R&F Inc. (R&F), is the largest civil engineering company in Canada. It is listed on the TSE and NYSE. It is considering bidding on a project to become principal (lead) contractor to build the Giant Dam Project in a country called Somewhere. The bid also provides that the successful bidder would operate and manage all matters related to the dam on behalf of the government of Somewhere for 20 years. The project would provide R&F with superior profitability and significantly enhance the reputation of the company if it is successful. The board of R&F prides itself in observing the highest standards of corporate governance. R&F's potential client, the government of Somewhere, will take into account several factors in appointing the principal contractor including each bidder's track record in large civil engineering projects, the value of the bid and a statement, required from each bidder, on how it would deal with the 'sensitive issues" and publicity that might arise as a result of the project. R&F is considered the favorite to win the bid because of the reputation of its chief engineer, Mr. Afra. Mr. Afra, has 44 years of experience in dam building and has worked on many of the largest and most technically challenging dams in the world. Despite his age and failing health, Mr. Afra has agreed to complete this last project. The Giant Dam Project is seen as vital to Somewhere's economic development as it will provide a large amount of hydroelectric power. This is seen as a 'clean energy' driver of future economic growth. The government is keen to point out that because hydroelectric power does not involve the burning of fossil fuels, the power would be environmentally clean and would contribute to the Somewhere's ability to meet its internationally agreed carbon emission targets. This, in turn, would contribute to the reduction of greenhouse gases in the environment. Critics, such as the environmental pressure group 'Stop-the-dam', however, argued that the project is far too large and the cost to the local environment would be unacceptable. Stop-the-dam is highly organized and, according to private investigators report's commissioned by R&F, is capable of disrupting progress on the dam by measures such as creating 'human barriers' to the site and hiding people in tunnels who would have to be physically removed before proceeding. A spokesman for Stop-the-dam was quoted as saying it would definitely be attempting to resist the Giant Dam Project when construction started. The project is intended to dam one of the region's largest rivers, thus creating a massive lake behind it. The lake would, critics claimed, not only displace an estimated 100,000 people from their homes, but would also flood productive farmland and destroy several rare plant and animal habitats. A number of important archaeological sites would also be lost. The largest community to be relocated is the indigenous people who have lived on and farmed the land for an estimated thousand years. A spokesman for the indigenous community said that the 'true price' of hydroelectric power was 'misery and cruelty' . A press report said that while the indigenous people would be unlikely to disrupt the building of the dam, it was highly likely that they would protest and also attempt to mobilize opinion in other parts of the world against the Giant Dam Project. The board of R&F was fully aware of the controversy when it submitted its tender to build the dam. As a consequence, the finance director, Fariba, had insisted on putting an amount into the tender for the management of 'local risks'. Fariba was also responsible for the financing of theproject for R&F. Although the client was expected to release money in several 'interim payments' as the various phases of the project were completed to strict time deadlines, she anticipated a number of working capital challenges for R&F, especially near the beginning where a number of early stage costs would need to be incurred. In addition, the contract contained significant penalty clauses for missing deadlines on project completion phases. There would, she explained, also be financing issues in managing the cash flows to R&F's many subcontractors. Although the major banks financed R&F through a lending syndicate, R&F's usual bank said it was wary of lending directly to R&F for the Giant Dam Project because of the potential negative publicity that might result. Another bank said it would provide R&F with its early stage working capital needs on the understanding that its involvement in financing R&F to undertake the Giant Dam Project was not disclosed. A press statement from Stop-the-dam said that it would do all it could to discover R&F's financial lenders and publicly expose them. Fariba told the R&F board that some debt financing would be essential until the first interim payments from the client became available. She explained that if they could not obtain the financing the company's credit rating could be lowered. This would result in institutional investors being forced to sell the company's shares and the share price would drop by as much as 50%. In the next few weeks the winner of the contract to build the Giant Dam Project would be announced. Some of R&F's institutional shareholders contacted the chairman of the board. They wanted reassurance that the company had fully taken the environmental issues and other risks into account. One fund manager asked if the chairman could explain the sustainability implications of the project to assess whether R&F shares were still suitable for his environmentally sensitive clients. The Chairman said, through the company's investor relations department, that he intended to give a statement at the next annual general meeting (AGM) that he hoped would address these environmental concerns. He would also, he said, make a statement on the importance of confidentiality in the financing of the early stage working capital needs. Required Use the following case analysis format and section headings to address the requirements listed within each section. Point form is acceptable for the solution. a) Problems and issues: (10 Marks) b) Discuss the causes and the impact of the issues identified in (a) (5 Marks) c) Alternatives: Identify and explain available alternatives to R & F at this stage. (2 Marks) d) Analysis of alternatives and recommendations. What recommendations do you propose for R&F and why