Funding models for infrastructure
Produced in partnership with Victoria McGie
Funding models for infrastructure

The following Construction practice note Produced in partnership with Victoria McGie provides comprehensive and up to date legal information covering:

  • Funding models for infrastructure
  • Factors influencing source of funding
  • Typical sources of funding for infrastructure projects
  • Typical funding models

The high level of demand, globally, for public infrastructure at a time when public revenues are restricted and banks are less willing to lend, has lead to new and varied ways of funding infrastructure development.

Below is an overview of the typical sources of funding and funding models employed for infrastructure development. A detailed review of the available financial structures and products for funding infrastructure is beyond the scope of this practice note.

Factors influencing source of funding

The source of funding for any given infrastructure project depends upon:

  1. the party/parties procuring the infrastructure project—is it a government body, private company or consortium? Does it have a strong track record? Are the parties or their sponsors investment grade?

  2. the finances of the procuring party—do they have available funds or do they need to raise finance?

  3. the security package—if the procuring party needs to raise finance, what entities, assets and documents will be included in the lenders’ security package?

  4. the location of the project—for instance, is it in a developed country, a developing country or a politically unstable region? Banks may have limits on the amount they will lend in any one country and may also be concerned about law application and enforceability of judgments

  5. the level of construction risk—for instance, is it a simple project using established construction methods or a complex process facility utilising new technology?

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