TABLE OF CONTENTS Just as financial instruments range from debt to equity and hybrids such as mezzanine finance, project finance can raise capital from a range of sources.
Raising financing depends on the nature and structure of the project financing being proposed. Lender and investor interest will vary depending on these goals and risks related to the financing. Commercial lenders seek projects with predictable political and economic risks. Multilateral institutions, on the other hand, will be less concerned with commercial lending criteria and will look towards projects that ostensibly satisfy not only purely commercial criteria.
In assembling a project financing, all available financing sources should be evaluated. This would include equipment suppliers with access to export financing; multilateral agencies; bilateral agencies, which may provide financing or guarantees; the International Finance Corporation or regional development banks that have the ability to mobilize commercial funds; specialized funds; institutional lenders and equity investors; and commercial banks, both domestic and international.
Equity is often raised in the stock markets and from specialized funds. Equity, as it is well known, is more expensive than debt financing. Domestic capital markets provide access to significant amounts of funds for infrastructure projects, although capital markets in developing countries may lack the depth to fund large transactions. In such cases, the international capital markets can also provide access to significant amounts of funds for infrastructure projects. However, this is generally limited to transactions whose sponsors are large, multinational companies. Access to international capital markets by...
