Students Who Build Hydroelectric Plants
Would you rather be a banker or a shareholder? That's the kind of question Project Finance and Financing Strategies For Green Business students were asked yesterday afternoon at the beginning of a business game. They call it a game, but rules and numbers are realistic. They're taken from a negotiation that took place in Southern Italy some years ago: the financing deal for the renovation of an aqueduct and the construction of a hydroelectric plan. A business game is not an exam, but it will produce a winner, to be announced on Friday, 30 May.
This is how it works: groups of three or four students play the role of either shareholders who want to maximize investment yield or the banks that finance the project and want to get the most out of it. During the first round of the game, which lasts one hour, the groups elaborate the proposals they're going to submit to the counterparty. Negotiation begins in the second round. Groups work in pairs to determine the offers that will be submitted to the Public Administration.
"A business game is an excellent way to understand how variables interact to get a result", says Stefano Gatti, director of the Bachelor of Science in Economics and Finance. "It's a way to apply what students have learned in classrooms. It also helps develop bargaining skills. Playing the game, students understand that finding an agreement with your counterparty isn't enough. If you want to win a competitive bid you also have to meet the Public Administration's demands".
Students didn't know that during yesterday's negotiation Gatti would have changed some parameters, including inflation rate. "It forced us to revise the agreements, just as happens in a real project finance", Francesca Vespignani says. "That's when the negotiation climate changed: external difficulties turned mutual distrust into collaboration". Gianluca Sciacovelli took part in a business game while attending the Cass Business School in London. This time he has enjoyed the realism of facts and figures. "It made the game more exciting. The complexity of the model forced us to take it seriously and go deeper into the issue".
Friday, 30 May each banker-shareholder couple will display its proposal to the class. Stefano Gatti and Alessandro Steffanoni will play the Public Administration role. They're going to unveil the winning proposal and explain the valuation criteria. "I use business games both in MSc's and MBAs", Gatti says. "It's usually one of the best moment of the course and competition is lively. Students drain their energy to the last drop in order to win".