Privately Financed Infrastructure Research Articles

Corruption, Democracy, and Privately Financed Infrastructure

Do political institutions moderate the influence of corruption on privately financed infrastructure projects? We argue that electoral competition incentivizes politicians to monitor bureaucratic corruption and focus on the public benefits of projects. Without such incentives, corruption is not monitored and the private benefits of bribes and favorable contract terms are responsible for increasing numbers of projects. Studying 116 countries between 1984 and 2012, we find that as public-sector corruption increases in democracies, no change in the number of projects is observed, while more projects emerge in non-democracies as corruption worsens.

Legal Analysis of the Procurement of Privately Financed Infrastructure Projects in Nigeria

Legal Analysis of the Procurement of Privately Financed Infrastructure Projects in Nigeria

Modeling Risk Allocation in Privately Financed Infrastructure Projects Using Fuzzy Logic

Abstract: Risk allocation (RA) plays a critical role in privately financed infrastructure projects. Project performance is contingent on whether the adopted RA strategy is efficient. However, no mechanism was specifically designed to facilitate the risk allocation decision‐making (RADM) process. Two theoretical frameworks based on the transaction cost economics (TCE) theory and on both the TCE and the resource‐based view (RBV) of organizational capability, respectively, were thus adopted in this article. As conventional modeling techniques are not suitable for modeling RADM processes, which involve ambiguous and qualitative information, fuzzy inference systems (FISs) were developed, illustrated, and evaluated to model these frameworks. An industry‐wide survey and rounds of expert consultation were conducted to collect data and generate fuzzy rules. It was found that both FISs are capable of reliably explaining the RADM process. In particular, the FIS based on both the TCE and the RBV theories performed more accurately and thus is more suitable for forecasting efficient risk allocation strategy.

Uncitral Model Legislative Provisions on Privately Financed Infrastructure Projects - An Introductory Note

Uncitral Model Legislative Provisions on Privately Financed Infrastructure Projects - An Introductory Note

UNCITRAL Model Legislative Provisions on Privately Financed Infrastructure Projects

Journal Article UNCITRAL Model Legislative Provisions on Privately Financed Infrastructure Projects Get access Uniform Law Review, Volume 8, Issue 4, December 2003, Pages 892–946, https://doi.org/10.1093/ulr/8.4.892 Published: 01 December 2003

Effects of Tariff Design in Risk Management of Privately Financed Infrastructure Projects

The design of tariff is a key issue in the development of privately financed infrastructure projects. It involves the determination of tariff magnitude, the choice of tariff structure, and the design of adjustment mechanisms. Tariff structures can be an all-in tariff or a compound tariff. Tariff adjustment mechanisms can be used to address different risk factors such as inflation, exchange rate, demand, and fuel prices. An appropriate combination of tariff structure and adjustment mechanism can be effective to manage key risks of privately financed infrastructure projects. Simulation results show that a well-designed tariff can create a win-win solution for both project promoter and the host government.

Tariff adjustment frameworks for privately financed infrastructure projects

Since privately financed infrastructure (PFI) projects are usually natural monopolies, their tariffs should be regulated to ensure socially desirable outcomes. In reality, the regulation is usually realized through tariff adjustment mechanisms. There are four basic tariff adjustment frameworks for PFI projects - adjustment based on sale price, revenue, operating income and profit after tax. They have different risk exposures and incentives. The adjustment based on the sale price provides the project company with the highest potential to increase profit but exposes it to the highest risk, while the adjustment based on the guaranteed ROR exposes the project company to the lowest risk but provides the least potential for increasing profit. Adjustments based on the revenue or the operating income are somewhere in between. In practice, a hybrid of two or more adjustment frameworks may be adopted to adapt to specific project environments. A well-designed tariff adjustment framework can create a ‘win-win’ solution for both the public and private sectors.

The UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects

The UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects

The Problem of Attracting Long-Term Debt for Privately Financed Infrastructure

The Problem of Attracting Long-Term Debt for Privately Financed Infrastructure

Debt Capacity and Optimal Capital Structure for Privately Financed Infrastructure Projects

Governments can use concession agreements to induce private sector development and operation of infrastructure projects. In concession agreements, several private sector companies form a separate company that becomes responsible for financing, building, and operating the facility. Before joining forces, though, the prospective players must determine how to fund the associated construction and startup costs. Such projects generally repay any debt obligations through their own net operating income, and do not provide the lenders with any other collateral. Thus, the likelihood of a costly bankruptcy becomes a real issue. This paper, explains that, under these circumstances, the amount of debt that a project can accommodate is less than 100 percent debt financing. The amount of debt that maximizes the investors' return on equity is less than the project's debt capacity, and the amount of debt that maximizes the project's net present value is even smaller. Exceeding these debt amounts and moving towards debt capacity is discouraged because it can quickly erode the project's value to the investors. An example is presented.