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Felix I. Lessambo
International
Project Finance
The Public-Private
Partnership
International Project Finance
Felix I. Lessambo
International Project
Finance
The Public-Private Partnership
Felix I. Lessambo
New Britain, CT, USA
ISBN 978-3-030-96389-7 ISBN 978-3-030-96390-3 (eBook)

https://doi.org/10.1007/978-3-030-96390-3
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer
Nature Switzerland AG 2022
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Acknowledgments
Writing a book is always a challenge. However, writing a book on

International Project Finance, a more daring intellectual exercise.
I would like to thank my astoundingly supportive friends who
motivated me all along the project, knowing my dedication to the
subject and thought I am more than able to complete this project:
Dr. Marsha Gordon, Dr. Linda Sama, Dr. Lavern A. Wright, Dr. Lester
Reid, Yanick Gil, and Jerry Izouele.
Last but not least, thank you to all the original readers of this book
when it was in its infancy. Without your enthusiasm and encouragement,
this book may have never been ready.
v
Contents
1 Introduction to Project Finance 1

1.1 General 1
1.2 Characteristics of Project Financing 3
1.3 Public-Private Partnership Framework 6
1.3.1 PPP Policy 6
2 Project Financing and Direct Conventional Financing 11
2.1 General 11
2.2 Corporate Finance 11
2.3 Traditional Procurement 12
2.4 Project Finance 13
2.5 Advantages and Disadvantages of Project Finance 14
2.5.1 Advantages 14
2.5.2 Disadvantages 15
2.6 Evolution of Project Finance 16
2.6.1 The Extractive and Oil Industry 16
2.6.2 The Natural Resource Industry 17
2.6.3 The Power Industry & Beyond 18
3 Sources of Project Funds 19
3.1 General 19
3.2 Sources of Funds 19
3.3 Project Financing Participants 26
3.4 Public–Private Partnerships 29
3.5 Structuring Project Finance 29
vii
viii CONTENTS
4 Bankability 33
4.1 General 33
4.2 Bankability Assessment 34
4.2.1 Certainty of Revenue Stream 34
4.2.2 Risk Factors 36
4.2.2.1 Political Environment 36
4.2.2.2 Economic Environment 37
4.2.2.3 Legal System 37
4.2.2.4 Regulatory Framework 37
4.2.2.5 Environmental Risk 38
4.2.2.6 Project Specificity 38
4.2.2.7 Project Financial Structure 39
4.2.2.8 Third-Party Risk Allocation 39
4.2.2.9 Contract Agreement 40
4.3 Bankability Tradeoff 40
5 Public Procurement: Laws and Regulations 43
5.1 General 43
5.2 Public Procurement Legal Framework 44
5.3 Principles of Public Procurement 45
5.3.1 Transparency 45
5.3.2 Integrity 46
5.3.3 Efficiency 46
5.3.4 Fairness 47
5.3.5 Openness 47
5.3.6 Competition 48
5.3.7 Accountability 48
5.4 Public Procurement Cycle 48
5.4.1 Competitive Tendering 48
5.4.2 Pre-qualification of Bidders 49
5.4.3 Processing and Evaluating Bids 49
5.4.4 Making Award Recommendations 50
5.4.5 Negotiating Contracts 50
5.4.6 Contract Award Letter and Signing
the Contract 50
5.5 Public Procurement Laws in the United States, EU,
and China 50
CONTENTS ix
5.5.1 Public Procurement Laws in the United

States 50
5.5.2 Public Procurement Laws in the European
Union 53
5.5.3 Public Procurement Laws in China 55
6 Assessment of Project’s Viability and Analytical Tools 57
6.1 General 57
6.2 The Procurement Process 58
6.3 The Six Assessment Areas 58
6.3.1 Project Identification and PPP Screening 58
6.3.2 Appraisal and Preparation Phase 59
6.3.3 Structuring and Drafting Phase 59
6.3.4 Tender Phase 60
6.3.5 Contract Operational Management 60
6.3.6 Contract Finalization Management 61
6.4 The Analytical Tools: Infrastructure Prioritization
Framework 61
6.4.1 Infrastructure Prioritization Framework 61
7 The Identification and Management of Risks 65
7.1 General 65
7.2 Identification of Projects: Project Cycle 65
7.3 Risk Assessment 69
7.3.1 Risk Identification 70
7.4 Risk Allocations 77
7.4.1 The Project Sponsor 78
7.4.2 The Lenders 78
7.4.3 The Contractor 78
7.4.4 The Suppliers 78
7.4.5 The Customers 79
7.4.6 The Project Company 79
7.4.7 The Governments 79
8 The Project Finance Contractual Arrangement 81
8.1 General 81
8.2 PPP Types 81
8.2.1 Build–Operate–Transfer (BOT) 81
8.2.2 Build–Own–Operate–Transfer (BOOT) 82
8.2.3 Buy-Build-Operate (BBO) 83
x CONTENTS
8.2.4 Build–Own–Operate (BOO) 83

8.2.5 Build–Own–Operate–Transfer (BOOT) 83
8.2.6 Design–Build 84
8.2.7 Design–Build–Finance 84
8.2.8 Design–Construct–Maintain–Finance
(DCMF) 85
8.2.9 O & M (Operation & Maintenance) 85
8.2.10 Lease-Purchase 85
8.2.11 Turnkey Contract 85
8.3 Bidding and Award Procedure 86
8.4 PPP Contract Clauses 87
8.4.1 PPP Contracts Under Various Legal Systems 87
8.4.2 PPP Key Contractual Terms 88
8.4.2.1 Force Majeure 88
8.4.2.2 Material Adverse Government
Action 94
8.4.2.3 Change of Law 94
8.4.2.4 Termination of Contract 95
8.4.2.5 Governing Law and Dispute
Resolution 98
9 Alternative Dispute Resolution 99
9.1 General 99
9.2 Advantages and Disadvantages of ADR 100
9.2.1 Benefits of ADR 100
9.2.2 Disadvantages of ADR 101
9.3 Forms and Types of ADR 102
9.3.1 Adjudicative ADR 102
9.3.2 Evaluative ADR 104
9.3.3 Facilitative ADR 105
9.4 International Platforms 106
9.4.1 The ICSID 107
9.4.1.1 Functions 107
9.4.1.2 Composition of Arbitral
Tribunal 107
9.4.1.3 Applicable Rules of Law
and Conduct of the Arbitration 108
9.4.1.4 Arbitration Award 108
9.4.2 The International Chamber of Commerce 109
CONTENTS xi
9.4.2.1 ICC Functions 109

Tribunal 110
9.4.3 The Arbitration Institute of the Stockholm
Chamber of Commerce (SCC) 113
9.4.3.1 The SCC Functions 114
Tribunal 114
9.4.4 The Hong Kong International Arbitration
Centre (HKIAC) 117
9.4.4.1 The HKIAC Missions 117
Tribunal 117
9.4.5 The Singapore International Arbitration
Centre 120
Tribunal 120
9.4.6 The Cairo Regional Centre
for International Commercial
Arbitration 122
Tribunal 123
xii CONTENTS
10 Project Finance Governance 127

10.1 General 127
10.2 OECD Principles for Public Governance of PPP 127
10.3 Quality Infrastructure Investment Principles 129
10.4 PPP Governance Paradigm 131
10.4.1 Traditional Public Administration 131
10.4.2 New Public Management 131
10.4.3 Collaborative Governance 132
10.4.4 Private Governance Approach 132
11 International Project Finance and Corruption 133
11.1 General 133
11.2 Forms of Corruption 133
11.3 Fighting Corruption Within World Bank
Group-Financed Projects 138
11.3.1 Effects of Corruption on Projects Finance 139
11.3.2 Corruption in the Extractive Industries 140
11.3.3 Example: Extractive Industries
Transparency Initiative 140
12 Infrastructure Projects Finance 143
12.1 General 143
12.2 Substantial Project Financing 143
12.2.1 Water and Sanitation Project 143
12.2.1.1 Human Right to Water
and Sanitation 144
12.2.1.2 Water and Sanitation PPP 145
12.2.2 Transportation and Telecommunications
Projects 149
12.2.2.1 Transportation 149
12.2.2.2 Telecommunications 154
12.2.3 Climate and Energy 158
12.2.3.1 Climate Change 158
12.2.3.2 Energy Power 160
13 Public Fiscal Risk Assessment Model 165
13.1 General 165
13.2 Understanding the Fiscal Metrics 166
13.3 PPP Accounting and Reporting 166
13.3.1 Budgeting 167
CONTENTS xiii
13.3.2 Accounting 167

13.3.3 Reporting PPPs in Public Deficit and Debt 168
13.4 Assessment of Fiscal Risk 168
13.5 Performing the Sensitivity Analysis 170
14 Cases Study 173
14.1 General 173
14.2 Successful Stories 173
14.2.1 Breaking New Ground: Lesotho Hospital
Public-Private Partnership—A Model
for Integrated Health Services Delivery 173
14.2.1.1 Conclusion 182
14.2.2 Ukraine: Providing Safe Harbors
for Ukraine’s Economic Growth 182
14.2.3 Senegal—A Road Leads to Economic
Opportunities 185
14.2.4 China (1997): The Greenfield Project
to Install Modern Medium-Density
Fiberboard Plants 186
14.3 Unsuccessful PPP 188
14.3.1 Liberia Education Advancement
Programme (LEAP) 188
14.3.2 The New Paris Courthouse 191
14.3.3 International Airport
of Chinchero—Cuzco 194
Glossary 199
Bibliography 203
Index 211
Acronyms
AAA American Arbitration Association

AALCO Asian-African Legal Consultative Organization
ARRA American Recovery and Reinvestment Act
ASPA Armed Services Procurement Act of 1949
BIT Bilateral Investment Treaty
BOO Build, Own, Operate
BOOT Build, Own, Operate, Transfer
BOT Build, Operate, Transfer
DBFO Design Build Finance Operate
EC Capital Expenditure
EU European Union
FAR Federal Acquisition Regulation
FARA Federal Acquisition Reform Act of 1949
FI Financial Intermediary
FIDIC International Federation of Consulting Engineers
FPASA Federal Property and Administrative Services Act of 1949
GPL Government Procurement Law (China)
HKIAC Hong Kong International Arbitration Center
IATA International Air Transport Association
IBRD International Bank for Reconstruction and Development
ICB International Competitive Bidding
ICC International Chamber of Commerce
ICSID International Center for Settlement of Investment Disputes
IDA International Development Association
IFC International Finance Corporation
IPSAS International Public Sector Accounting Standard
xv
xvi ACRONYMS
LCIA London Court of International Arbitration

LIB Limited International Bidding
MIGA Multilateral Investment Guarantee Agency
NASA National Aeronautics and Space Administration
NCB National Competitive Bidding
NPM New Public Management
OBA Output-Based
OBM Office of Management and Budget
OECD Organization for Economic Cooperation and Development
OFPP Office of Federal Procurement Policy
PCG Partial Credit Guarantee
PFRAM Public Fiscal Risk Assessment Model
PPP Public-Private Partnerships
PPPLRC Public-Private Partnership Legal Resource Center
PRG Partial Risk Guarantee
RFP Request for Proposal
SBD Standard Bidding Document
SCC Stockholm Chamber of Commerce
SIAC Singapore International Arbitration Center
SPV Special Purpose Vehicle
TPA Traditional Public Administration
WB World Bank
WBG World Bank Group
WTO World Trade Organization
List of Figures
Fig. 2.1 PPP versus Traditional Procurement (Source World Bank

[2019]) 13
Fig. 3.1 Role of World Bank in PPPs (Source World Bank [2017]) 30
Fig. 3.2 Typical PPP project structure (Source World Bank [2017]) 31
Fig. 4.1 PPIAFF—enabling infrastructure investment (Source
World Bank) 34
Fig. 6.1 PPP process cycle (Source World Bank Group [2020]) 59
Fig. 7.1 Identification of project cycle (Source World Bank) 66
Fig. 13.1 GFS—Government Finance Statistics (Source Fact
Sheet, Government Finance Statistics [GFS], Statistics
Department, IMF [2009]. http://www.imf.org/ext
ernal/pubs/ft/gfs/manual/comp.htm) 169
xvii
List of Tables
Table 3.1 Infrastructure finance instruments 20

Table 4.1 Example of bankability—tradeoff in Sheffield highways
PF 41
Table 13.1 Risk category 170
xix
CHAPTER 1
Introduction to Project Finance
1.1 General
The origins of project finance date back to the thirteenth century, when
the financing of a mining operation was structured not unlike todays’
methods. In 1299 A.D., the English Crown financed the exploration
and the development of the Devon silver mines by repaying the Floren-
tine merchant bank, Frescobaldi, with output from the mines.1 In the
seventeenth century, another form of project finance emerged with fund
sailing ship voyages with Investors providing financing for trading expe-
ditions on a voyage-by-voyage basis. Upon return, the cargo and ships
were liquidated and the proceeds of the voyage split among investors.2
Over centuries, project financing has evolved into primarily a vehicle
for assembling a consortium of investors, lenders, and other partici-
pants to undertake infrastructure projects that would be too large for
individual investors to underwrite. To date, project financing, as an alter-
native to conventional direct financing, is a well-established technique
for large capital-intensive projects. Finnerty defines project finance as
1 John W. Kensinger and John D. Martin (1993): Project Finance: Raising Money the
Old-Fashioned Way. In Donald H. Chew, Jr. (Ed.) The New Corporate Finance: Where
Theory Meets Practice (p. 326). New York: McGraw-Hill.
2 Kensinger and Martin (1993): Project Finance- Raising Money the Old fashion Way.
McGraw-Hill.
© The Author(s), under exclusive license to Springer Nature 1

Switzerland AG 2022
F. I. Lessambo, International Project Finance,
https://doi.org/10.1007/978-3-030-96390-3_1
2 F. I. LESSAMBO
the raising of funds to finance economically separable capital investment

projects, where the project cash flow serves as the source of funds to
service loans and provide returns on the equity invested in the project.3
The OECD defines project finance as the financing of long-term infras-
tructure, industrial, extractive, environmental, and other projects/public
services (including social, sports, and entertainment PPPs) based upon a
limited recourse financial structure where project debt and equity used
to finance the project are paid back from the cash flow generated by the
project (typically, a special purpose entity (SPE) or vehicle (SPV)).4
Project finance helps finance new investment by structuring the
financing around the project’s own operating cash flow and assets,
without additional sponsor guarantees. Project financing involves non-
recourse financing of the development and construction of a particular
project in which the lender looks principally to the revenues expected to
be generated by the project for the repayment of its loan and to the assets
of the project as collateral for its loan rather than to the general credit of
the project sponsor. Thus, the technique is able to alleviate investment
risk and raise finance at a relatively low cost, to the benefit of sponsor
and investor alike.5 Prior to World War I, private entrepreneurs built
major infrastructure projects all over the world. During the nineteenth
century, ambitious projects such as the Suez Canal and the Trans-Siberian
Railway were constructed, financed, and owned by private companies.
However, the private sector entrepreneur disappeared after World War I
and as colonial powers lost control, new governments financed infrastruc-
ture projects through public sector borrowing. The state and the public
utility organizations became the main clients in the commissioning of
public works, which were then paid for out of general taxation. After
World War II, most infrastructure projects in industrialized countries were
3 J.D. Finnerty (2013): Project Financing: Asset-Based Financial Engineering, 3rd

edition, New York: Wiley.
4 OECD (2015): Infrastructure Financing Instruments and Incentives (p. 13). https://
www.oecd.org/finance/private-pensions/Infrastructure-Financing-Instruments-and-Incent
ives.pdf.
5 IFC (2009): Lessons of Experience No. 7: Project Finance in Developing Countries,
Chapter 1-importance of project finance, https://www.ifc.org/wps/wcm/connect/public
ations_ext_content/ifc_external_publication_site/publications_listing_page/lessonsofexperi
enceno7.
1 INTRODUCTION TO PROJECT FINANCE 3
built under the supervision of the state and were funded from the respec-
tive budgetary resources of sovereign borrowings. In 1978, the United
States passed the Public Utility Regulatory Act (PURPA) and established
a private market for electric power. In so doing, the United States paved
the way for the growth of project financing in many other industrial
countries. Similarly, recent large-scale privatizations in developing coun-
tries aimed at strengthening economic growth and stimulating private
sector investment have given further impetus to project finance struc-
turing. In the 1990s as a means of financing projects designed, to help
meet the tremendous infrastructure needs existing in both developed and
developing countries, project financing almost replaced the traditional
financing model that prevailed for centuries. Perhaps the most prolific
use of project financing has been in the UK, where something called
the “Private Finance Initiative” (PFI) has been used. PFI was started in
1992 and has been managed by the British government as a systematic
public-private partnership program.
1.2 Characteristics of Project Financing

• Capital-intensive
Project financings are often large-scale projects that require a great

amount of debt and equity capital, from hundreds of millions to billions
of dollars. A World Bank study in late 1993 found that the average size of
project financed infrastructure projects in developing countries was $440
million.
• Highly leveraged
Project financing transactions are highly leveraged with debt accounting

for usually 65–80% of capital in relatively normal cases.
• Long-term
The tenor for project financings can easily reach 15–20 years.
4 F. I. LESSAMBO
• Non-recourse or limited recourse financing
The project company is the borrower. Since these newly formed enti-
ties do not have their own credit or operating histories, it is necessary for
lenders to focus on the specific project’s cash flows. That is, “the financing
is not primarily dependent on the credit support of the sponsors or the
value of the physical assets involved.” Thus, it takes an entirely different
credit evaluation or investment decision process to determine the poten-
tial risks and rewards of a project financing as opposed to a corporate
financing. In the former, lenders place a substantial degree of reliance on
the performance of the project itself. As a result, they will concern them-
selves closely with the feasibility of the project and its sensitivity to the
impact of potentially adverse factors. Lenders must work with engineers
to determine the technical and economic feasibility of the project. From
the project sponsor’s perspective, the advantage of project finance is that
it represents a source of off-balance sheet financing.
• Controlled dividend policy
To support a borrower without a credit history in a highly leveraged

project with significant debt service obligations, lenders demand receiving
cash flows from the project as they are generated. This aspect of project
finance recalls the Devon silver mine example, where the merchant bank
had complete access to the mine’s output for one year. In more modern
major corporate finance parlance, the project has a strictly controlled
dividend policy, though there are exceptions because the dividends
are subordinated to the loan payments. The project’s income goes to
servicing the debt, covering operating expenses, and generating a return
on the investors’ equity. This arrangement is usually contractually binding.
Thus, the reinvestment decision is removed from management’s hands.
• Economies of scale and externalities
Projects financed, in infrastructure may lead to natural monopolies such

as highways or energy supply (i.e., Inga Project), which exhibit increasing
returns to scale and can generate social benefits. Though the direct payoffs
to an owner of an infrastructure project may be inadequate for costs to
be covered, nonetheless, the indirect externalities can still be beneficial for
the economy as a whole. Such social benefits are fundamentally difficult

to measure.6
• Numerous participants
These transactions frequently demand the participation of numerous

international participants. It is not rare to find over ten parties playing
major roles in implementing the project. The different roles played by
participants are described in the section below.
• Allocated risk
Because many risks are present in such transactions, often the crucial
element required to make the project go forward is the proper alloca-
tion of risk. This allocation is achieved and codified in the contractual
arrangements between the project company and the other participants.
The goal of this process is to match risks and corresponding returns to the
parties most capable of successfully managing them. For example, fixed-
price, turnkey contracts for construction, which typically include severe
penalties for delays put the construction, risk on the contractor instead
on the project company or lenders. The risks inherent to a typical project
financing and their mitigants are discussed in more detail below.
• Costly
Raising capital through project finance is generally costlier than through

typical corporate finance avenues. The greater need for information,
monitoring and contractual agreements increase the transaction costs.
Furthermore, the highly specific nature of the financial structures also
entails higher costs and can reduce the liquidity of the project’s debt.
Margins for project financings also often include premiums for country
and political risks since so many of the projects are in relatively high risk
countries. Alternatively, the cost of political risk insurance is factored into
overall costs.
6 OECD (2015): Infrastructure Financing Instruments and Incentives (p. 10). https://
ives.pdf.
6 F. I. LESSAMBO
1.3 Public-Private Partnership Framework

There is no single, model PPP framework. A government’s PPP frame-
work typically evolves over time, often in response to specific challenges
facing its PPP program. In the early stages of a program, the emphasis
may be on enabling PPPs, and creating and promoting PPP opportu-
nities. Once several PPPs have been implemented on an ad hoc basis,
concern about the level of fiscal risk in the PPP program may be the
impetus for strengthening the PPP framework. Often the initial phase of
this iterative process involves introducing PPP-specific institutions, rules,
and procedures to ensure PPP projects are subject to similar discipline as
public investment projects.
1.3.1 PPP Policy

The first step for any government in establishing a PPP framework is to
articulate its PPP policy. PPP policy is used in different ways in different
countries. PPP policy is meant to explain how to mean the government
intent to use PPPs, the course of action, and the guiding principles for
that course of action. A PPP policy would typically include:(i) PPP ratio-
nale/program objectives, (ii) PPP program scope, and (iii) implementing
principles and governance arrangements.
• PPP Rationale
There are various rationales for governments to adopt PPP as a method

for the procurement of public services. Enhancing private sector involve-
ment in economic development seems to be the main rationale for PPP.
Other rationales include:
– PPP enables the public sector to reduce its borrowing figure and the
projects will be financed using private sector capital.
– PPP provides efficient use of resources for delivering public services.
– PPP allows the public sector to enjoy value for money in the long-
term, as the private sector is not only providing the financing but
also operating the PPP facilities for the benefit of the public.
– PPP enables the public sector to provide services at a lower price.
• PPP Scope
The scope of the PPP framework indicates the types of projects for which
the framework applies. As such, the scope is generally defined by juris-
diction, sector, size, and contract type. The scope of the PPP has to
be established during the process of strategic planning. The scope of
the public-private partnership must be considered in terms of geograph-
ical area and service requirements. However, the regulatory framework
is another aspect through which the parameters of the partnership must
be defined. In terms of geographical area, the scope needs to be defined
with regard to both the nature of the project (e.g., if the service to be
provided is water supply, waste management, and so on) and the objec-
tives of the decision-maker. Projects often deliver improved value for
money if the scope of the contract is increased to provide greater possi-
bilities for innovation and economies of scale. However, other projects
may be sufficiently large and/or complex to the degree that there exist a
number of sub-options to the PPP. These options may relate to the sepa-
ration of a business by function or geographical area. For example, if the
government is considering the use of a PPP to provide integrated waste
management services in a particular region, it could use a number of area-
based contracts or separate PPP contracts for waste collection and waste
treatment/disposal. Where such sub-options exist, the costs and benefits
of each sub-option need to be appraised in monetary and non-monetary
terms and the preferred option identified in the PPP assessment.
• PPP Implementation Principles
The implementation of public-private partnerships can be challenging in

developing economies. The shortage of government financial resources,
public sector inefficiencies, uncertainties in contractual environment,
public and private partners’ capacity deficiencies, weak political willing-
ness, and administrative bottlenecks are hurdles to a proper implementa-
tion of PPP. Efficient PPP requires:
– Public authority and private companies must act as partners. To

achieve this close relationship, both parties must build trust based
on each partner’s credibility,
8 F. I. LESSAMBO
– Engaging all stakeholders that are either directly involved in the PPP
project or directly or indirectly affected in the short and/or long
run,
– Ensuring clear accountability mechanisms;
– Ensuring transparency, including in public procurement frameworks
and contracts;
– Ensuring participation, particularly of local communities in decisions
affecting their communities;
– Ensuring effective management, accounting, and budgeting for
contingent liabilities, and debt sustainability;
– Alignment with national priorities and relevant principles of effective
development
• PPP Governance Arrangements
The OECD has set forth the following principles for the governance of
PPP7 :
– The political leadership should ensure public awareness of the rela-

tive costs, benefits, and risks of public-private partnerships and
conventional procurement. Popular understanding of public-private
partnerships requires active consultation and engagement with stake-
holders as well as involving end-users in defining the project and
subsequently in monitoring service quality.
– Key institutional roles and responsibilities should be maintained.
This requires that procuring authorities, Public-Private Partnerships
Units, the Central Budget Authority, the Supreme Audit Institution,
and sector regulators, be entrusted with clear mandates and sufficient
resources to ensure a prudent procurement process and clear lines of
accountability.
– Ensure that all significant regulation affecting the operation of
public-private partnerships is clear, transparent, and enforced. Red
tape should be minimized and new and existing regulations should
be carefully evaluated.
7 OECD (2012): Recommendation of the Council on Principles for Public Governance of

Public–Private Partnerships (pp. 1–14). https://legalinstruments.oecd.org/public/doc/
275/275.en.pdf.
– All investment projects should be prioritized at senior political level.

As there are many competing investment priorities, it is the respon-
sibility of the government to define and pursue strategic goals.
The decision to invest should be based on a whole of government
perspective and be separate from how to procure and finance the
project. There should be no institutional, procedural, or accounting
bias either in favor of or against public-private partnerships.
– Carefully investigate which investment method is likely to yield
most value for money. Key risk factors and characteristics of specific
projects should be evaluated by conducting a procurement option
pre-test. A procurement option pre-test should enable the govern-
ment to decide on whether it is prudent to investigate a Public-
Private Partnerships option further.
– Transfer the risks to those that manage them best. Risk must be
defined, identified and measured, and carried by the party for whom
it costs the least to prevent the risk from realizing or for whom
realized risk costs the least.
– The procuring authorities should be prepared for the operational
phase of the public-private partnerships. Securing value for money
requires vigilance and effort of the same intensity as that neces-
sary during the pre-operational phase. Particular care should be
taken when switching to the operational phase of the public-private
partnerships, as the actors on the public side are liable to change.
– Value for money should be maintained when renegotiating. Only
if conditions change due to discretionary public policy actions
should the government consider compensating the private sector.
Any re-negotiation should be made transparently and subject to the
ordinary procedures of public-private partnership approval. Clear,
predictable, and transparent rules for dispute resolution should be
in place.
– Government should ensure there is sufficient competition in the
market by a competitive tender process and by possibly structuring
the Public-Private Partnerships program so that there is an ongoing
functional market. Where market operators are few, governments
should ensure a level playing field in the tendering process so that
non-incumbent operators can enter the market.
– In line with the government’s fiscal policy, the Central Budget
Authority should ensure that the project is affordable and the overall
investment envelope is sustainable.
10 F. I. LESSAMBO
– The project should be treated transparently in the budget process.

The budget documentation should disclose all costs and contin-
gent liabilities. Special care should be taken to ensure that budget
transparency of Public-Private Partnerships covers the whole public
sector.
– Government should guard against waste and corruption by ensuring
the integrity of the procurement process. The necessary procurement
skills and powers should be made available to the relevant authorities.
CHAPTER 2
Project Financing and Direct Conventional

Financing
2.1 General
Project finance is the process of financing a specific economic unit that the
sponsors create, in which creditors share much of the venture’s business
risk and funding is obtained strictly for the project itself.1 Project finance
is generally structured to maximize tax benefit and to assure that all avail-
able tax benefits are used by the sponsors or transferred to the extent
possible to another party through a partnership, lease, or vehicle.2 Project
finance differs from traditional finance where the primary source of repay-
ment for investors and creditors is the sponsoring company, backed by its
entire balance sheet, not the project alone.
2.2 Corporate Finance

Corporate finance deals with the financing and investment decisions set
by the corporations’ management in order to maximize the value of the
1 João M. Pinto (2017): What Is Project Finance. Investment Management and

Financial Innovations, Vol. 14, Issue 1, 200.
2 Katharine C. Baragona (2004): Project Finance. Global Business & Development Law
Journal, Vol. 18, Issue 1, 141.

Switzerland AG 2022
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12 F. I. LESSAMBO
shareholders’ wealth.3 In traditional corporate finance, the primary source

of repayment for investors and creditors is the sponsoring company,
backed by its entire balance sheet, not the project alone. Although cred-
itors will usually still seek to assure themselves of economic viability of
the project being financed so that it is not a drain on the corporate
sponsor’s existing pool of assets, an important influence on their credit
decision is the overall strength of the sponsors balance sheet, as well as
their business reputation. If the project fails, lenders do not necessarily
suffer, as long as the company owning the project remains financially
viable. Corporate finance is often used for shorter, less capital-intensive
projects that do not warrant outside financing. The company borrows
funds to construct a new facility and guarantees to repay the lenders from
its available operating income and its base of assets. However, private
companies avoid this option, as it strains their balance sheets and capacity,
and limits their potential participation in future projects. Project financing
is different from traditional forms of finance because the financier princi-
pally looks to the assets and revenue of the project in order to secure and
service the loan. Project finance is usually for large, complex, and expen-
sive installations such as power plants, chemical processing plants, mines,
transportation infrastructure, environment, media, and telecoms.4
2.3 Traditional Procurement

Traditional procurement can be defined as a comprehensive process by
which designers, constructors, and various consultants provide services for
design and construction to deliver a complete project to the client.5 In
traditional public procurement, the government manages a set of inde-
pendent short-term contracts: with banks and investors for procuring
project finance; with construction firms for developing the asset; and
with operating firms for operating the asset. The government is ulti-
mately responsible for designing, financing, constructing, operating, and
3 Stefan Cristian Gherghina (2021): Corporate Finance. Journal of Risk & Financial
Management, MDPI.
4 Basel Committee on Banking Supervision (2001): Working Paper on the Internal
Ratings-Based Approach to Specialised Lending Exposures (p. 2), BIS.
5 Molenaar, K., Sobin, N., Gransberg, D., Tamera McCuen, T.L., Sinem Korkmaz, S.,
and Horman, M. (2009): Sustainable, High Performance Projects and Project Delivery
Methods. The Charles Pankow Foundation and The Design-Build Institute of America.
2 PROJECT FINANCING AND DIRECT CONVENTIONAL FINANCING 13
Fig. 2.1 PPP versus Traditional Procurement (Source World Bank [2019])
managing the asset, although it hires private companies to do these on

its behalf. In a PPP, the government signs one long-term contract with
the private partner (often established as a special purpose vehicle, SPV).
The SPV is responsible for providing an infrastructure asset and services in
line with the contract specifications agreed to with the government. Then,
the private partner manages a set of contracts with banks and construc-
tion and operating companies; the government ensures that the asset and
services provided are in line with the performance specifications agreed to
in the PPP contract (Fig. 2.1).
2.4 Project Finance

In corporate finance, the sponsoring company typically procures capital by
demonstrating to lenders that it has sufficient assets on its balance sheets,
to use as collateral in the case of default. The lender will be able to fore-
close on the sponsor company’s assets, sell them, and use the proceeds
to recover its investment. However, in project finance, the repayment
of debt is not based on the assets reflected on the sponsoring compa-
ny’s balance sheet, rather on the revenues that the project will generate
once it is completed. Project finance greatly minimizes risk to the spon-
soring company, as compared to traditional corporate finance, because
the lender relies only on the project revenue to repay the loan and cannot
14 F. I. LESSAMBO
pursue the sponsoring company’s assets in the case of default. In addition,

transferring responsibility to the private sector for mobilizing finance for
infrastructure investment is one of the major differences between PPPs
and traditional procurement. Where this is the case, the private party
to the PPP is responsible for identifying investors and developing the
finance structure for the project. In project finance, a team or consor-
tium of private firms establishes a new project company to build own and
operate a separate infrastructure project. The new project company to
build own and operate a separate infrastructure project. The new project
company is capitalized with equity contributions from each of the spon-
sors. In contrast to an ordinary borrowing situation, in a project financing
the financier usually has little or no recourse to the non-project assets of
the borrower or the sponsors of the project.6 The project is not reflected
in the sponsors’ balance sheets.
2.5 Advantages and Disadvantages

of Project Finance
2.5.1 Advantages
Project finance offers a means for investors, creditors, and other unrelated
parties to come together to share the costs, risks, and benefits of new
investment in an economically efficient and fair manner. Project finance
can provide a strong and transparent structure for projects, and through
careful attention to potential risks, it can help increase new investment
and improve economic growth.
Project finance reduces the cost of capital for the project and allows
a higher amount of debt to be used, which generates bigger tax savings.
Project finance transactions allow the reduction of funding costs when
compared with traditional sources of funds. The rates charged on project
finance loans are often lower than the rates charged on non-project
finance loans.
Finally, yet importantly, because the debt is non-recourse to the spon-
sors, the project leaders have to claim against the other assets of the
6 Benjamin C. Esty (2003): The Economic Motivations for Using Project Finance
(p. 10), HBS. https://faculty.fuqua.duke.edu/~charvey/Teaching/BA456_2006/Esty_F
oreign_banks.pdf.
sponsors. That is, sponsors do not expose themselves to the risk of finan-
cial distress in the event the project has trouble. Although creditors’
security will include the assets being financed, lenders rely on the oper-
ating cash flow generated from those assets for repayment. Depending
upon the structure of project financing, the project sponsors may not be
required to report any of the project debt on its balance sheet because
such debt is non-recourse or of limited recourse to the sponsor.
2.5.2 Disadvantages
A project finance project needs to be carefully structured to ensure that
all the parties’ obligations are negotiated and are contractually binding.
Financial and legal advisers and other experts may have to spend consid-
erable time and effort on this structuring and on a detailed appraisal of
the project. These steps will add to the cost of setting up the project and
may delay its implementation. Moreover, the sharing of risks and bene-
fits brings unrelated parties into a close and long relationship. A sponsor
must consider the implications of its actions on the other parties associ-
ated with the project if the relationship is to remain harmonious over the
long-term.
Since project finance structuring hinges on the strength of the project
itself, the technical, financial, environmental, and economic viability of the
project is a paramount concern. Anything that could weaken the project
is also likely to weaken the financial returns of investors and creditors.
Therefore, an essential step of the procedure is to identify and analyze the
project’s risks, then to allocate and mitigate them. Such risks are many and
varied. Some may relate to a specific subsector, others to the country and
policy environment, and still others to factors that are more general. Last
but not least, a complex financing mechanism can require significant lead
times. Project finance is expensive to arrange as it involves establishing
the project company, forming a consortium of equity-holders and lenders,
gaining agreement to a complex set of contractual arrangements between
the parties involved, and arranging costly documentation.
16 F. I. LESSAMBO
2.6 Evolution of Project Finance

Project finance has evolved from its beginnings in the natural resources
industry in the 1970s, to the US power industry in the 1980s, to a
much wider range of industry applications and geographic locations in
the 1990s and 2000s, and most recently to infrastructure finance in the
2010s.7
2.6.1 The Extractive and Oil Industry

Developing countries have long used grants and concessional finance
(from the World Bank and others) to develop infrastructure. The exces-
sive cost of natural resource exploitation led some of them to consider
PPP as an alternative to ordinary financing. More and more developing
countries are entering into Resource Finance Infrastructure agreements
with lenders. Under an RFI arrangement, a loan for current infrastruc-
ture construction is securitized against the net present value of a future
revenue stream from oil or mineral extraction, adjusted for risk. The
revenues for paying down the loan, which are disbursed directly from
the oil or mining company to the financing institution, often begin a
decade or more later, after initial capital investments for the extractive
project have been recovered. Angola postwar reconstruction was financed
mainly through RFI deals. Later on, the RFI mode of contracting was
used in several other African countries—predominantly by Chinese banks,
including China Development Bank, but recently also by Korea Exim
Bank for the Musoshi mine project in the Democratic Republic of Congo
(DRC). The infrastructure component of an RFI transaction can be struc-
tured as a government procurement project, with 100% government
ownership, or in any number of other ways consistent with a public-
private partnership (PPP) transaction. Thus, the success of a specific RFI
transaction depends on proper structuring and implementation. Whereas
RFI has stood as a model for a while, developing countries have recently
embraced the PPP as a more appropriate financing model for their devel-
opment. The PPP model leaves more room for government involvement
both initially and over time. This model is frequently used where a project
7 Jakob Müllner (2017): International Project Finance: Review and Implications for
International Finance and International Business. Management Review Quarterly, Vol. 67,
97–133.
finance model transaction has been considered, but will not work because
of the need to fill a gap in project risks that only the government can
fill. Because of the many ways it can be applied, it is a very flexible
model. From natural resource exploitation, many developing countries
have extended the recourse to PPP in other areas.
2.6.2 The Natural Resource Industry

Developing countries are entering into PPP arrangements as a means to
manage and preserve their natural resources such as water and forests. For
instance, On September 5, 2016, the Eranove Group signed an agree-
ment protocol with Côte d’Ivoire for the financing, design, construction,
operation, and maintenance of a thermal combined cycle power plant
of 390 MW.8 As lead arranger and overall coordinator, the Interna-
tional Finance Corporation (IFC) negotiated all the debt financing which,
besides IFC, is provided by the African Development Bank (AfDB),
the Netherlands Development Finance Corporation (FMO), the German
Cooperation Bank (DEG), the Emerging Africa Infrastructure Fund
(EAIF), and the OPEC Fund for International Development (OPEC
Fund). In 2018, the IFC arranged a Euro 303 million financing package
to Eranove, a French industrial group that manages several water and
electricity assets, for the construction and operation of a new 390 MW
natural gas plant in Ivory9 Coast. Several financing agreements have been
signed between the project developer, the pan-African group Eranove; the
International Finance Corporation (IFC), the World Bank Group’s private
sector financing arm; and the government of Ivory Coast. The facility,
which will be built as part of a public-private partnership (PPP), will inject
390 MW into the Ivorian national power grid. The project will result in
the construction of a combined cycle power plant, i.e., producing elec-
tricity through two turbines. With such a process combining steam and
natural gas, CO2 emissions are divided by two compared to an ordinary
thermal power plant. The new power plant will support public policies
aimed at facilitating access to electricity in Ivory Coast and meeting
national and regional electricity needs generated by strong economic
8 https://www.eranove.com/en/africa/atinkou/.
9 IFC (2016): Eranove, Côte d’Ivoire. https://disclosures.ifc.org/#/projectDetail/SII/
39096.
18 F. I. LESSAMBO
growth. The group specializing in the production of electricity and

drinking water will operate the Atinkou power plant for a period of
20 years, in accordance with the agreement signed with the Ivorian
government in December 2018. Eranove considers that its plant will be
able to supply around 1 million households in Ivory Coast. Up to 2,500
people will be employed during the construction phase of the Atinkou
combined cycle power plant.
2.6.3 The Power Industry & Beyond

Many countries have adapted energy policies and laws to encourage
investment in renewable energy (RE) sources. Renewable energy projects
rely on a number of legal contracts: the power purchase agreement (PPA),
which governs the sale and purchase of power, and other contracts such as
land use agreements, supply agreements, installation agreements, O&M
agreements, and implementation agreements. Many countries both devel-
oped and developing are funding their renewable energy projects through
PPP financing. In the Anglo-American world, project finance came to
prominence in the mid-twentieth century in the United States where it
was used to finance mining and rail companies. In the 1980s, project
finance evolved or expanded its scope to finance the construction of
natural gas projects and power plants in Europe and in North America
following the 1978 Public Utility Regulatory Policy Act.10 Since then, a
bulk of project finance projects involve the power or energy sector. The
power sector is a fundamental building block for economic advancement
in any country. Power is a critical input for the successful growth and
functioning of a country’s economy, across all its sectors, and thus for job
creation. Electricity demand is closely correlated with GDP growth and
other socio-political advancements. As such, power investments demon-
strate a clear and quantifiable economic return upon completion and
commissioning of the financed power projects, with a resultant multiplier
effect on the broader economy.11 These transactions require substantial
and long-term investments which have long repayment periods. They
often require highly technical and specialized knowledge and expertise
to prepare and implement.
10 https://www.publicpower.org/policy/public-utility-regulatory-policies-act-1978.
11 Asghar, Zahid (2018): Energy—GDP Relationship: A Causal Analysis for the Five
Countries of South Asia. Applied Econometrics and International Development, Vol. 8,
Issue 1, 167–180.
CHAPTER 3
Sources of Project Funds
3.1 General
The financing of PPP combines equity, loans, and government grants.
The initial equity investors, who develop the PPP proposal, are typically
called project shareholders. Typical equity investors include project devel-
opers, engineering or construction companies, infrastructure management
companies, and private equity funds. Lenders to PPP projects in devel-
oping countries include commercial banks, multilateral and bilateral
development banks and finance institutions, and institutional investors
such as pension funds and insurance companies. Projects’ shareholders
often have an incentive to finance a PPP with a high ratio of debt
to equity—that is, to achieve high advantage. Conversely, governments
often provide more protection to debt investors than to equity investors,
providing a further incentive for high leverage.
3.2 Sources of Funds

Project finance comes from a variety of sources: equity, debt, and govern-
ment grants. Project sponsors, government, third-party private investors,
and internally generated cash provide equity. Equity providers require
a rate of return target, which is higher than the interest rate of debt
financing. This is to compensate the higher risks taken by equity investors
as they have junior claim to income and assets of the project. Lenders

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20 F. I. LESSAMBO
of debt capital have senior claim on income and assets of the project.
The other sources of project finance include grants from various sources,
supplier’s credit, etc. Government grants can be made available to make
PPP projects commercially viable, to reduce the financial risks of private
investors, and to achieve socially desirable objectives such as to induce
economic growth in lagging or disadvantaged areas. Many governments
have established formal mechanisms for the award of grants to PPP
projects. Where grants are available, depending on government policy
they may cover 10–40% of the total project investment (Table 3.1).
Generally, debt finance makes up the major share of investment needs
(usually about 70–90%) in PPP projects. The common forms of debt are.
• Syndicated Commercial Loans
Table 3.1 Infrastructure finance instruments
Source OECD analysis drawing on OECD (2015b)

3 SOURCES OF PROJECT FUNDS 21
Syndicated commercial loans are funds lent by commercial banks and

other financial institutions and are usually the main source of debt
financing. Put differently, a commercial loan is a debt-based funding
arrangement between a business and a financial institution such as a bank.
It is typically used to fund major capital expenditures and/or cover oper-
ational costs that the company may otherwise be unable to afford. In
general, banks provide or finance project finance transactions. Bank loans
provide several advantages over bonds or other structured instruments
as (i) banks provide an important monitoring role; (ii) projects finance
need gradual disbursement of funds, and bank lending has the required
flexibility; and (iii) projects finance are relatively more likely to require
debt restructurings in unforeseen events, and banks can quickly negotiate
restructurings with each other.1 In the banking model of infrastructure
finance, banks underwrite loans for infrastructure projects, hold them on
their books, and service the loan through maturity. Increasingly, loans
are being originated by a lead underwriting bank, or a consortium of
banks, and syndicated among financial institutions and investors. The lead
underwriting bank collects fees for arranging the deal, or fees are shared
depending on level of participation in the syndicate.2 However, as a result
of the constraints imposed by Basel III, the appetite of banks to partici-
pate in the longer-term tenors required by project financing has lessened.
The limited availability of long-term commercial funding for projects has
slowed the momentum of the project finance sector in recent years. With a
diminished group of banks willing to commit to the longer-term financ-
ings demanded by sponsors required by the economics of the project,
appetite for tenors in excess of 15 years has been tepid since the outbreak
of the financial crisis in 2008 and the introduction of more onerous Basel
III requirements. Bank loans have the lowest level of risk on the project
finance debt risk scale: They are senior debt instruments and are usually
secured to a sufficient extent by collateral. The amount of the loan is
1 Esty, B., and Megginson, W. (2003): Creditor Rights, Enforcement, and Debt Owner-
ship Structure—Evidence from the Global Syndicated Loan Market. Journal of Financial
and Quantitative Analysis, 689–721.
2 Weber, Barbara, and Alfen HH (2010): Wilhelm: Infrastructure as an Asset Class:
Investment Strategies Project Finance and PPP, Wiley Finance Series.
22 F. I. LESSAMBO
related to the liquidation value of the asset and in its ability to generate
cash flow to service debt payments.
• Bridge Finance
Bridge financing is a short-term financing arrangement (e.g., for the

construction period or for an initial period) which is generally used until
a long-term financing arrangement can be implemented. In other words,
bridge financing is a form of temporary financing intended to cover a
company’s short-term costs until the moment when regular long-term
financing is secured. Thus, it is named as bridge financing since it is like
a bridge that connects a company to debt capital through short-term
borrowings. In most cases, bridge financing sources are from invest-
ment banks and venture capital institutions in the form of either debts
or ownership contributions. Bridge loans have higher interest rates than
permanent loans, typically LIBOR plus 3–4%. Because they are intended
for the short term, the loan term is only six months, though some lenders
are willing to extend this term longer for a fee equaling one or two
“points.” There are no prepayment fees. Mostly, there are two types of
bridge finance:
(i) Debt Bridge Financing
One option with bridge financing is for a company to take out a short-
term, high-interest loan, known as a bridge loan. Companies who seek
bridge financing through a bridge loan need to be careful, however,
because the interest rates are sometimes so high that it can cause further
financial struggles.
(ii) Equity Bridge Financing
Sometimes companies do not want to incur debt with high interest. If

this is the case, they can seek out venture capital firms to provide a bridge
financing round and thus provide the company with capital until it can
raise a larger round of equity financing (if desired). In so doing, the
company offers the venture capital firm equity ownership in exchange for
several months to a year’s worth of financing. The venture capital firm

will take such a deal, if they believe the company will ultimately become
profitable, which will see its stake in the company increase in value.
• Bonds and Other Debt Instruments
Bonds are long-term interest-bearing debt instruments purchased either

through the capital markets or through private placement (which means
direct sale to the purchaser, generally an institutional investor). Bonds
can be structured to have long-term maturities that extend over the life
of long-term assets. Bonds financing can be obtained through either
private-placement debt or public markets through registered corporate
and government bonds.
• Stapled Financing
Stapled financing is a pre-arranged financing package for the project,

developed by the government, and provided to bidders during the tender
process. The winning bidder has the option, but not the obligation, to
use the financial package for the project. Stapled financing is common
in Mergers and Acquisition deals and has been used for infrastructure
projects.
• Equity Finance
Equity finance refers to all financial resources that are provided to firms
in return for an ownership interest. Investors may sell their shares in the
firm/project, if a market exists, or they may get a share of the proceeds if
the asset is sold. They are crucial in the financing of infrastructure invest-
ments as the providers of risk capital to initiate a project or refinancing.
Listed shares are indirect participation rights in corporations, projects,
and other entities; investors hold minority positions with limited ability
to influence management. Unlisted shares often confer direct ownership,
24 F. I. LESSAMBO
control, and operation of the corporate entity or project asset due to

concentrated shareholder positions and closer ties to managers.3
• Mezzanine Loan
Mezzanine debt is a type of privately placed subordinate loan or bond

unique to project finance or private equity investments, often with equity
participation. Mezzanine debt can be interest-bearing instruments that
include a share in the value growth of the project or interest-only
instruments. Payment in kind (where debt payments would be delivered
through equity offerings) features are increasingly being used. Mezzanine
loans are subordinate tranches of debt often used in project finance to
provide credit enhancement for senior debt tranches. Mezzanine is higher
risk and pays higher yields than senior issues and often includes equity
participation.4
• Hybrid Instruments
Hybrid instruments deserve to be mentioned as a distinct finance instru-

ment—because despite the fact that they are essentially debt instruments,
they often possess both equity- and debt-like characteristics. Subordinated
loans and bonds are the chief category in this section and can be part of
a corporate finance structure or project finance.
• Pension Funds
Pension funds have long-term liabilities on their balance sheets in the

form of future pension payments. To avoid a mismatch of maturities
between the two sides of their balance sheets, pension funds need to invest
in long-term assets. Thus, the long-term nature of infrastructure invest-
ments suits the investment profile of pension funds, and their returns,
3 OECD (2015): Infrastructure Financing Instruments and Incentives, p. 10, https://

ives.pdf.
4 OECD (2015): Infrastructure Financing Instruments and Incentives, p. 1, https://
ives.pdf.
which tend to keep up with inflation, help hedge pension funds’ liabilities
that are also inflation-prone. Additionally, pension funds are interested in
diversifying their portfolios to lower the volatility of their returns. Infras-
tructure investments can be attractive when the correlation between their
anticipated returns and those of traditional assets is low.
• Government Grants
Governments can provide financial support to the private partner in the

PPP in various forms: guarantees, subsidies, equity injection, tax amnesty,
or a contribution in kind.
• Under a debt guarantee, the government guarantees the repayment

of part or all of the debt of the SPV to finance the investment under
the PPP.
• Subsidies can be provided as lump-sum payments, or they may be
linked to the volume produced and sold by the private partner:
– The lump-sum subsidy is recorded as a one-off payment from

the government. It is an outflow from and cost for the govern-
ment and an inflow or revenue to the private partner.
– The volume-based subsidy is calculated from a subsidy amount
per unit and the volume consumed. These payments constitute
a periodic outflow from and cost for the government, and a
periodic inflow or revenue to the private partner.
• An equity injection is a contribution from the government to finance

the project company, which may require a cash outflow.
• The government might grant the private partner a tax amnesty,
exempting it from certain taxes, for example, to reduce the private
partner’s cost of business or to reduce service cost for users.
• Governments often provide contributions in kind to the project
company. These include the transfer of existing assets or the right
to use government assets temporarily, for example, the right to
use the ground around a public infrastructure, such as a road, for
commercial exploitation.
26 F. I. LESSAMBO
3.3 Project Financing Participants

• Project Sponsors or Owners
The sponsors are the generally the project owners with an equity stake
in the project. It is possible for a single company or for a consortium to
sponsor a project. Because project financings use the project company as
the financing vehicle and raise non-recourse debt, the project sponsors
do not put their corporate balance sheets directly at risk in these often
high-risk projects. However, some project sponsors incur indirect risk
by financing their equity or debt contributions through their corporate
balance sheets. To further buffer corporate liability, many of the multi-
national sponsors establish local subsidiaries as the project’s investment
vehicle.
• Project Company
The project company is a single-purpose entity created solely for

executing the project. Controlled by project sponsors, it is the center of
the project through its contractual arrangements with operators, contrac-
tors, suppliers, and customers. Typically, the only source of income for
the project company is the tariff or throughput charge from the project.
The amount of the tariff or charge is generally extensively detailed in
the off-take agreement. Thus, this agreement is the project company’s
sole means of servicing its debt. Often the project company is the project
sponsors’ financing vehicle for the project (i.e., it is the borrower for the
project). The creation of the project company and its role as borrower
represent the limited recourse characteristic of project finance. However,
this does not have to be the case. It is possible for the project spon-
sors to borrow funds independently based on their own balance sheets
or rights to the project. When a project is located in a high-tax country,
and the project company in a lower-tax country, it may be beneficial for
the sponsor to locate the debt in the high-tax country. The company
maximizes its interest tax shields in so doing.
• Contractor
The contractor is responsible for constructing the project to the tech-

nical specifications outlined in the contract with the project company.
These primary contractors will then sub-contract with local firms for
components of the construction. Contractors also own stakes in projects.
• Operator
Operators are responsible for maintaining the quality of the project’s

assets and operating the power plant, pipeline, etc. at maximum effi-
ciency. It is not uncommon for operators to also hold an equity stake
in a project. Depending on the technological sophistication required to
run the project, the operator might be a multinational, a local company,
or a joint venture.
• Supplier
The cost of the input usually drives the project’s competitiveness. The
supplier provides the critical input to the project. If only a few firms domi-
nate the supply of a critical factor of production relative to the number
of potential customers, a project, absent mitigating factors, could be at
higher risk because the supplier is in a better position to dictate terms
of sale. Projects that rely on fixed and dedicated transportation systems,
such as pipelines or rail lines, to deliver necessary inputs, may have few
substitutes available.
• Customer
The customer is the party who is willing to purchase the project’s output,
whether the output be a product (electrical power, extracted minerals,
etc.) or a service (electrical power transmission or pipeline distribution).
The goal for the project company is to engage customers who are willing
to sign long-term, offtake agreements.
• Multilateral Agencies
The World Bank, International Finance Corporation, and regional devel-

opment banks often act as lenders or co-financiers to important infras-
tructure projects in developing countries. In addition, these institutions
often play a facilitating role for projects by implementing programs to
28 F. I. LESSAMBO
improve the regulatory frameworks for broader participation by foreign

companies and the local private sector. In many cases, the multilateral
agencies are able to provide financing on concessional terms. The addi-
tional benefit they bring to projects is further assurance to lenders that
the local government and state companies will not interfere detrimentally
with the project.
• Export Credit Agency
Because infrastructure projects in developing countries so often require

imported equipment from the developed countries, contractors to
support these projects routinely approach the export credit agencies
(ECAs). Generally, the ECA will provide a loan guarantee or funding to
projects for an amount that does not exceed the value of exports that
the project will generate for the ECA’s home country. ECA participa-
tion has increased rapidly. In just four years, ECA involvement in project
finance has risen from practically zero to an estimated $10 billion a year.
Again, ECA participation can bolster a project’s status and give it a certain
amount of de facto political insurance.
• Legal Advisers
Legal advisers play a role in assembling project finance transactions given

the number of important contracts and the need for multi-party nego-
tiations. Legal advisers also play a role in interpreting the regulatory
frameworks in the local countries. From the outset, the project sponsors
might work with a financial adviser, e.g., commercial bank, investment
bank, or independent consultant, to structure the financing for the
project.
• The Trustee
The trustee is typically responsible for monitoring the project’s progress

and adherence to schedules and specifications, usually working with
the independent engineer to coordinate fund disbursements against a
project’s actual achievement.
• Insurance Companies
The risk transfer contracts that we described earlier have the effect of
transferring many of the project risks from the project sponsor to the
other parties to the project. Further risks are transferred by a variety of
insurance contracts, such as completion insurance, insurance against force
majeure, and insurance against political risks.
3.4 Public–Private Partnerships

A public–private partnership is a long-term contract between a private
party and a government entity, for providing a public asset or service, in
which the private party bears significant risk and management responsi-
bility and remuneration is linked to performance.5 Well-structured PPPs
bring private capital for investment, private sector expertise, and commer-
cial management incentives needed for enhancing service provision to
users.6 Most PPP projects present a contractual term between 20 and
30 years; others have shorter terms; and a few last longer than 30 years.
PPPs have been used in a wide range of sectors to procure different kinds
of assets and services (Fig. 3.1).
3.5 Structuring Project Finance

The project finance structure underlying PPP projects is a response
to the agency problem that arises from the differing and conflicting
interests of various parties involved in an infrastructure project. In the
case of PPP project finance structure, a complex series of contracts
and financing arrangements distributes the different risks presented by a
project among the various parties involved in the project, including spon-
sors and investors, lenders, contractors, suppliers, and the government. In
many cases, the project company retains ownership of the project assets.
Thus, project finance must be carefully structured and provide comfort
to its financiers that it is economically, technically, and environmentally
feasible, and that it is capable of servicing debt and generating finan-
cial returns commensurate with its risk profile. The private party to most
5 World Bank (2017): Public–Private Partnerships, Reference Guide, p. 14, World Bank
Document, 122,038-WP-PUBLI-PPPReferenceGuideVersion.pdf.
6 Idem.
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Title: Lead poisoning and lead absorption

The symptoms, pathology and prevention, with special
reference to their industrial origin, and an account of the
principal processes involving risk
Author: Kenneth Weldon Goadby

Sir Thomas Morison Legge
Release date: December 3, 2023 [eBook #72301]
Language: English
Original publication: London: Edward Arnold, 1912
Credits: Charlene Taylor, Harry Lamé and the Online Distributed

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*** START OF THE PROJECT GUTENBERG EBOOK LEAD POISONING

AND LEAD ABSORPTION ***
Please see the Transcriber’s Notes at
the end of this text.
New original cover art included with this
eBook is granted to the public domain.
LEAD POISONING AND LEAD
ABSORPTION
INTERNATIONAL MEDICAL MONOGRAPHS

General Editors { Leonard Hill, M.B., F.R.S.
William Bulloch, M.D.
THE VOLUMES ALREADY PUBLISHED OR IN
P R E PA R AT I O N A R E :
THE MECHANICAL FACTORS OF DIGESTION. By
Walter B. Cannon, A.M., M.D., George Higginson Professor of
Physiology, Harvard University. [Ready.
SYPHILIS: FROM THE MODERN STANDPOINT. By
James Macintosh, M.D., Grocers’ Research Scholar; and Paul
Fildes, M.D., B.C., Assistant Bacteriologist to the London
Hospital. [Ready.
BLOOD-VESSEL SURGERY AND ITS APPLICATIONS.
By Charles Claude Guthrie, M.D., Ph.D., Professor of
Physiology and Pharmacology, University of Pittsburgh, etc.
CAISSON SICKNESS AND THE PHYSIOLOGY [Ready.
OF WORK in Compressed Air. By Leonard Hill, M.B., F.R.S.,
Lecturer on Physiology, London Hospital. [Ready.
LEAD POISONING AND LEAD ABSORPTION. By
Thomas Legge, M.D., D.P.H., H.M. Medical Inspector of
Factories, etc.; and Kenneth W. Goadby, D.P.H., Pathologist
and Lecturer on Bacteriology, National Dental Hospital.
THE PROTEIN ELEMENT IN NUTRITION. By Major D.
McCay, M.B., B.Ch., B.A.O., M.R.C.P., I.M.S., Professor of
Physiology, Medical College, Calcutta, etc.
SHOCK: The Pathological Physiology of Some Modes
of Dying. By Yandell Henderson, Ph.D., Professor of
Physiology, Yale University.
THE CARRIER PROBLEM IN INFECTIOUS DISEASE.
By J. C. Ledingham, D.Sc., M.B., M.A., Chief Bacteriologist,
Lister Institute of Preventive Medicine, London; and J. A.
Arkwright, M.A., M.D., M.R.C.P., Lister Institute of Preventive
Medicine, London.
DIABETES. By J. J. MacLeod, Professor of Physiology,
Western Reserve Medical College, Cleveland, U.S.A.
A Descriptive Circular of the Series will be sent free on
application to the Publishers:
LONDON: EDWARD ARNOLD
New York: Longmans, Green & Co.
INTERNATIONAL MEDICAL MONOGRAPHS
General Editors { Leonard Hill, M.B., F.R.S.
William Bulloch, M.D.
LEAD POISONING AND
LEAD ABSORPTION
THE
SYMPTOMS, PATHOLOGY AND PREVENTION,

WITH SPECIAL REFERENCE TO THEIR
INDUSTRIAL ORIGIN AND AN ACCOUNT OF THE

PRINCIPAL PROCESSES INVOLVING RISK
BY
THOMAS M. LEGGE, M.D. Oxon., D.P.H. Cantab.

H.M. MEDICAL INSPECTOR OF FACTORIES; LECTURER ON FACTORY HYGIENE
UNIVERSITY OF MANCHESTER
AND
KENNETH W. GOADBY, M.R.C.S., D.P.H. Cantab.

PATHOLOGIST AND LECTURER ON BACTERIOLOGY, NATIONAL DENTAL HOSPITAL
APPOINTED SURGEON TO CERTAIN SMELTING AND WHITE
LEAD FACTORIES IN EAST LONDON
LONDON
EDWARD ARNOLD
NEW YORK: LONGMANS, GREEN & CO.
1912
[All rights reserved]

GENERAL EDITORS’ PREFACE
The Editors hope to issue in this series of International Medical
Monographs contributions to the domain of the Medical Sciences on
subjects of immediate interest, made by first-hand authorities who
have been engaged in extending the confines of knowledge.
Readers who seek to follow the rapid progress made in some new
phase of investigation will find therein accurate information acquired
from the consultation of the leading authorities of Europe and
America, and illuminated by the researches and considered opinions
of the authors.
Amidst the press and rush of modern research, and the multitude
of papers published in many tongues, it is necessary to find men of
proved merit and ripe experience, who will winnow the wheat from
the chaff, and give us the present knowledge of their own subjects in
a duly balanced, concise, and accurate form.
This volume deals with a subject of wide interest, for lead is dealt
with in so many important processes of manufacture—in the making
of white lead; pottery glazing; glass polishing; handling of printing
type; litho-making; house, coach, and motor painting; manufacture of
paints and colour; file-making; tinning of metals; harness-making;
manufacture of accumulators, etc.
The authors bring forward convincing evidence, experimental and
statistical, in favour of the causation of lead poisoning by the
inhalation of dust. This makes prevention a comparatively simple
matter, and the methods of prevention are effective, and will
contribute greatly to the health of the workers and the prevention of
phthisis, which is so prevalent among lead-workers. Exhaust fans
and hoods, or vacuum cleaners, for carrying away the dust formed in
the various processes—these are the simple means by which the
dust can be removed and the workers’ health assured.
LEONARD HILL.
WILLIAM BULLOCH.
September, 1912.
AUTHORS’ PREFACE
Progress in the knowledge of the use of lead, the pathology of
lead poisoning, and the means of preventing or mitigating the risk
from it, has been rapid of late years, and has led to much legislative
action in all civilized countries. The present is a fitting time, therefore,
to take stock of the general position. We have both, in different ways,
been occupied with the subject for several years past, the one
administratively, and the other experimentally, in addition to the
practical knowledge gained by examining weekly over two hundred
lead-workers.
The present treatise takes account mainly of our own persona
experience, and of work done in this country, especially by members
of the Factory Department of the Home Office, and certifying and
appointed surgeons carrying out periodical medical examinations in
lead factories. The book, however, has no official sanction.
We are familiar with the immense field of Continental literature
bearing on legislation against lead poisoning, but have considered
any detailed reference to this outside the scope of our book, except
in regard to the medical aspects of the disease.
Most of the preventive measures mentioned are enforced under
regulations or special rules applying to the various industries or
under powers conferred by the Factory and Workshops Act, 1901.
Occasionally, however, where, in the present state of knowledge,
particular processes are not amenable to the measures ordinarily
applied, we have suggested other possible lines on which the
dangers may be met. We have not reprinted these regulations and
special rules, as anyone consulting this book is sure to have access
to them in the various works published on the Factory Acts.
The practical value of the experimental inquiry described in
Chapter VI., and the light it seems to throw on much that has been
difficult to understand in the causation of lead poisoning, has led us
to give the results in detail.
One of us (K. W. G.) is responsible for Chapters I., III., and V. to
XI., and the other (T. M. L.) for Chapters II. and XII. to XVII.; but the
subject-matter in all (except Chapter VI., which is the work entirely of
K. W. G.) has been worked upon by both.
Our thanks are due to the Sturtevant Engineering Co., Ltd.,
London; Messrs. Davidson and Co., Ltd., Belfast; the Zephyr
Ventilating Co., Bristol; and Messrs. Enthoven and Sons, Ltd.,
Limehouse, for kindly supplying us with drawings and photographs.
September, 1912.
CONTENTS
CHAPTER PAGE
I. Historical—Chemistry of Lead 1
II. Ætiology 7
III. Susceptibility and Immunity 27
IV. Statistics of Plumbism 44
V. Pathology 62
VI. Pathology—Continued 81
VII. Symptomatology and Diagnosis 110
VIII. Excretion of Lead 127
IX. The Nervous System 140
X. Chemical Investigations 165
XI. Treatment 184
XII. Preventive Measures against Lead Poisoning 199
XIII. Preventive Measures against Lead Poisoning
—Continued 221
XIV. Preventive Measures against Lead Poisoning
—Continued 230
XV. Description of Processes 242
XVI. Description of Processes—Continued 265
XVII. Description of Processes—Continued 288
Index 305
LIST OF PLATES
FACING
PAGE
Plate I. 92
Plate II. 93
Plate III. 95
Plate IV. 276
LEAD POISONING AND LEAD
ABSORPTION
CHAPTER I
HISTORICAL—CHEMISTRY OF LEAD
The use of lead for various industrial processes and for painting
was well known to the ancients. Pliny[1] speaks of white lead, and a
method of corroding lead in earthen pots with vinegar, sunk into a
heap of dung, as the means by which white lead was made for paint.
Agricola mentions three forms of lead—white lead, a compound
which was probably bismuth, and metallic lead itself. The alchemists
were acquainted with the metal under the name of “saturn,” the term
signifying the ease with which the nobler metals, silver and gold,
disappear when added to molten lead.
Colic caused by lead was also known in ancient times, and is
described by Pliny; many other writers refer to it, and Hippocrates
was apparently acquainted with lead colic. Not until Stockhusen[2],
however, in 1656, ascribed the colic of lead-miners and smelters to
the fumes given off from the molten liquid was the definite co-relation
between lead and so-called “metallic colic” properly understood, and
the symptoms directly traced to poisoning from the metal and its
compounds. Æthius, in the early part of the sixteenth century, gave a
description of a type of colic called “bellon,” frequently associated
with the drinking of certain wines. Tronchin[3], in 1757, discovered
that many of these wines were able to dissolve the glaze of the
earthenware vessels in which they were stored, the glaze being
compounded with litharge.
In our own country, John Hunter[4] describes the frequent
incidence of “dry bellyache” in the garrison of Jamaica, caused by
the consumption of rum which had become contaminated with lead.
Many other writers in ancient and historical books on medicine have
written on the causation of colic, palsy, and other symptoms,
following the ingestion of salts of lead; and as the compounds of
lead, mainly the acetate or sugar of lead, were freely used
medicinally, often in large doses, opportunities constantly occurred
for observing the symptoms produced in susceptible persons. It is
not to the present purpose to examine the historical side of the
question of lead poisoning, but those interested will find several
valuable references in Meillère’s work “Le Saturnisme”[5].
Lead was used in the seventeenth and eighteenth centuries
particularly, and in the earlier part of the nineteenth, for its action
upon the blood. In view of experimental evidence of the action of
lead on the tissues, particularly the blood, this empirical use has
interest. Salts of lead were found to be hæmostatic, and were
therefore used for the treatment of ulcers because of the power,
notably of lead acetate, of coagulating albuminous tissue. It was also
used in the treatment of fevers, where again it is quite possible that
the administration of a lead salt, such as an acetate, produced
increase in the coagulability of the blood. At the same time spasms
of colic and other accidents followed its use. There is practically no
disease to which the human body is subject which was not treated
by lead in some form or another. Lead, with the addition of arsenic,
was given for malaria, while its use in phthisis was also common.
The present use of diachylon plaster is an instance of the continuous
use of a salt of lead medicinally, as also is the lotion of the British
Pharmacopœia containing opium and lead.
The Chemistry of Lead.
Physical Properties.—Lead belongs to the group of heavy

metals, and occupies a position between bismuth and thorium in the
list of the atomic weights, the atomic weight being 206·4, and density
11·85. It is blue-grey in colour, and its softness and facility to form a
mark upon paper are well known. Lead melts at a temperature of
325° C., and at this temperature a certain (if negligible) amount of
volatilization takes place, which vapour becomes reprecipitated in
the form of an oxide. Use is made of the volatility of the metal at the
higher temperatures, 550° C. and upwards, in the oxidation of lead
from a mixture of lead, silver, and gold; the oxide of lead, or litharge,
is partially collected and absorbed by the crucible, but the greater
part is mainly removed from the surface of the liquid metal as it is
formed, while the richer metal is left in the crucible.
Chemically speaking lead is a tetrad, and forms a number of
organic derivatives, especially through the intervention of a particular
oxide, minium. Lead forms metallic alkalies and alkaline earths,
resembling silver in this direction, and also metallic compounds with
zinc and copper; in this point it is very similar to silver. Small
quantities of lead present in other metals—as, for instance, a small
trace in gold—alter its physical qualities to a great extent; whilst the
addition of minute traces of other metals to lead—as, for instance,
antimony—cause it to become hard, a fact made use of in the
manufacture of shot.
A number of oxides of the metal are known: two varieties of
protoxides (massicot and litharge), protoxide hydrate, and bioxide.
Sulphide, or galena, represents the chief form in which lead is found
in Nature, and from which the actual metal is produced by
metallurgical processes.
The salts of lead may be divided as follows:
1. The carbonates or hydrated carbonates employed in a large
number of industrial and other processes, which are the cause of
much lead poisoning.
2. The acetates, both normal and basic, which are particularly
concerned in the production of white lead—at any rate in the process
of converting metallic lead into the hydrated carbonate through the
medium of acetic acid and steam.
3. Chromate of lead, which is used as a pigment, and also in
dyeing yarns, etc.
4. The nitrates and chlorides; the chloride particularly is used as
an oxidizing agent (plumbing, soldering, tinning of metals).
5. The silicates, silico-borates, silico-fluoborates, which constitute
the many varieties of glass and crystals used in optical instruments,
and the various glazes and enamel colours used in the potteries.
There are a large number of other derivatives, but these are not of
special interest to the subject in hand.
The Action of Water upon Lead.—The action of water on lead
was known even to the ancients, Pliny and Galen having written on
the subject. At times, and under certain conditions, as much as 20
milligrammes per litre have been found, as in the Bacup epidemic,
and 14 milligrammes per litre in the epidemic at Claremont.
Bisserie[6] in 1900 made an exhaustive inquiry into the action of
water upon lead; he gives the following conclusions:
1. Water and saline solutions attack lead more or less readily
when it is in combination with another metal, such as solder, copper,
bronze, iron, or nickel, the result being a hydrated oxide.
2. The maximum effect is produced with water slightly acid and
with solutions of chlorides or nitrates. With these it is not necessary
to have other metals present, and if the water is thoroughly aerated
the pure metal is attacked.
3. Bicarbonates and carbonic acid exercise by themselves an
action on wet lead, but the carbonate of lead formed in the process
adheres firmly to the surface of the metal, and prevents any further
action.
4. Sulphates act in the same way, but in less degree.
5. This protective action is much diminished when the water is
even slightly charged with nitrates or organic material. Pouchet has
pointed out that lead branch-pipes fixed to iron water-pipes, thus
producing an “iron-lead couple,” set up definite electro-chemical
changes, and tend to increase the rate at which solution of lead in
the pipe water takes place.
Houston[7], in an extensive and very full report on the effect of
water upon lead, especially undertaken for the purpose of inquiry
into the contamination of supplies of drinking water by means of
lead, distinguishes two species of action—namely, plumbo-solvency,
which is brought about by the acidity of the water in contact with
lead; and a second kind of action, erosion, determined to some
extent by the dissolved air in the water. He came to the conclusion
that the plumbo-solvency and erosive action of water on metallic
lead differed considerably, and that the protective layer or plumbo-
protective substance did not always protect lead pipes from the
solvent action of water.
Chemical Characters of Lead Salts.—A short summary of the
chemistry of lead salts may not be out of place.
A soluble salt of lead, such as the acetate or nitrate, is precipitated
by (1) hydrogen sulphide or alkaline sulphide as a brown or black
precipitate, which is insoluble in ammonium sulphide. In dilute
solutions this sulphide is, however, appreciably soluble in mineral
acids, and may introduce errors in analysis, especially as the
solubility is distinctly increased by the presence of certain earthy
salts. The sulphide produced through the action of alkaline sulphide
on a soluble salt of lead is less soluble than is the corresponding
acid sulphide. Soluble salts of lead are at once precipitated by
albumin or peptone; the resulting precipitate has no stable
composition.
Under certain conditions definite colloidal precipitates are formed,
particularly in the presence of sulphide of copper or mercury. (2)
Sulphuric acid or soluble sulphates produce a precipitate of lead
sulphate insoluble in excess of the precipitating salt or sulphuric
acid, and only slightly soluble in alkaline solutions. This method is
the one generally adopted for gravimetric determination of a lead
salt. (3) Potassium chromate produces a precipitate of chromate of
lead very little soluble in acid, but soluble in caustic alkali. (4)
Potassium iodide produces a yellow lead iodide, soluble on heating,
and reprecipitating and crystallizing on cooling. (5) Alkaline chlorides
and hydrochloric acid produce needle-like crystals of lead chloride
soluble on heating, and reprecipitating on cooling. (6) Potassium
nitrate in conjunction with a copper salt (copper acetate) produces a
precipitate of a triple copper, lead, and potassium nitrate,
crystallizing in characteristic violet-black cubes. This reaction is one
made use of in the qualitative determination of small quantities of
lead in organic fluids (see p. 167).
All the precipitates of lead salts, with the exception of the sulphide,
are soluble in fixed alkalies, in ammonium acetate, ammonium
tartrate, and ammonium citrate. It is possible to determine the
presence of lead in a large volume without evaporating down the
whole bulk of fluid. By this means liquid containing lead is treated
with sulphide of copper, sulphide of mercury, or baryta-water.
Meillère states that he has detected the presence of as small a
quantity as 1 milligramme of lead in 1,000 c.c. of water in this
manner without evaporating the liquid. Where lead is in organic
combination, as is the case in the urine of persons suffering from
lead poisoning, it is not decomposed by hydrogen sulphide, and the

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International Project Finance: The

Public-Private Partnership Felix I.

ISBN 978-3-030-96389-7 ISBN 978-3-030-96390-3 (eBook)

Writing a book is always a challenge. However, writing a book on

1 Introduction to Project Finance 1

5.5.1 Public Procurement Laws in the United

8.2.4 Build–Own–Operate (BOO) 83

9.4.2.1 ICC Functions 109

10 Project Finance Governance 127

13.3.2 Accounting 167

AAA American Arbitration Association

LCIA London Court of International Arbitration

Fig. 2.1 PPP versus Traditional Procurement (Source World Bank

Table 3.1 Infrastructure finance instruments 20

Introduction to Project Finance

© The Author(s), under exclusive license to Springer Nature 1

the raising of funds to finance economically separable capital investment

3 J.D. Finnerty (2013): Project Financing: Asset-Based Financial Engineering, 3rd

1.2 Characteristics of Project Financing

Project financings are often large-scale projects that require a great

Project financing transactions are highly leveraged with debt accounting

• Non-recourse or limited recourse financing

• Controlled dividend policy

To support a borrower without a credit history in a highly leveraged

• Economies of scale and externalities

Projects financed, in infrastructure may lead to natural monopolies such

the economy as a whole. Such social benefits are fundamentally difficult

These transactions frequently demand the participation of numerous

Raising capital through project finance is generally costlier than through

1.3 Public-Private Partnership Framework

1.3.1 PPP Policy

There are various rationales for governments to adopt PPP as a method

• PPP Implementation Principles

The implementation of public-private partnerships can be challenging in

– Public authority and private companies must act as partners. To

• PPP Governance Arrangements

– The political leadership should ensure public awareness of the rela-

7 OECD (2012): Recommendation of the Council on Principles for Public Governance of

– All investment projects should be prioritized at senior political level.

– The project should be treated transparently in the budget process.

Project Financing and Direct Conventional

2.2 Corporate Finance

1 João M. Pinto (2017): What Is Project Finance. Investment Management and

© The Author(s), under exclusive license to Springer Nature 11

shareholders’ wealth.3 In traditional corporate finance, the primary source

2.3 Traditional Procurement

managing the asset, although it hires private companies to do these on

2.4 Project Finance

pursue the sponsoring company’s assets in the case of default. In addition,

2.5 Advantages and Disadvantages

2.6 Evolution of Project Finance

2.6.1 The Extractive and Oil Industry

2.6.2 The Natural Resource Industry

growth. The group specializing in the production of electricity and

2.6.3 The Power Industry & Beyond

Sources of Project Funds

3.2 Sources of Funds

© The Author(s), under exclusive license to Springer Nature 19

• Syndicated Commercial Loans

Table 3.1 Infrastructure finance instruments

Source OECD analysis drawing on OECD (2015b)

Syndicated commercial loans are funds lent by commercial banks and

Bridge financing is a short-term financing arrangement (e.g., for the