -