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Equity investment in privately financed projects

2012-05-02 Business & Economics
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Release : 2012-05-02
Genre : Business & Economics
Kind : eBook
Book Rating : 129/5 ( reviews)

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Book Synopsis Equity investment in privately financed projects by : Great Britain: Parliament: House of Commons: Committee of Public Accounts

Download or read book Equity investment in privately financed projects written by Great Britain: Parliament: House of Commons: Committee of Public Accounts. This book was released on 2012-05-02. Available in PDF, EPUB and Kindle. Book excerpt: This report examines the risks and rewards for private equity investors in government private finance projects. The Private Finance Initiative (PFI) model has been used by governments in some 700 projects over the last 20 years but defects, including failures to demonstrate the value for money case satisfactorily, the use of long inflexible contracts and the costly contracting process, and inefficient pricing of equity have made continuing with the current model unsustainable. The Treasury is currently reviewing the PFI model. It needs to improve flexibility in the way that private finance is used, establishing quicker and more efficient procurement procedures and achieving a better balance between investors' risks and their rewards. Private finance should only be used where it secures real value for money for the taxpayer, not because of definitional statistical incentives to get projects off the balance sheet (only some 20% of long term PFI liabilities are recorded as debt in the national accounts). Business cases must be an unbiased and transparent assessment of the best form of procurement for the particular project being undertaken, taking account of expected tax receipts from alternative options and not adjusting assumptions to bias the outcome of the assessment. The Treasury needs to collect data on investors' experiences and use this information to assess and challenge investors' returns. There needs to be greater transparency over the pricing of contracts, and inefficiencies which add to the cost of private deals, such as long procurement times, need to be addressed.

Equity investment in privately financed projects

2012-02-10 Business & Economics
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Release : 2012-02-10
Genre : Business & Economics
Kind : eBook
Book Rating : 406/5 ( reviews)

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Book Synopsis Equity investment in privately financed projects by : Great Britain: National Audit Office

Download or read book Equity investment in privately financed projects written by Great Britain: National Audit Office. This book was released on 2012-02-10. Available in PDF, EPUB and Kindle. Book excerpt: Banks or bondholders provide around 90 per cent of the project funding for a PFI project on the condition that the remaining money is provided by the investors as risk capital or equity, which will be lost first if the project runs into difficulty. However, the investors limit their risk by passing it to their contractors. In addition, the government is a very safe credit risk and many projects such as hospitals and schools are repeat projects. This report identifies three potential inefficiencies in the pricing of equity. These are the time and costs of bidding; minimum rates set by investors, which sometimes do not reflect the actual risks the project will face; and bank requirements. It concludes that, generally, public sector authorities have not been equipped with the skills and information required to challenge investors' proposed returns rigorously. The NAO shows how further analysis during the bidding process would help authorities to assess the reasonableness of the investor returns. Some investors in successful projects have gone on to sell shares in their equity to release capital and fund new projects. Analysis has shown that investors selling shares early have typically earned annual returns of between 15 per cent and 30 per cent. The Treasury should use its current review of PFI to consider alternative investment models that limit the potential for very high investor returns in relation to risk

Leveraging Private Capital for Infrastructure Renewal

2019 Infrastructure (Economics)
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Release : 2019
Genre : Infrastructure (Economics)
Kind : eBook
Book Rating : 628/5 ( reviews)

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Book Synopsis Leveraging Private Capital for Infrastructure Renewal by :

Download or read book Leveraging Private Capital for Infrastructure Renewal written by . This book was released on 2019. Available in PDF, EPUB and Kindle. Book excerpt: Public-private partnerships (P3s) can provide solutions to the project delivery challenges faced by state departments of transportation (DOTs) and local transportation agencies in delivering surface transportation infrastructure by aligning risks and rewards between public and private sectors, accelerating project delivery, improving operations and asset management, realizing construction and operational cost savings, and attracting private-sector equity investment. P3s are becoming an increasingly important option for financing and implementing critical improvements to U.S. surface transportation infrastructure. As interest in P3s grows, U.S. transportation agencies and stakeholders evaluating the potential benefits of P3s have raised issues relating to the role of private equity in these transactions. Recognizing the complexity and challenges of structuring a highway or bridge P3 compared to a conventional procurement, the objective of NCHRP Synthesis 540: Leveraging Private Capital for Infrastructure Renewal is to bridge the knowledge gap on the role of equity in surface transportation P3 projects and to document current practices relating to private-equity investments in small-scale and large-scale transportation infrastructure projects.

Mastering the Risky Business of Public-Private Partnerships in Infrastructure

2021-05-10 Business & Economics
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Release : 2021-05-10
Genre : Business & Economics
Kind : eBook
Book Rating : 569/5 ( reviews)

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Book Synopsis Mastering the Risky Business of Public-Private Partnerships in Infrastructure by : Manal Fouad

Download or read book Mastering the Risky Business of Public-Private Partnerships in Infrastructure written by Manal Fouad. This book was released on 2021-05-10. Available in PDF, EPUB and Kindle. Book excerpt: Investment in infrastructure can be a driving force of the economic recovery in the aftermath of the COVID-19 pandemic in the context of shrinking fiscal space. Public-private partnerships (PPP) bring a promise of efficiency when carefully designed and managed, to avoid creating unnecessary fiscal risks. But fiscal illusions prevent an understanding the sources of fiscal risks, which arise in all infrastructure projects, and that in PPPs present specific characteristics that need to be addressed. PPP contracts are also affected by implicit fiscal risks when they are poorly designed, particularly when a government signs a PPP contract for a project with no financial sustainability. This paper reviews the advantages and inconveniences of PPPs, discusses the fiscal illusions affecting them, identifies a diversity of fiscal risks, and presents the essentials of PPP fiscal risk management.

Using Project Finance to Fund Infrastructure Investments

2016-08-23 Business & Economics
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Release : 2016-08-23
Genre : Business & Economics
Kind : eBook
Book Rating : 092/5 ( reviews)

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Book Synopsis Using Project Finance to Fund Infrastructure Investments by : Steffen Schmidt

Download or read book Using Project Finance to Fund Infrastructure Investments written by Steffen Schmidt. This book was released on 2016-08-23. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2015 in the subject Economics - Finance, grade: 1,3, , language: English, abstract: The competitiveness and the ability of economic growth and the local living standards are closely related to a country’s infrastructure quality and volume. After World War II, in Europe huge investments in infrastructure, such as roads, railways or hospitals were traditionally financed by public sources, such as tax revenues, over-printing of money or borrowings. Today, especially in the developing countries there is a huge demand for infrastructure investments. There exist so-called “infrastructure gaps”: In order to improve the standard of living and the attractiveness of a country and econ-omy, the segments of transport, electricity generation, transmission as well as water and telecommunications are essential. The main problem for governments is that Infrastructure projects within these segments usually have a huge extent and require a lot of capital, which often is not available. The OECD estimates that there exists a global infrastructure investment requirement of 71 trillion dollars by the year 2030 only to improve the basic infrastructure. But also in Europe there is an important demand for infrastructure investments. Today, post financial crisis, the TEN-T pro-gram which started in 2014 and also the energy distribution networks or the power plants will require very huge amounts of capital in the coming years and decades, while the political and economic situation is rather uncertain. The forms of financing projects like the above mentioned have changed substantially: Over the past years and decades, severe budget constraints and inefficient manage-ment of infrastructure projects by public entities have led to an increased involvement of private investors in the business of infrastructure financing. This development has attached more and more importance to concrete strategies of private financing forms or partnerships. In recent years this private funding has increasingly taken the form of project finance. So there are basically the following questions: What exactly is project finance, how can a partnership between a public and a private entity be es-tablished and how can this construct help to solve the problem of the mentioned infrastructure gap? The scope of project finance, the different forms and the critical success factors and the meaning for infrastructure finance are the subject of this assignment.

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