Cracking the Achilles’ heel of energy performance contracting projects: the credit risk identification method for clients

ABSTRACT

A credit risk identification model is established to examine the credit status of Energy performance contracting (EPC) project clients (i.e., energy-using companies) in China based on rough set theory. The model is verified with data from 120 listed companies at different times. Study shows that lack of credit is one of the main obstacles to the implementation of EPC projects, and information asymmetry is the main reason for this lack of credit among potential clients in China. The credit risk identification method based on rough set theory can make up for the shortcomings of existing EPC projects in terms of credit risk identification, including redundant information and indicators, and unclear decision rules. Credit risk identification indicators of clients are dynamic. The research results can help energy service companies (ESCOs) determine the credit status of clients, facilitate cooperation between ESCOs and clients, and help explain the various dynamics of clients’ credit risk identification indicators over time.

KEYWORDS:

• Energy performance contracting project
• client
• credit risk
• rough set theory
• energy service company

Highlights

• Credit risk identification model is developed for energy performance contracting projects.

• Rough set theory is used to handle credit data issues specific to China.

• Key credit indicators are identified and are found to be dynamic over time.

• Model performance is verified with data from 120 listed companies at different times.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Additional information

Funding

This work was supported by the National Social Science, China Fund under grant [number 15FGL017] and the Tianjin Science and Technology Development Strategy Research, China Fund under grant [number 18ZLZDZF00110].