Project finance in local public services: little finance and little project?
AbstractThis paper analyzes the potential and the limits of project finance for the provision of local public services and compares them with alternative instruments in the light of current regulation. The main requirements for project finance, even in non “pure” forms, to justify its complex network of contracts, appear to be the presence of synergies between construction and service provision, the allocation of a substantial part of market risk to the private partner, and infrastructure that is large in scale. The available data and a survey carried out in the Emilia-Romagna region show that instruments similar to project finance are widespread in local public services. Yet the actual features of public finance in Italy seem to be far from those that would normally justify its use. The main reason for using project financing has often been to avoid an immediate and direct financial burden to the public administration or to bypass overly rigid rules in the public management of some services.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Questioni di Economia e Finanza (Occasional Papers) with number 25.
Date of creation: Sep 2008
Date of revision:
project finance; local public services; infrastructure; risk allocation;
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-14 (All new papers)
- NEP-PBE-2009-02-14 (Public Economics)
- NEP-PPM-2009-02-14 (Project, Program & Portfolio Management)
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