Project Finance: Practical Case Studies

not have the required expertise and was not particularly committed to those businesses when

expectations were not met.

Common themes

As mentioned above, the project case studies in these volumes were selected to exhibit the

types of projects most frequently financed in a variety of countries. As a result, common

themes can be identified across the two volumes. Some of these are summarised below.

Infrastructure requirements

Power shortages motivated the privatisation of the electricity sector in China, Colombia, Côte

d’Ivoire, India, Indonesia, Mexico and the Philippines, and led to commercial project financ-

ing of power projects in these countries.

Legal and regulatory

First-of-their-kind projects in developing countries typically introduce new legal con-

cepts. In China, India, Indonesia, Mexico and the Philippines inadequate existing legal

and regulatory frameworks meant that negotiating contracts according to international

standards for each country’s first IPP required both the introduction of legal issues, con-

tract structures and financial concepts new to each country, and lengthy negotiations with

government officials. A similar process was evident in contract and financing negotiations

for Greece’s first build-operate-transfer (BOT) toll road and Uruguay’s first cellular tele-

phone system (see Volume II –Resources and Infrastructure). Lack of coordination among

government agencies and weak provisions in privatisation statutes has created problems

for the SCL Terminal Aéreo Santiago project in Chile (see Volume II –Resources and

Infrastructure). Project negotiations highlighted the need for concession contact law in

Côte d’Ivoire (see Chapter 4) and for mining law in Tanzania (see Volume II – Resources

and Infrastructure).

The availability of international arbitration was an issue in many project contract nego-

tiations, including those for power projects such as Meizhou Wan in China (see Chapter 2),

Azito in Côte d’Ivoire (see Chapter 4), Dabhol in India (see Chapter 5) and Paiton I in

Indonesia (see Chapter 6). International arbitration was used, but largely failed, with Dabhol

and Paiton I.

The refusal of host governments to honour contracts and guarantees is highlighted in the

Dabhol (India) and Paiton I (Indonesia) case studies.

Credit risk

Political risk insurance is a necessity for project financing in most emerging markets. It was

required to attract lenders to the Azito (Côte d’Ivoire) and CBK (Philippines) power projects

(see Chapters 4 and 10) and the three Tanzanian gold mine project loans (see Volume II –

Resources and Infrastructure). The CBK power and Geita gold mine (Tanzania) projects

highlight the growing use of private political risk insurance.

The International Finance Corporation’s A/B loans, which provide private commercial

POWER AND WATER

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