Principles of Project Finance

funding for additional investment in infrastructure that the public

sector might otherwise not be able to undertake because of economic or

financial constraints on the public-sector investment budget.

Of course, if the public sector pays for the project through a long-term Pro-

ject Agreement, it could be said that a project financed in this way is merely

off-balance sheet financing for the public-sector, and should therefore be in-

cluded in the public-sector budget anyway. Whether this argument is a valid

one depends on the extent to which the public sector has transformed real proj-

ect risk to the private sector.

Risk transfer. A project finance contract structure transfers risks of, for ex-

ample, project cost overruns from the public to the private ...