The Worldwide Revolution in Infrastructure Provision and Project Finance
THE NATURE OF INFRASTRUCTURE For most of the post-war period, government has been the principal provider of infrastructure (at least outside the United States). Over the last decade, that position has begun to change. Faced with budgetary stringencies and, at the same time, pressure to expand and improve public facilities and services, governments have turned to the private sector, in order to harness private finance and achieve better value for money. Private sector entities have entered into long-term contractual agreements to construct or manage public sector infrastructure facilities, or to provide services to the community (using the infrastructure facilities). The techniques have been developed at national level, used to promote investment in local government services and in infrastructure projects more generally elsewhere, and have been extended to joint ventures and infrastructure projects for regional regeneration. When considering infrastructure projects, ‘infrastructure financing’ and ‘infrastructure investment’ need to be distinguished. The former can arise from the privatization of existing facilities, whereas infrastructure investment involves development, operation and ownership either by the private sector alone or in a joint venture between government and the private sector entity. The distinction is analogous to buying an existing office block, already fully let, as opposed to developing a new site – the financing requirements and risks are obviously quite different in the two cases. Our interest is with infrastructure investment, and in the case of a PPP contract it incorporates: • the construction of a new infrastructure asset (or the refurbishment of an existing one) to be designed,...
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