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AbstractThis paper explores the link between political institutions and the size of global bank loans received to fund project finance (PF) transactions, a commonly used funding method for domestic infrastructure construction. We theorize that lenders' political risk assessments lead to a prioritization of political predictability over other institutional features of host countries. This indicates that, all else being equal, full democracies and politically closed regimes have advantages in attracting global PF capital, while hybrid regimes are least likely to receive global funds for similar projects. Using the global PF deals reported by the DealScan database and data on political institutions and economic indicators, we show that the relationship between host country regime type and global bank loans is indeed U-shaped. Our additional analysis demonstrates that a greater PF investment is associated with a lower hazard rate of regime failure in host autocracies, particularly in the form of an irregular exit by a dictator. Overall, our findings suggest that global bank loans, mostly originating from economically advanced democracies, contribute to infrastructure funding in dictatorships that might not otherwise be available through domestic or sovereign borrowing channels.

This article examines the effects of project finance on economic growth in the least developed countries (LDC). Inspired by the neoclassical growth model we set up an econometric model to estimate the effects of project finance for a sample consisting of 38 of the least developed countries using data from the period 1994-2007. The results of our study suggest, that project finance has a significant positive effect on economic growth and therefore constitute an important source of financing in the selected set of countries. Additionally, the project sheds light on other factors of importance for economic growth in LDCs. We find that a higher regulatory quality, lower government consumption and a higher level of education helps increase growth. The significance of these variables are, however, not as consistently robust as the results for project finance.

AbstractSetting project financing parameters, such as the loan to valuation ratio, loan interest rate, repayment schedules, and fees, requires detailed modelling of the resulting credit risk in a non‐recourse setting. Structured credit risk models, based on the early work of Merton, have been developed in continuous time which can assist with project financing structuring. These models require a level of mathematical sophistication that may not always be available to those undertaking project financing analysis. This note provides an overview of a discrete time binomial approach to structural credit risk modelling, which enables project financing analysts a more accessible tool to evaluate project loan structures.

Tesis por compendio ; [EN] Academics, managerial and policy making community reinforce that renewable energy investments are one of the most effective instruments to attain CO2 emission reduction targets set by the Kyoto Protocol and by the recent Paris Agreement signed at the Paris climate conference (COP21) in December 2015 in which 195 countries adopted the first-ever universal, legally binding global climate deal. The problem of financing Renewable Energy (RE) projects has become a crucial issue for private and public decision makers worldwide. Budget constraints from governments and limited bank lending capacities have led to a reconsideration of the traditional financial instruments in the RE sector. The lack of credit makes impossible for commercial banks to fund RE projects with traditional loans. Research on new financing techniques for RE projects, such as Project Finance (PF) has gained interest in recent years. PF is a recent technique applied in large investments projects. During the last decades of the 20th century new public private partnership schemes enabled large infrastructure, energy and environmental projects. In these sectors PF has been used to reduce cost agency conflicts and better risk management. There is a wide number of contributions underlying the relevance of RE, however there is a lack of research on the financial aspects of RE projects. This research aims to make several contributions. First, to provide a better understanding of the PF technique and its use in the RE sector. Second, to fill the gap of research on financial aspects of RE in the literature by reviewing contributions of MCDM to RE project evaluation from the investor's perspective. Third, we propose a MPDM Moderate Pessimism Decision Making model, which adds to the rational financial evaluation of investment opportunities a set of non-financial factors that affects the investor's decisions. Finally, within the illustrative example, we apply this multi-criteria decision making process to help banks to decide if they ...

This work shows how is possible to finance and to organize development projects in heavily depressed areas using a "project finance" method. Project finance is the financing of a project based upon a non-recourse financial structure, in which project financial resources are paid back from the cash flow generated by the project. The paper shows a real case of application of this innovative management technique in a small Ethiopian agricultural village. It can be seen that the process goes far beyond simple financial calculation to fully enter into the management of all risks involved in the development project: underlying assets, participants, natural conditions, economic factors, regulatory changes, political interference, etcetera. The technique allows the self-financing of the development project because it is the asset itself that generates such financing and this allows to promote the creation of other similar assets that will improve the quality of life of the population In the case analyzed, the construction of a well can lead to the cultivation of four orchards that will not only improve the food quality of the population but will also allow the financing of the construction of newwells with their annexes orchards. This cycle ends once all the families of the village have their own orchards. ; El uso de la técnica de gestión de proyectos, cuya financiación está garantizada por el propio proyecto gestionado, denominada financiación de proyectos sin recurso o, más habitualmente "Project Finance", puede emplearse para financiar y gestionar determinados proyectos de desarrollo local en áreas fuertemente deprimidas. El trabajo muestra un caso real de aplicación de esta innovadora técnica de gestión en una pequeña aldea agrícola etíope. Se puede observar que el proceso va mucho más allá del simple cálculo financiero para entrar de lleno en la gestión de todos los riesgos implicados en el proyecto de desarrollo: activos subyacentes, participantes, condiciones naturales, factores económicos, cambios regulatorios, injerencia política y cambios legislativos. La técnica permite la autofinanciación del proyecto de desarrollo gracias a que es el propio activo el que genera dicha financiación y ello permite impulsar la creación de otros activos similares que mejorarán la calidad de vida de la población. En el caso analizado, la construcción de un pozo puede dar lugar al cultivo de unas cuatro huertas que no sólo mejorarán la calidad alimenticia de la población sino que además permitirán financiar la construcción de nuevos pozos con sus huertas anexas. Este ciclo termina una vez que todas las familias del poblado disponen de sus propias huertas.

Project loans are one of the financial instruments widely used for delivering large infrastructure projects. Nevertheless, there is a lack of standardized procedures and quantitative methods for assessing the credit risk and determining banks' total exposure. This article aims to fill this gap by presenting a methodological framework that can account for a unique risk factor in a toll road project development—roadway network externalities. In other words, the developed framework accounts for the effect of the changes in the publicly owned transportation network on a privately owned toll road link. These changes can come in multiple ways, as the roadway expansion, signal optimization, or application of intelligent transportation system technologies; and their effects are considered using typical loan risk indicators (e.g., probability of default, losses given default) and the implied capital requirement under Basel II accord. Hence the presented model provides a direct link between transportation planning and engineering decisions and their financial implications. The application of the model is tested on a simple network example for which identification of the feeder and competing links was possible. The case study results indicate that strategic position of a toll link in a roadway network and the size of the marginal change in the surrounding network have a significant effect on the loan risk indicators and the implied capital requirement.

Many infrastructure projects around the world are funded through the project finance method, which combines private financing with public sector backing from multilateral finance institutions such as the World Bank. This examination of the theoretical and practical implications of such funding begins with a discussion of the relationship between the financial structuring of these projects and finance, policy and legal disciplines, especially in the form of investment law, human rights and environmental law. A number of case studies are then examined to provide practical insights into the application (or otherwise) of human rights and sustainable development objectives within such projects. While these theoretical perspectives do not conclude that the project finance method detracts from the application or implementation of human rights and sustainable development objectives, they do highlight the potential for the prioritisation of investment returns at the expense of human rights and environmental protection standards.

Machine generated contents note: Part I. The Framework: 1. An introduction to the issues Sheldon Leader; 2. The linkages between project finance and sustainable development Annie Dufey and Maryanne Grieg-Gran; 3. Project finance and the relevant human rights Ozgur Can Kahale; 4. Applying international environmental principles within project-financed transnational investment agreements David M. Ong; Part II. Special Topics: 5. Risk management, project finance, and rights-based development Sheldon Leader; 6. Freezing the balancing act?: Project finance, legal tools to manage regulatory risk, and sustainable development Lorenzo Cotula; 7. Human rights impact assessments and project finance Tamara Wiher; 8. Project finance investments and political risk: an empirical investigation Claudia Girardone and Stuart Snaith; 9. Insurance as a risk management tool: a mitigator or an aggravant? Rasmiya Kazimova; 10. Irreparable damages, project finance and access to remedies by third parties Judith Schönsteiner; Part III. Case Studies: 11. The implications of the Chad-Cameroon and Sakhalin transnational investment agreements for the application of international environmental principles David M. Ong; 12. The human rights and sustainable development implications of the project finance arrangements for the Baku-Tbilisi-Ceyhan (BTC) pipeline project Annie Dufey with contribution from Rasmiya Kazimova; 13. The Orion and CMB pulp plants in Uruguay Annie Dufey with contribution from Diana Morales; 14. The Newmont and Anglogold mining projects Nii Ashie Kotey and Poku Adusei; 15. Overview and recommendations Sheldon Leader and Rasmiya Kazimova

This work provides a structured process for determining the commercial viability of large construction projects - from gas pipelines and bridges to hospitals and schools - procured with project finance (PF). With this guide, readers can develop their own assessment structures as required using the assessment mechanism described.