Purpose – Logistic service providers (LSPs) are increasingly required to take over the ownership of network-specific inventories and to finance related working capital. The paper examines the nature of associated uncertainties, especially behavioural risks and illustrates the mechanisms of the...

This paper examines whether certification by government and development partners enhances private sector ownership in public-private partnership (PPP) projects. Based on a sample of 4,246 PPP projects for 37 developing countries from 1990 to 2012, we find government certification is not related...

We theoretically analyze the optimal contracts and the capital structure of public-private partnerships (PPPs) formed to implement infrastructure projects under a limited-recourse project financing arrangement. In our model, a sponsoring company and a host government set up a project company in...

Many models in energy economics assess the cost of alternative power generation technologies. As an input, the models require well calibrated assumptions for the cost of capital or discount rates to be used, especially for renewable energy for which the cost of capital differs widely across...

The flows-to-equity method is often used to value highly leveraged projects, or transactions, where debt typically amortises over time according to a fixed schedule. This requires a formula that links the changing leverage over time with a time-varying equity discount rate. We show that the...

We define long shots as investment projects with four features: (1) low probabilities of success; (2) long gestation lags before any cash flows are realized; (3) large required up-front investments; and (4) very large payoffs (relative to initial investment) in the unlikely event of success....

This updated note – the fifth in a series – provides an introduction to the fields of project finance and infrastructure finance, and gives a statistical overview of project-financed investments over the past five years. Examples of project-financed investments include the $1.4 billion Mozal...

A common method of valuing the equity in highly leveraged transactions is the flows-to-equity method. When applying this method various formulas can be used to calculate the time-varying cost of equity. In this paper we show that some commonly used formulas are inconsistent with the assumptions...

While limited-recourse project financing has been used extensively to finance large infrastructure projects, the rationale for its use is not well understood. In this paper, we develop a dynamic model of a firm’s choice between limited-recourse project financing (separate debt issued against...