Leonard N. Stern School of Business


Limpopo Hydro

A case study on project financing and cross-border leasing

Prof. Ian Giddy

Tel 212-998-0426; Fax 212-995-4233

E-mail: ian.giddy@nyu.edu Web: http://giddy.org


The Situation


John Mbeki has been preparing a presentation for the newly privatized airline of Zimbabwe. He thinks the airline should consider a lease-based financing structure, and he uses the financing package for Limpopo Hydro, the new hydroelectric facility that he has been associated with, as an example of how leases can be used to create tax benefits. Before his presentation, Mbeki must be able to explain how the Limpopo Hydro financing package works and to evaluate the circumstances when this financial technique can produce tax benefits.





  1. Explain how the deal was structured.
  2. The lease payments were to be made in Zimbabwe dollars, while the ultimate debt was denominated in US dollars.What would happen if the Zimbabwe dollar falls against the US dollar?
  3. Explain the tax benefits of the leasing structure.
  4. What do you think happens to the equipment after 11 years?
  5. Could this financing structure be applied to other products, such as aircraft purchases? What might be the obstacles to its application elsewhere?
  6. How valuable do you think the interest rate protection is to Limpopo Hydro? How would the lenders protect themselves?