Financial Closure Research Articles

Procuring authorities and project performance: a case study of PPP highway projects in India

PurposePublic-private partnership (PPP) highway projects in India are undertaken at both state and national levels, such that differences exist in how the procuring authorities manage project risk during the development and construction phase under different institutional frameworks. This study assesses the performance implication of the different administrative positionings of the procuring authority.Design/methodology/approachA data set of 516 PPP highway projects implemented in India formed the basis of this study. Means comparison, ordinary least squares (OLS) regression and seemingly unrelated regression were used to assess the impact of procuring authority on schedule performance.FindingsThe findings suggest that the state and the national highway projects were no different in achieving financial closure. However, the administrative positioning of the procuring authorities had a significant impact on other schedule performance variables. The construction of the state highway projects started quickly after the financial closure compared to the national highway projects. Moreover, the state highway projects were not only planned to be implemented at a faster rate but they were actually implemented at a faster rate and had a lower time overrun.Practical implicationsProcuring authorities under the state governments, being closer to the project, are better placed to manage project risk than those under the national government.Originality/valueThe administrative distance of the procuring authority from the PPP project and its implication on performance has never been studied.

The public-private partnershipsin healthcare sector in China.

This manuscript is a narrative review on experience in the healthcare public-private partnerships (PPP) field project in China. The PPP model allows healthcare officials to share the risk of building new facilities with the private sector. The objective of this study is to evaluate and to review the PPP of healthcare sector in China, and to investigate the critical success factors and best practice of PPP. We adapted the PPP evaluation framework of the World Bank Independent Evaluation Group as our conceptual framework to summarize the literatures. The current study systematically reviewed the evolution and current status of public and private hospitals development in China, and to investigate factors related to the successful and less successful deployment and performance of PPP in the healthcare sector of China, and to develop best practice models of PPP among hospitals of China. We found that the PPP organizations providing finance and political risk coverage, thus enabling specific PPP transactions to reach financial closure-potentially setting demonstration effects. Such PPPs may then contribute to improving access to infrastructure and social services, which drives economic growth and other optimal outcomes.

Public private partnerships and water and sanitation infrastructure development in Zimbabwe: what determines financing?

BackgroundZimbabwe envisions being an upper-middle-income economy by the year 2030. The vision 2030 has infrastructure development as a stand-out pillar upon which it is founded. The vision envisages well-developed, modern, efficient and resilient infrastructure as paramount to Zimbabwe’s economic recovery. The policy plan seeks to increase infrastructure investments in energy, transport, information technology, tourism, housing, and water and sanitation. However, a still hesitant private sector exists with regard to investment in water and sanitation infrastructure even in developed countries. Thus, the study seeks to analyse determinants of financing water and sanitation public private partnerships in Zimbabwe given that there is no consensus between reseachers on how determinant factors impact PPP investments.MethodsThe study applied Tobit regression methodology on data collected for the 25 years ending 2021 to investigate determinants of financing water sanitation PPPs in Zimbabwe. Tobit regression method is preferred given the censored nature of the investment values of water and sanitation public private partnerships that reached financial closure in Zimbabwe.ResultsIn Zimbabwe, financial market development is a key financing determinant of water and sanitation public private partnerships. Both the capital and bank market development influences infrastructure financing in Zimbabwe`s water and sanitation sector. Moreover, foreign direct investment negatively and significantly relates with water and sanitation public private partnership investments.ConclusionAttracting private investment into Zimbabwe`s water and sanitation sector requires that policy design targets capital and bank market development. Reforms can be achieved through putting in place sound frameworks that facilitate effective financial intermediation systems, enhance market liquidity and lower cost of capital.

Closing the gap: financial closure in public private partnership markets

Closing the gap: financial closure in public private partnership markets

Factors affecting the intention to use cloud accounting among Sri Lankan accounting professionals

Cloud accounting systems enable business owners to collaborate with their accountants daily to ensure that all transactions are up to date, making it much simpler and quicker to file taxes, accelerating the financial closure process and providing ease of compliance, accuracy, and a single source of truth. This research study was carried out to examine the factors affecting the intention to use cloud accounting among Sri Lankan accounting professionals. This study was primarily carried out by developing a conceptual model based on several aspects from various theoretical models of technology adoption. The sample of professionally qualified accountants in Sri Lanka was selected using the convenience sampling method. This study consists of six independent variables such as perceived usefulness, perceived ease of use, job relevance, trust, computer self-efficacy, and cloud accounting awareness. Data were collected from 167 Sri Lankan accounting professionals in 2021 via an online questionnaire and intention to use cloud accounting was considered as the dependent variable. The results of the study indicated that respondents use cloud accounting because of perceived usefulness, perceived ease of use, job relevance, trust, computer self-efficacy, and cloud accounting awareness. Further analysis revealed that job relevance and cloud accounting awareness are the most influential factors when using cloud accounting. Sri Lanka could gain a competitive advantage if organizations adapted to these cloud accounting solutions since accounting professionals are well-versed in this phenomenon.

IMPROVEMENT OF TAXATION OF INDIRECT TAXES IN THE REPUBLIC OF KAZAKHSTAN

The article discusses the induction method of considered to have established a solid legal and institutional framework for public-private partnership (PPP) projects, which led to a sharp increase in the formation of PPPs: In addition to the fact that Kazakhstan is a leader in Central Asia in terms of creating a legal and institutional framework for PPP and the number of signed PPP contracts, Kazakhstan has also achieved success in implementing the control concession project Big Almaty Ring Road with a length of 66 km (toll road around the city of Almaty), also known as BAKAD. The financial closure of this project took place on August 7, 2020, making it the largest PPP project in Central Asia. In order to define the concept of the control environment and its place in the audit of the internal control system, it is necessary to establish the essence of internal control, its goals and structure. The goal includes the goals of the organization for doing business, namely, operational objectives, profitability indicators, business activity, as well as ensuring the safety of assets. The second goal concerns the preparation of reliable financial (accounting) statements, as well as management information. The third purpose of internal control implies ensuring compliance of the company's activities with the requirements of both general legislative acts and specific ones directly regulating the activities of the organization. In addition to compliance with the law, this goal also applies to ensuring compliance with the requirements of internal regulatory documents of the organization.

Challenges and enabling features of small and medium infrastructure public–private partnerships (P3s): a case study of the US P3 infrastructure market

PurposeIn classical perspective, projects under a certain size are not feasible for P3. However, there is an emerging trend on using P3 to deliver projects which are frequently at small- to medium- size to meet ever-increasingly complex social needs, including enhancing lifecycle performance of existing facilities, designing and building for resilience and sustainability, ensuring cost effectiveness of public spending and fostering innovation. In contrast with the increasing implementation, small and medium P3s, especially those in the United States, receive little attention in existing studies. This study aims at answering the question: in the context of US, what features of those small- to medium- sized P3s with success records enable the selection of P3 as delivery method.Design/methodology/approachBy critically reviewing the literature, this study synthesizes and discusses the challenges in classical perspective. The authors use a framework drawn from the transaction cost to propose two types of enabling features that could contribute to the success of small and medium P3s. The proposed enabling features are supported by case study of twelve identified small- to medium- sized P3s which have reached financial closure as of 2018 in the United States.FindingsThe results show how the identified enabling opportunities have been used in these cases to enhance the viability of the P3 model in the infrastructure market. The two types of features are high tolerance enabler explained by the expectations on indirect and non-monetary compensations, and cost reduction enablers including: (1) being in the sectors with well-established traditions on using private investments; (2) having developers with expertise on infrastructure finance; (3) being in the jurisdictions with favorable legislative environment and (4) having less-uncertain future project revenue.Originality/valueThis study, for the first time, critically examines the enabling features of the P3 model for delivering small and medium infrastructure projects in the United States. This research sheds light on the credibility and viability of small- to medium- sized P3 and increases the confidence in policy makers to promote this model.

Failure of Operational PPP Projects in India Leading to Private Developer’s Apathy to Participate in Future Projects: A Case Study Based Analysis

The goal of this study is to examine the failure of operational public-private partnership (PPP) infrastructure projects in India. The case study based analysis is done of eleven operational PPP projects from infrastructure subsectors like roads, metro rail, seaports, and power projects to investigate various risks faced during the life cycle of projects. The construction risks like land acquisition delay, change in scope, delay in financial closure resulting in time and cost overrun, revenue risk of not getting adequate revenue during operation phase and legal disputes between the authority and the concessionaire are prominent risks observed in these projects. Mitigating these risks through efficient life cycle contract management and appropriate allocation of risk creates adequate risk-adjusted financial returns to the private developers and value for money for the government. The study concludes that failure in contract and risk management in case of the majority of operational projects resulting in disappointing financial returns is the major reason for the private developer's apathy towards participation in a once successful PPP program in India.

Effect of Hybrid Annuity Model on Road Project

Indian road network is one of the largest road network in world and need huge funding for maintaining and construction of new project. And in India time and cost overrun on infrastructure project are very common. BOT was one of the most successful model from PPP type. But from last couple of years BOT model is lagging behind to achieve financial closure within budget. Most of the BOT project fails due to not generating minimum revenue. Government modifies the MCA (Model Concession Agreement) time to time to eliminate lacunas from existing model. Recent modification of PPP is HAM (Hybrid Annuity Model). Hence to overcome from this type of difficulty government of India introduce the new PPP model called Hybrid Annuity Model (HAM) in 2016. This model was introduce to reduce the financial burden from the contractor. HAM model is a contractual arrangement made by government to overcome the limitations from BOT model. The financial strategy of HAM model is different than BOT model. In HAM model 60% funding made by authority during construction phase and remaining 40% is on annuity basis. In this paper the strength and limitation of HAM model is found out and identified most influencing factor for success of HAM model by using Relatively Importance Index (RII) technique. And schematic representation of financial model of HAM is generated by using Model concession Agreement (MCA)

Planning project closure phase in combined cycle power plant projects

Project closure is a significant and mandatory process, particularly in mega projects. During the closing phase, mega projects often encounter a number of problems including lack of budget, shortage of required resources, disputes and claims. This paper presents a scientific procedure for performing closing process group in mega projects. This study was conducted on a Combined Cycle Power Plant (CCPP) mega project in Esfahan as a case study. A project planning system has been integrated with a continuous project control system in order to execute and utilize this process group. The aim of this paper is to apply an appropriate planning for implementation of the CCPP project in the closing phase with minimum deviation. The proposed closing process consists of a preliminary phase, transition planning, and four major phases, such as physical, contractual, legal and financial closure. After performing the process group, the results of this project were compared with results obtained from similar projects in term of time. Implementing this process group definitely enabled us to meet projects deadline with minimum deviation.

Integrated North Sea grids: The costs, the benefits and their distribution between countries

A large number of offshore wind farms and interconnectors are expected to be constructed in the North Sea region over the coming decades, creating substantial opportunities for the deployment of integrated network solutions. Creating interconnected offshore grids that combine cross-border links and connections of offshore plants to shore offers multiple economic and environmental advantages for Europe's energy system. However, despite evidence that integrated solutions can be more beneficial than traditional radial connection practices, no such projects have been deployed yet. In this paper we quantify costs and benefits of integrated projects and investigate to which extent the cost-benefit sharing mechanism between participating countries can impede or encourage the development of integrated projects. Three concrete interconnection case studies in the North Sea area are analysed in detail using a national-level power system model. Model outputs are used to compute the net benefit of all involved stakeholders under different allocation schemes. Given the asymmetric distribution of costs and benefits, we recommend to consistently apply the Positive Net Benefit Differential mechanism as a starting point for negotiations on the financial closure of investments in integrated offshore infrastructure.

A feasibility pilot using a mobile personal health assistant (PHA) app to assist stroke patient and caregiver communication after hospital discharge.

Recent advancements have lowered national acute stroke mortality, yet posthospital care and readmission rates remain challenges. A personal health assistant (PHA) may help manage the spectrum of posthospital care. We hypothesized that a PHA application (app) would be associated with high poststroke patient care satisfaction and might prevent hospital readmission. This is a case series of acute stroke patients admitted to a single, tertiary care, comprehensive stroke center (Mayo Clinic, Jacksonville, Florida) who were offered a personal health assistance through a smart phone app. Patients were screened based on having a cerebrovascular event and the ability to use a necessary device. All patients received the standard poststroke discharge protocol, the PHA app, and the 30-day Likert scale survey. We screened 21 patients and enrolled 3 (14%) before premature financial closure. Two of the 3 patients rated the app highly, and the third patient had not started using it. Of the ineligible patients, 4 had no device, 3 declined enrollment, and 2 were not able to use the device. One of the 2 patients who used the PHA app was readmitted for new stroke symptoms. Both patients who used the app were very satisfied with the PHA and their posthospital care coordination. This study had an enrollment rate of about 14% due to various factors, including limited access or utilization of necessary technology. Though limited by final patient sample size and early termination from funding, this study provides useful information about developing future mobile health apps for acute stroke patients.

PUBLIC PRIVATE PARTNERSHIPS FROM THE POINT OF VIEW OF LARGE CONSTRUCION COMPANIES

Stringent budget constraints and the need to build infrastructures have resulted in Public–Private Partnerships (PPP) being acknowledged as a desirable delivery/financing system for public projects. A PPP is an agreement between a public agency and a private consortium that allows the financing, design, construction, and operation of large scale infrastructure. While the public agency can be a single government department (e.g., a highway department), the private consortium is composed of several parties including contractors, designers, financial institutions, and other investors. The party that plays a critical role in the consortium is typically a large construction company. Various researchers have identified some of the critical factors that affect the success of a PPP, but only few studies have undertaken a comprehensive examination of financial issues. This paper aims to fill this research gap by analyzing information collected from large construction companies pertaining to financial issues. A structured questionnaire survey was administered to the largest 190 international construction companies listed by Engineering News–Record to investigate the relative significance of 19 financial issues that were identified in a thorough review of the literature. The findings indicate that factors such as inappropriate financial analysis, a low rate of return, and long delays in reaching financial closure have a high impact on the success of PPPs. Moreover, the public agency’s tendency for corruption and the private consortium’s weak financial standing can also undermine the financial strength of the arrangement. The findings can be used by all participants in PPPs to evaluate the financial issues in such projects.

Utility-scale PV power and energy supply outlook for South Africa in 2015

In South Africa, the projects for the first two rounds of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) have reached financial closure, and construction and commissioning has commenced, on all of the twenty-seven PV sites. The question remains as to what can be expected from these PV facilities in 2015 should all of them be fully operational. The objective of the paper was then to analyse the power and energy supply outlook from an annual time series simulation of all approved utility-scale PV facilities. The total amount of delivered energy, if the solar resource profile in 2015 will be similar to that of 2010, will be 1906 GWh. This amounts to just below 1% of the total (net) electricity generated by Eskom, the national utility, in 2012. The cumulative maximum power will almost reach 900 MW. Thus, all of the PV projects will represent up to a maximum of 2% of Eskom's net rated capacity. Of importance to policy- and decision-makers, is that the supplied power and energy performances are well within the best practice spinning reserve of the national grid. As a consequence, the intermittencies of these facilities are of lesser importance.

Capital Forbearance, Ex Ante Life Insurance Guaranty Schemes, and Interest Rate Uncertainty

Insurance guaranty funds have been adopted in many countries to compensate policyholders for losses resulting from insurers’ insolvencies. In this article we focus on the risk-based premiums in ex ante insurance guaranty schemes since a preassessment mechanism could reduce the shareholders’ incentive to engage in risk-taking behavior. We derive the closed-form solutions of the risk-based premium charged by the insurance guaranty fund in a setting that incorporates financial leverage, asset allocation, early closure, and capital forbearance during the grace period. Most importantly, we assume that the interest rate is stochastic, and we find that the premium is underpriced if the uncertainty of the interest rate is neglected by the insurance guaranty fund. Moreover, the influence of stochastic interest rate for the premium is more significant when we consider the capital forbearance mechanism. The impacts of the key factors in our model that decide the fair premium of the guaranty fund are examined numerically. The results of our analysis could provide valuable insights for regulators in terms of revising regulatory policies and insurance guaranty schemes.

The Financial Sector and Growth in Emerging Asian Economies

This study suggests that Asian emerging-market economies now have financial sectors relatively unlikely to provoke new financial crises, either because of reforms after the late-1990s East Asian financial crisis or because of the dominance of state-owned banks not subject to bank runs. Financial intermediation is found to be surprisingly high and is consistent with higher rates of saving and investment and hence growth in the main economies of the region than in counterparts in Latin America. There are sharply diverging patterns nonetheless (e.g., high foreign ownership of banks in the Republic of Korea versus minimal presence in the People's Republic of China). Differing national structures are identified (bank dominated, portfolio oriented, diversified). Policy recommendations include establishing clear long-term plans to improve efficiency in state-owned banks or reduce their dominance; pursuing bank capitalization targets at least as ambitious as those of Basel III; ensuring adequate regulation of growing nonbank intermediaries; reversing a recent trend toward renewed international financial closure in some economies; and improving legal security of bank regulators in some countries.

Best Practice for Financial Models of PPP Projects

Public-private partnership (PPP) project's arrangement involves many participants with complex transactions and diverse interests at 5 different project stages. Especially in the project financing perspective, this arrangement creates the entire project evaluation process prone to take an extensive period before reaching financial closure. The importance of utilizing financial model as a tool for project evaluation and negotiation is highlighted in this study. 26 input assumptions and 16 output variables have been identified through comparison study of three PPP financial models, and their significances were verified based on pilot studies in India and the UK and expert opinion solicited worldwide through a structured questionnaire survey. SPSS program was used to evaluate the survey responses. The best practice PPP financial model was identified quantitatively by the agreement of four groups of stakeholders (i.e. sponsors, authorities, lenders, and consultants) upon the most preferred financial input and output indicators.

Pricing and financing of infrastructure projects; the challenge before the indian policymakers

Ever since the economic reforms started two decades ago, India has been trying to lead the developing nations in terms of building their infrastructure. The challenge of government‟s fund constraint has been tried to put behind by allowing flow of funds from private sources with regulatory control in government own hand. However, with the global economic crisis that had knocked heavily at the doors of Indian economy too during last couple of years, it was found that developmental bottlenecks for infrastructure sector has escalated in spite of the best efforts by the government.Arranging of Debt and equity capitals are major financial investment concerns for infrastructure developers today. While studies reveal that issues like land acquisition, utility shifting, discrepancies in DPR, state support agreements, dispute resolutions are still considered to be critical for an infrastructure development projects, more recently the loose ends at the financial structures of many projects are posing as more vulnerable threats. Especially in the period of economic recession, the financial organizations have tightened their hands and as a result project cash flows are affected at halfway round. As the investment retrieval periods are going to be prolonged, the investors are facing uncertainty on their assured return. The commercial banks which had already reached their sectarian limits; still tried to backed promoters with decent track records, with clearances in place and well defined business plans. However, very few projects could achieve financial closure during past two years. The participation rates in recent biddings of PPP projects are also not encouraging, especially in Highway sector. More recently, there have been reports of NHAI favoring for moving back to the old EPC mode. Salient features of few case studies of Indian projects have highlighted that there is no project specific debt equity ratio and it may differ from project to project. Study by the authors also reveals that availability of debt in India is Sector specific and projects are still being supported with generous government grant varying upto 70% in case of Jawaharlal Nehru National Urban Renewal Mission (JnNURM) schemes. However, the principal concern remains for retrieval of at least 20% return on the investment by the private party. A fair bidding, a robust agreement and the well planned pre-constructional activities can be beneficial to all the stack holders of the infrastructure development project. But whatever be the planning, with the complexity of multiple issues involved for choice of funds,one has to keep in mind that investments in infrastructures are non-recourse in nature. At the same time the sharing of responsibilities in a pre-framed manner proves to be successful in many occasions for the participants concerned and reflect a win-win situation for all.

CAUSES OF DELAY IN INDIAN TRANSPORTATION INFRASTRUCTURE PROJECTS

A survey on time performance of different types of construction projects in western Maharashtra was co nducted to determine the causes of delay and their importance according to e ach of the project participants, i.e., the owner, consultant and the contractor. Sixty four causes of delay were identified during the res earch. It seems that the problem is common and nota ble as 72% of the total infrastructure projects reported by all the respond ents were delivered late, whereas only 28% were com pleted on time. Clients’ respondents indicated that 59% of the public projec ts they were involved in were delivered late. Consu ltants’ respondents reported that 62% of the projects they were involved in were completed late. Contractors’ respondents also shar e the same view and articulated that 77% of the projects they are invol ved in exceeded the preset duration. The top five icauses of construction delays in transportation infrastructure projects ar e mainly Land Acquisition, Environmental Impact of the project, financial closure, Change orders by the client, Poor site management asupervision by contractor .Respondent’s opinion about the contribution towards the delay is 50 % respondent feels that del ay in the construction in mainly due to the contrac tor. 40 % of respondent feel that client is mainly responsible for the delay in const ruction projects. And only 10 % of respondent feel that delay mainly occur due to consultant. It is evident that consultant as a medi ator has less responsibility in construction delays .

Project finance and investments in risky environments: evidence from the infrastructure sector

Purpose – Privately financed infrastructure projects commonly use a project finance structure. Project finance is expected to facilitate investment flow in risky environments. The objective of this paper examines the link between the use of project finance and investments in risky environments. Design/methodology/approach – Project Finance International database has been used as the data source for this study. 3,372 transactions from power, oil and gas, transportation, telecommunication, and water supply sectors have been considered means analysis and multi-variate regression models have been used in the analysis. Findings – The average project cost in a developing country was higher than that of developed countries. Gearing ratio, however, was higher in the developed countries. This indicated that the projects had a lower level of inherent risk, which enabled them to get funded at high gearing levels. The proportion of foreign banks in the syndicate was higher in the developing countries, which indicated that the use of project finance has helped to attract investment from foreign investors. Practical implications – Practitioners and project development companies in the developing countries should actively consider using project financing technique for achieving financial closure of large infrastructure projects. Simultaneously, policy makers should create appropriate supporting institutional framework (regulatory, legal, contractual arrangements) that supports the use of project finance. Originality/value – As far as the authors know, this study uses a dataset that has not been used in the previous studies. The results of this paper strengthen the understanding of project financing.