Principles of Project Finance

As the development process on all projects runs into months, and on many proj-

ects into years, Sponsors should not underestimate the scale of costs involved.

High costs are unavoidable, with the Sponsor’s own development staff working for

long periods of time on one project, perhaps traveling extensively or setting up a

local office. The costs of external advisers (cf. §4.3) have to be added to this. De-

velopment costs can reach 2.5–5% of the project cost, and there is always a risk

that the project will not move forward and all these costs will have to be written

off. Cost-control systems are therefore essential. (There are also limited econo-

mies of scale—large projects also need to be more complex in structure, so the

development costs also remain ...