Risks Involved in Financing Public Transport Infrastructure Projects

Risk identification is an essential part of public transportation infrastructure project financing. Risk identification must be addressed in a satisfactory manner prior to debt and equity investors committing themselves to project funding. To attract debt financing, risk mitigation is key. Debt financiers cannot participate in the upside of successful projects, but they can experience the downside of unsuccessful projects. A number of risks are addressed by this article that are commonly encountered in public transportation infrastructure financing. Major risks include those found in the construction phase (delays in the commencement of project cash flows and project completion; costs overruns with increased capital needed for construction completion; contractor or key supplier insolvency or lack of experience) and in the start-up and operating phase (political, regulatory and legal, force majeure, financial (fluctuations in interest rate and foreign exchange rate), traffic demand/revenue risk, and technology risks). A source of financing for public transportation infrastructure projects absent in other mechanisms is private sector involvement in public private partnerships (PPPs). It is essential that there be full and transparent disclosure of PPP operations, and that the disclosure be incorporated into medium-term policy analysis, until internally accepted PPP accounting and reporting standards are developed.

Language

  • English

Media Info

  • Media Type: Print
  • Features: References;
  • Pagination: pp 6-8
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 01150697
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Feb 5 2010 4:12PM