Chapter 11

Financial Hedging

§11.1 Introduction

This chapter covers the two main macroeconomic issues in the financial structuring of a PPP project, namely interest-rate risk (§11.2), and issues related to inflation (§11.3).

Another possible macroeconomic risk is that of currency exchange-rate movements, but this can only occur if the funding, Service Fees, capex or opex are in different currencies. Although this happens in other project-finance sectors, this is not normally the case in a PPP project. The few exceptions may occur in Concessions where users pay in foreign currencies, e.g. port or airport projects, or in cases where there is a high component of imported capital equipment in the project, which is not common in the infrastructure field. ...

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