Issues and trends in project finance for public infrastructure

In the last decades, many governments across the world have sought to use public private partnerships (PPP) as a means of attracting private capital to build economic and social infrastructure. Increasingly, PPPs have strong interest groups support, especially among a new range of investors, such as pension funds, life insurance companies and sovereign wealth funds; however, some policy instru- ments remain an indispensable element to attract these alternative risk-adverse long-term investors in the infrastructure sector. This chapter reviews the policy actions used by governments to enhance the viability of PPP contracts and shows how economic and financial equilibrium can be established. Crucial to the latter is the expected cost of the equity and the chapter outlines a range of approaches that can be used to estimate this.