Project Finance: Practical Case Studies

because of the need for adequate credit quality of the off-takers, but it is in these countries

that the need is greatest.

Project finance will continue to play a major role

As the model for infrastructure projects throughout the world continues to be refined to apply

the lessons learned, it is likely that project financing will continue to play a major role in the

sound and creditworthy structuring of projects. Despite the losses experienced in some of the

projects discussed by Hal Davis and alluded to in this foreword, the fact remains that even

these projects have, in most cases, proved to be resilient over time.

One of the key lessons learned is that projects that fill an important social need, are fun-

damentally sound and low-cost, and have sponsors with the financial resources and patience

to work though problems have enabled investors and lenders to recover a much higher per-

centage of their investment than have similarly rated corporate investments. This reflects the

secure nature of these investments, the strategic nature of the facilities being financed and the

careful structuring of all contractual, and other, aspects of the projects.

Examples of such projects include the Indonesian power projects, including Paiton

Energy (discussed in Chapter 6) and Jawa Power (not in this book), which are on the path to

recovery, and the Indonesian telecommunications projects (not in this book), which are

expected to recover. Similarly, the success of International Power in working through the

problems of its Pakistan projects (not in this book) is encouraging.

Government agencies in these countries have worked through project problems in the

midst of great domestic difficulties, but still have demonstrated much higher recovery rates

than similarly rated corporate transactions.

Role of private sector in global power and infrastructure

The common element in all of the initiatives discussed in this important book is the creativi-

ty of the private sector, working with governments and other affected parties, in building key

facilities needed by people around the world to live better lives. Henry Davis’s excellent

introduction and case studies demonstrate the great challenge we face in the development and

financing of critical infrastructure on a global basis, particularly in the developing world. We

have learned many lessons from our mistakes, and Henry Davis teaches them well. This book

comes at a time of crisis. It makes an important contribution to our understanding of what can

go wrong and what is needed to implement better the critical power and infrastructure facili-

ties that the world needs.

FOREWORD

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