Using Project Finance to Fund Infrastructure Investments

Funding for projects is always a topic of discussion, payments for a sculptor to sculpt a statue, and hiring wrecking crews for doing their job are just small examples. The funding cost for Light Rail is extremely high when it comes to construction, these prices are something that a any+ billionaire can personally handle. These prices are always subject to change because of materials used and the constant change of technology. Through the talks of this new transit system coming to San Antonio, different funding options have been suggested, raising taxes,

“When AES undertook primarily domestic contract generation projects where the risk of changes to input and output prices was minimal, a project finance framework was employed.”

The UK government had made concerted efforts over the years in developing a definite course of action for the Renewable energy industry in the UK in light of changing conditions of the industry. This was done in order to guide and determine the conditions of engagement while proposing future directions and decisions. The intentions of these high level overall plans were to provide clear goals for the relevant stakeholders including, regulators, generators, suppliers and consumers.

In the past ten years there have been many infrastructure failures that make you wonder when the government will get serious about the issue at hand. Not paying attention to the condition of infrastructure has proven to

This journal will look at the economy as a whole and what that means for the growing cost of infrastructures. Should we be combining public and privately owned utilities? Will federal funding be enough to sustain our nation? By defining the pros and cons of combining public and private, these questions can be answered. By the start of the next decade, this current state could drastically change.

A decent example of funded public good is the public highway and road system. Roads are supported by Federal Government funds, compensated by taxes. An excessive free highway system is vital for a current economy because stress-free expedient transportation is crucial to the movement of goods from suppliers to consumers and for individuals to go back and forth to work, go on a vacation, visit friends and family, or just for recreational purposes (Behboodi, 2009).The capability to transport raw resources and industrial goods between rural and suburb areas produced a cut in prices and time for consumers and producers. All Americans reaped the benefits from less expensive and speedier goods and services. The Interstate Highway System created

Utilizing public funds to invest in megaprojects has been a contentious topic for many cities who are tempted to endure years, if not decades, of construction and billions of dollars of debt to hopefully experience some economic and social advantages that other megaprojects have brought to fortunate cities and areas. However, from studies and research, it seems that megaprojects have higher likeliness to fail and bring economic turmoil to cities and areas that take the risk. Unless protocol for how such projects and associated contractors are held accountable improve, using public resources to fund megaprojects should cease. Too often does it occur that the burden of megaprojects falls on taxpayers where such funding could have been used for

We recommend Private Partnerships fund to be used as a form of financing transportation projects in the public sector:

private sector will assume 90 percent of the total costs with funding through loans, equity

Project finance is a kind of Financing that has a priority does not depend on the creditworthiness of the sponsors proposing the business idea to launch the project. Approval does not even depend on the value of assets sponsors are willing to make available as collateral. Instead, it is basically a function of the project’s ability to repay the debt contracted and remunerate capital invested at a rate consistent with the degree of

A privately financed project was a specified from of PPP that involved not only private sector financing but also controlling ownership. PFPs differed. From the outsourcing or construction by the government. There has been widespread adoption by Governments across the world of Public Private Partnerships (PPPs) as a way of providing public infrastructure. Grimsey and Lewis report that the UK version of PPPs,

The structure of a project’s financing depends on the industry the transaction is taking place, the underlying business model and in particular the allocation of risks and responsibilities between the individual partners (Weber & Alfen, 2010).

There however are challenges in the industry occasioned by uncertainty on future spending on construction projects by the government. Moreover, the cost of doing business and the ability to increasingly make revenue have created a challenging environment for the construction firms. Therefore stakeholders in the construction industry are concerned with whether the government would increase its spending and whether the public construction projects will be available in the future since less than 10 percent are currently financing their clients.

As this table illustrates, many of the stakeholders are similar. However, there are significant differences in the asset providers and those entities with a direct financial interest. This variance drives major differences in the evaluation of investment in projects in either area, freight or passenger transportation. In freight operations, most often the assets are provided by private firms with a direct interest in the operation of freight transportation services on the asset. In most passenger transportation systems, the asset provider is a public entity, such as a transit authority.

Project finance transactions are typically either (i) limited recourse, where lenders do not assume the entire financial risk of the project and instead rely on mechanisms such as completion guarantees or parent guarantees, or (ii) non-recourse, where the revenues generated from the project and the project’s assets repay the indebtedness owed to the lenders. In addition to providing funds to complete new projects, the scope of project finance also allows project companies to expand existing projects or refinance existing indebtedness on existing projects at more favorable terms.