Construction risk in infrastructure project finance and traditional procurement we begin by defining project financing as a method for procuring large projects, and how it is used as an alternative to traditional public infrastructure. Vikas srivastava 10420 this is the final report towards partial completion of macro research award 12 awarded by the indian institute of banking and finance. According to the oecd, the global infrastructure investment. It has underpinned many bu youts of companies and assets, and is seen as a method of lending against a controllable and predictable cash flow. Project finance is the financing of longterm infrastructure, industrial, extractive. Each paper addresses a unique piece of the infrastructure finance puzzle and provides.
Data indicate, for example, that developments in the equity market for investments in infrastructure are promising and that the creation of a liquid market for project bonds can be a good complement to syndicated loans for project finance. Mechanics of issuance of debt parties, roles and tasks. Online course fundamentals of infrastructure project finance. The share of bank finance to infrastructure in gross bank credit has increased from 1. Pdf construction risk in infrastructure project finance. Section iii looks at brazil, section iv looks at chile, section v at china and section vi at korea. We would like to thank the members of the afmeicma infrastructure working group, comprising banks, investors, law firms. Financing and investing in infrastructure coursera.
Project finance is a means to finance a large and capital intensive project, such as an infrastructure project, on nonrecourse or limited recourse basis through a special purpose vehicle called a. These are the most appropriate sectors for developing this structured financing technique, as they have low technological risk, a reasonably predictable market, and the possibility of selling to a single buyer or a few large buyers based on multi. Innovative financing models for energy infrastructure in africa. This guide to infrastructure financing bank loans, debt private placements and. Bank provides fund based and non fund base credit facilities for new project as well as expansion, diversification and modernisation of existing projects in infrastructure and non infrastructure sector. While banks underwent a period of deleveraging and decreased exposures to project finance and infrastructure.
London business school is the only topranked school to provide a specialist executive course on project and infrastructure finance. Finance manual primarily addresses the financing of longerterm ppp projects in. Some emerging countries, like malaysia, korea, hong kong, chile, and brazil have already begun to do this. The course offers participants an introduction to project finance and instruction on project finance. Pdf for much of the past century, there has been an increased tendency for large infrastructure projects to be funded and operated by. On the infrastructure side, we are recognised by infranews as the number one global financial advisor in 2015 by the value of deals. Pdf in the last decades, many governments across the world have sought to use public private partnerships ppp as a means of attracting. The course offers participants an introduction to project finance and instruction on project finance structures, modeling examples, risk mitigation strategies, and procurement.
First, exposure to currency risk, which for foreign investment in exportoriented manufacturing industries is of a relatively minor concern, is a 6 according to world bank estimates global development finance. Public and private financing of infrastructure european investment. Project finance enables companies to raise focused, risk sharing, finance in key industries and is an increasingly important method for governments to introduce private sector skills, disciplines and funding in a range of sectors. Pdf issues and trends in project finance for public infrastructure. Pdf using project finance to fund infrastructure investments. We are also named by thomson reuters project finance international as the number one global and emea financial advisor in 2015 by the volume of infrastructure. The paper will be focused only on one infrastructure sector, which is energy. Master the financing of infrastructure and industrial projects. Financing infrastructure projects tony merna, cyrus. Idfs investment objective is to generate income and capital appreciation by investing at least 90% of the corpus in a portfolio of predominantly infrastructure. Principles of project and infrastructure finance is written for senior undergraduates, graduate students and practitioners who wish to know how major projects, such as residential and infrastructural.
Highlights of efsi the european fund for strategic investments 10 4. The performance of renewable resources, the primary driver of renewable project revenue, s has been mixed. International project finance association ipfa defined project financing as. A spectrum of country approaches sophia chong and emily poole over recent decades, there has been a shift away from public infrastructure financing towards private infrastructure financing, particularly in advanced economies. Principles of project and infrastructure finance request pdf. Pdf using new data, we show that construction risk in infrastructure project finance is wellmanaged and that project sponsors face very little. Way of delivering public infrastructure through procuring services rather than capital assets public sector defines service requirement private sector designs, finances, builds, operates, usually transfers the asset interest alleviate budgetary constraints expertise transfer of risk 2 infrastructure ppps. Working paper series infrastructure finance in the developing. Based in hong kong, he focuses on transport and social infrastructure projects, including public utilities and ppp transactions in the asiapacific region. Navigator project finance a dscr of project are not strong enough to support the level of debt.
Scheme and guidelines for india infrastructure project development fund were notified by the ministry of finance, department of economic affairs, vide om no. The cib aims to institutionalize the publicprivate partnership p3 model and private finance schemes, reconfiguring public infrastructure as commercializable projects, and altering. Asian development bank institute adbi has undertaken a study to identify the key issues in relation to improving connectivity between south and southeast asia. Infrastructure and project finance university of birmingham. Infrastructure finance in the developing world working paper series is a joint research effort by gggi and the g24 that explores the challenges and opportunities for scaling up infrastructure finance in emerging markets and developing countries. Project finance is a wellestablished technique for raising funds for large standalone projects that require huge initial investments but have long pay offs. Project and infrastructure finance risk assessment. Principles and case studies pretorius, frederik, chunghsu, berryfong, mcinnes, arthur, lejot, paul, arner, douglas on. Project finance is the financing of longterm infrastructure, industrial projects and public services based upon a nonrecourse or limited recourse financial structure, in which project debt and.
Project finance and projects in the energy sector in. Project infrastructure refers to the organisational structure, processes, tools, techniques and training an organisation puts in place to make projects more successful. Our focus is broad and extends from the structured debt and financing side of major projects into infrastructure focused investment banking, direct investment and fund of. We are also named by thomson reuters project finance international as the number one global and emea financial advisor in 2015 by the volume of infrastructure mandates won. Apply a structured and systematic approach to financing projects using some of the techniques of project finance. This study seeks to identify the financing needs and issues governing crossborder infrastructure projects connecting the two subregions. Investment specialist project financeinfrastructure finance job purpose support the origination, development, due diligence, approval and implementation of private sector infrastructure financing projects to contribute to adbs overall mission of reducing poverty in asia and the pacific. Cleary gottlieb has a long history as a project finance pioneer, and our lawyers have represented parties on every side of these transactionsproject sponsors, lenders, equipment suppliers, infrastructure funds, insurers, public sector entities and rating agenciesfor infrastructure.
Pdf financing infrastructure projects through publicprivate. Investment specialist project financeinfrastructure finance. The purpose of this chapter is to provide an overview of project finance. Apply to chief investment officer, analyst, foreign exchange trader and more. Infrastructure project finance in 2016 world bank group. Construction risk in infrastructure project finance.
Project finance and infrastructure cleary gottlieb. He holds a msc real estate investment and finance degree. Infrastructure project financing by banks in select. Project finance versus corporate finance opportunities in. Under increasing public demand for higher levels of infrastructure services and insufficient public funds, attention has refocused on private finance. A government borrows funds to finance an infrastructure project and gives a. The new project company is capitalised with equity contributions from each of the sponsors. Students work through a series of case studies to apply project finance principles and valuation methods to reallife projects. An empirical analysis of factors influencing project financing by. Guide to infrastructure financing page 4 introduction 1. The project finance and infrastructure industry has seen a number of key changes in recent times. Schemes 2a, 2b and 2c april 2014 3 registrar and transfer agent.
Gavin munro is the head of infrastructure finance for asiapacific at societe generale corporate and investment banking sgcib. Along with india, brazil, china and korea are among the largest emerging markets, while chile has been unusually successful at catalyzing private sector involvement in infrastructure finance. Project finance is the longterm financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Way of delivering public infrastructure through procuring services rather than capital assets public sector defines service. Overview of the bank loan and project bond markets 7 3. Usually, a project financing structure involves a number of equity investors, known as sponsors, and a syndicate of banks or other lending institutions that. This is generally the case in a socalled designbuildoperate project where the operator is paid a lump sum for completed stages of construction and will then receive an operating fee to cover operation and maintenance of.
Ultimately, rating cases are established to assess the level of financial. The african development bank afdb temporary relocation. Structurally, power project finance has involved largely build. This chapter will outline what project finance is, the key features which distinguish it from other methods of financing, the motivations and circumstances for utilising it and.
We also are involved in a number of publicprivate partnerships ppps in illinois, michigan. Project and infrastructure finance pf london business. At first glance, infrastructure finance does not seem to be a viable vehicle for attracting foreign capital to developing countries. Project finance as a tool for financing infrastructure projects public finance for infrastructure projects financial instruments financial engineering restructuring projects financial markets the concession or buildownoperatetransfer boot procurement strategy the private finance initiative challenges and opportunities for infrastructure. The fundamentals of project finance ecc association. This is a selfcontained text on the logic and institutions of project finance, supplemented by a series of project finance case studies illustrating applications in different economic environments, across different jurisdictions and at different stages of development. Cleary gottlieb has a long history as a project finance pioneer, and our lawyers have represented parties on every side of these transactionsproject sponsors, lenders, equipment suppliers, infrastructure funds, insurers, public sector entities and rating agenciesfor infrastructure projects around the world. It is used in industrialized countries, such as the united states, in emerging countries, such as in eastern europe, the pacific rim or in countries with tremendous new infrastructure. Working paper series infrastructure finance in the. Barajas is a member of the state bar of california. Dykemas infrastructure and project finance practice is comprised of attorneys and other professionals from offices in chicago, detroit, washington, d.
The goal of this course is to equip participants with an overview of project finance by taking them through all stages of a project finance transaction, so that they can apply the techniques of project finance. Project finance version 1 national treasuryppp manual january 2001 a team or consortium of private firms establish a new project company to build, own and operate a specific infrastructure project. First, exposure to currency risk, which for foreign investment in exportoriented manufacturing industries is of a relatively minor concern, is a 6 according to world bank estimates global development finance, 1997. In this article, infrastructure financing in four countries china, india, australia and the united kingdom is examined to illustrate the different approaches taken by governments to finance infrastructure. Infrastructure project finance jobs, employment in new. The wharton school project finance teaching note 3 there is no singular definition of project finance. North american energy infrastructure 4 december 5, 2017 learn more at our outlooks site. There are two broad ways to finance infrastructure publicly or privately. Project financing for major infrastructure projects.
A report by the working group on infrastructure finance. Over the past twenty years, the private sector has increasingly financed projects traditionally considered in the public domain. Learn how debt and equity can be used to finance infrastructure investments and how investors approach infrastructure investments. Project structures, procurement and planning process 12 5. Infrastructure financing challenges of restructuring prof. Financing infrastructure the institute for government.
Introduction and executive summary the global financial crisis has brought changes in the bank lending market that may, in time, make some global banks view the longterm lending typically required for infrastructure projects as less attractive. Project finance is used repeatedly as a financing technique for construction of new energy infrastructure. Project finance for construction and infrastructure. Worldwide, extractive industries account for 36% of the total project finance market, almost half the share of africa. Investment specialist project finance infrastructure finance job purpose support the origination, development, due diligence, approval and implementation of private sector infrastructure financing. It is all about sourcing funds to a long term infrastructure. Project finance a primer on the project finance industry. Indeed, case studies extracted from best practice of cut and thrust at global multilateral banks will be used to expose students to the opportunities and challenges of infrastructure and project finance. A major player in sponsoring infrastructure projects and providing financing in developing countries, the world bank defines project finance as the use of. Infrastructure finance in the developing world g24. Investment in infrastructure is critical to economic growth, quality of life, poverty reduction, access to education, good quality healthcare and achieving many of the goals of a robust and dynamic economy but infrastructure is difficult for the public sector to get right. It is all about sourcing funds to a long term infrastructure project, or any other project. Infrastructure financing instruments and incentives oecd.
Infrastructure financing instruments and incentives. Guide to infrastructure financing longterm investors club. Project finance is generally used in oil extraction, power production, and infrastructure sectors. Investment in infrastructure is critical to economic growth, quality of life, poverty reduction, access to education, good quality healthcare and achieving many of the goals of a robust and dynamic economy but infrastructure. Pdf financing infrastructure projects through public. Organisational structure organisational structure including such support mechanisms as project management office, project recruiting function, financial monitoring area etc. Rating criteria for infrastructure and project finance. An overview of project finance and infrastructure finance. Main financing mechanisms for infrastructure projects. Scheme and guidelines for india infrastructure project. Nov 22, 2018 financing is distinct from funding infrastructure.
821 1001 1488 663 969 10 763 284 947 1313 146 556 59 1189 1523 184 531 632 220 38 1002 788 1421 652 499 1351 793 626 1105 807 630 507