Financing Water and Sanitation Projects : The Unique Risks
A project finance structure allows water projects with attractive cash flows and risk profiles to secure long-term private capital. But even in industrial countries the credit strength of off-taking municipal governments and the sector's tradi...
| Main Authors: | , |
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| Format: | Viewpoint |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/1998/09/441599/financing-water-sanitation-projects-unique-risks http://hdl.handle.net/10986/11535 |
| Summary: | A project finance structure allows water
projects with attractive cash flows and risk profiles to
secure long-term private capital. But even in industrial
countries the credit strength of off-taking municipal
governments and the sector's traditional monopoly
structure expose lenders to potentially significant credit,
regulatory, and political risks. These risks, combined with
the sunk, highly specific, and non-redeployable nature of
water infrastructure investments, mean that lenders and
investors are vulnerable to opportunistic contracting
problems and expropriation. Reviewing some recent innovative
water and sanitation projects, the authors show that private
capital participation on a limited recourse or nonrecourse
basis has required support by third parties such as
multilaterals and federal government agencies to absorb
noncommercial risks. |
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