A Thillai Rajan

Private financing of infrastructure projects is commonly seen in many countries today. In recent years, many private infrastructure projects have also attracted investment from Private Equity (PE) firms. Though there have been instances of PE investment in infrastructure even in the past, the growth has been substantial in recent years. This paper analyses the role of PE investments in infrastructure financing. The findings are based on an analysis of 2821 infrastructure projects that were announced during 1990-2009. It was found that projects with PE investment were larger when compared to projects that did not have PE investment, indicating that that PE investment helped in successfully financing larger projects. Our analysis also indicated that PE investment in infrastructure is more frequently seen in developed countries as compared to developing countries. In developing countries, the number of sponsors is higher in projects with PE investment without any corresponding increase in project size. This indicates that PE investors have helped in sharing the project risk among a larger group of investors, thereby reducing the risk faced by the individual sponsors. © 2011 Elsevier Ltd.

– Privately financed infrastructure projects commonly use a project finance structure. Project finance is expected to facilitate investment flow in risky environments. The objective of this paper examines the link between the use of project finance and investments in risky environments. – Project Finance International database has been used as the data source for this study. 3,372 transactions from power, oil and gas, transportation, telecommunication, and water supply sectors have been considered means analysis and multi-variate regression models have been used in the analysis. – The average project cost in a developing country was higher than that of developed countries. Gearing ratio, however, was higher in the developed countries. This indicated that the projects had a lower level of inherent risk, which enabled them to get funded at high gearing levels. The proportion of foreign banks in the syndicate was higher in the developing countries, which indicated that the use of project finance has helped to attract investment from foreign investors. – Practitioners and project development companies in the developing countries should actively consider using project financing technique for achieving financial closure of large infrastructure projects. Simultaneously, policy makers should create appropriate supporting institutional framework (regulatory, legal, contractual arrangements) that supports the use of project finance. – As far as the authors know, this study uses a dataset that has not been used in the previous studies. The results of this paper strengthen the understanding of project financing. © 2013, Emerald Group Publishing Limited