TABLE OF CONTENTS Governments play a very important role in project finance. Projects financed in this way are often major long-term investments, for which a political will and sustained political support are needed. They may also form part of a government policy of privatization or the provision of public infrastructure through PPPs, whose success or failure may have considerable political consequences.
In fact, few major projects can be structured and financed without political backing. Political support from a high level is often necessary to enable a project to be completed successfully; for example, if a PPA is being negotiated with the state-owned power company, the latter's management may consider that such a contract is not in their interests, and it would be better if they developed the power station themselves as they have done in the past. Thus the Power Purchaser has no incentive to negotiate constructively. The only way to break this impasse is for the Power Purchaser to be given a strong direction from the Host Government that they must not take this attitude.
Once the project is operating, continued political support is needed. The project will be weakened if it becomes a political football because it provides a handle for the opposition to attack the government, or for a new government to try to undo the deal agreed by the previous government, e.g., because it did not go through a transparent (competitive) public procurement process (cf. 4.6) or it produces very high returns for the investors (cf. 6.9.3), and so is open to charges, at best, of having been favored unfairly, or, at worst, of corruption. Once...
