Project Finance in Local Public Services: Little Finance and Little Project?

35 Pages Posted: 21 Feb 2009

Date Written: September 22, 2008

Abstract

This paper analyzes the potential and the limits of project finance for the provision of local public services and compares them with alternative instruments in the light of current regulation. The main requirements for project finance, even in non "pure" forms, to justify its complex network of contracts, appear to be the presence of synergies between construction and service provision, the allocation of a substantial part of market risk to the private partner, and infrastructure that is large in scale. The available data and a survey carried out in the Emilia-Romagna region show that instruments similar to project finance are widespread in local public services. Yet the actual features of public finance in Italy seem to be far from those that would normally justify its use. The main reason for using project financing has often been to avoid an immediate and direct financial burden to the public administration or to bypass overly rigid rules in the public management of some services.

Keywords: project finance, local public services, infrastructure, risk allocation

JEL Classification: D61, D81, H44, H54, H76, L33, L90

Suggested Citation

Bentivogli, Chiara and Panicara, Eugenia and Tidu, Alfredo, Project Finance in Local Public Services: Little Finance and Little Project? (September 22, 2008). Bank of Italy Occasional Paper No. 25, Available at SSRN: https://ssrn.com/abstract=1344253 or http://dx.doi.org/10.2139/ssrn.1344253

Chiara Bentivogli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Eugenia Panicara

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alfredo Tidu

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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