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Financing

Approaches to selecting infrastructure financing options

Ferdinand Pecson's picture


Photo: GotCredit| Flickr Creative Commons 

Whether an infrastructure project should be pursued through government funding, official development assistance (ODA), a Public-Private Partnership (PPP), or a hybrid, is a matter of finding the solution that best meets a government’s objective given a set of constraints and the risks presented by each option. 

Next steps from the first Global Infrastructure Forum

Laurence Carter's picture

Saturday’s Global Infrastructure Forum was full of firsts:  this unprecedented daylong gathering in Washington, DC brought together the leaders of the multilateral development banks (MDBs), as well as development partners and representatives of the G20, G-24, and G-77, the OECD, the Global Infrastructure Hub and the United Nations.  All shared the goal of enhancing multilateral collaboration to improve infrastructure delivery globally.   

In search of new ideas on public-private partnerships and water-loss reduction

Chris Shugart's picture
Chris Shugart is prize manager for the Dreampipe Challenge.
 
Credit: Asian Development Bank

Two questions worth debating are whether we might soon see a renaissance in public private partnerships (PPPs) in urban water supply and services, and whether PPPs are a good way for water companies in developing countries to reduce their staggering level of water losses.

These pressing issues demand our attention because an inordinately high level of water losses – up to 50 percent of water entering the distribution system – burdens water companies and customers in developing countries. More precisely, the culprit is “non-revenue water” (NRW): both physical losses (leakage and bursts) and commercial losses (poor customer databases, meter inaccuracies, and illegal connections).

The consensus is that there is no lack of technical solutions to the NRW problem. In the concluding sessions of a recent conference on water losses in Bangalore, India (February 1–3), organized by the International Water Association (IWA), experts spoke of the need for a “change in mind-set” if the problem of NRW is to be given sufficient attention by politicians and utility managers. True enough, but how exactly do you do that?

Small public-private partnerships: inevitable and essential

Aijaz Ahmad's picture
Local governments are under pressure to provide more and better services. But in most cases, they cannot do this alone. An examination of the World Bank Group’s PPI database and the PPP databases of some key countries reveals that while there is a preponderance of larger public-private partnerships (PPPs), several small-scale PPPs with promising results have also been undertaken, especially at sub-national levels of government and by autonomous bodies affiliated with governments.

The PPI database suggests that approximately 40 percent of all projects are valued at less than $50 million, and approximately 25 percent of all projects are less than $25 million (Figure below). However, the database misses out on projects in several emerging sectors at the sub-national level. While non-traditional sectors are captured in country and sub-national databases, few of these databases are readily available in the public domain.
Source: Ahmad, A. and Shukla, S., A Preliminary Review of Trends in Small-Scale Public-Private Partnerships, World Bank Group 2014.

Carolina on my mind: North Carolina’s Innovative Road PPP Financing Mechanism

Cledan Mandri-Perrott's picture
A rendering of the south section of I-77 near
Oaklawn Avenue in Charlotte.
Credit: NCDOT communications

“In my mind, I’m goin’ to Carolina,” sang North Carolina native James Taylor – but he probably wasn’t traveling there on a road funded through a public-private partnership (PPP). That’s because PPPs in the United States are not as prevalent as in other regions of the world. The reasons are varied, but it’s in large part because each state is responsible for setting its own transportation strategy and financing plan. Furthermore, U.S. state and subnational entities have traditionally benefited from an active municipal bond market that has allowed them to access monies from the capital market.

But a recent project in a commuter corridor in North Carolina might change the way people travel around the state.  Based in Charlotte, the largest city, the I-77 is the region’s first transportation PPP. This innovative US$650 million brownfield project combines private sector know-how with an efficient use of public funding structures, and could be a model for other U.S.-based transportation projects. In fact, some of the lessons from this project could also offer a way for other countries to develop public support mechanisms.

Saint Petersburg: 3 lessons in public-private partnership implementation

Jeff Delmon's picture
St. Petersburg, Russia
Credit: https://www.flickr.com/photos/kishjar/

The enchanting city of Saint Petersburg, Russia, boasts the canals of Venice, the cathedrals of Paris, the architecture of Stockholm, and the non-stop festival atmosphere of white nights in July and August. It is Russia’s second largest city, with around 4 million people and a bustling economy.  Saint Petersburg has also learned hard-won lessons in public-private partnership (PPP) creation and implementation, including:

Lesson 1: Start with the basics
Saint Petersburg started with very big, very bold PPP projects, like a €6 billion toll road and a €1 billion tunnel, followed by a €1 billion light rail line and a €1.2 billion airport expansion. The toll road and tunnel came to bid in late 2008, mid-financial crisis—leading to Lesson 1a: Timing is everything. But rather than get discouraged, the city restructured the tunnel, flipping it around so that the concessionaire finalized the design first, thereby delaying the search for financing until the markets could recover. The toll road bid process was cancelled and the project broken up (more on this later). The light rail project was also restructured to fit with evolving ridership in the city. The airport, the last project to be launched, was the first to reach financial close, so here we simply note that hard currency revenues and an existing asset and revenue stream are convenient advantages when financial markets are lean.  Lesson 1b: Roll with the punches.

Indonesian Public-Private Partnerships now speak with one voice

Sinthya Roesly's picture
City and traffic lights at sunset in Jakarta, Indonesia

Translation of PPP Reference Guide into Bahasa Indonesia strongly supports national PPP delivery efforts

Indonesia’s strategy to become one of the 10 major world economies by 2025 – part of a long-term program outlined in its Masterplan for Acceleration and Expansion of Indonesia's Economic Development (MP3EI) – relies heavily on how quickly it can build new infrastructure to support its rapid growth. This entails cooperation among the central government, local governments, state owned enterprises, and the private sector. Of the four parties, according to experts on the ground, “the private sector has a vital role to play in this masterplan (in the form of PPP schemes), as it is expected to contribute the bulk of financing.”