Construction Project Finance

Project finance is a pervasive method of financing in developing countries. It has a significant advantage over traditional financing approaches. In the era of the globalization of business and investment, where the demand for energy has soared and many international oil companies and private and institutional investors ventured into the developing world, this method of finance has created a wealth of new opportunities to finance capital-incentive ventures, including development of oil production, gas transmission, and electric power generation facility. Beginning in the 1980s, the risk associated with the construction of large infrastructure were largely born by governments, which normally built and operated these projects through their own enterprises. However, most of these governments were in transition or post-conflict states-saddled with debt and unable to finance large expensive infrastructure projects. Through much of the mid-to-late twentieth century, these government came to adopt the view that the best way to boost economic growth would be to limit the government involvement and make room for private investments and innovation. The proposed solution was the private financing of large and capital-incentive infrastructure. The world's appetite for oil & gas is great and is steadily increasing. The consumption of oil & gas remains concentrated in wealthy nations, particularly the United States and China which has surpassed most of the industrialized countries to become the world's second-largest consumer of Energy. To satisfy this increasing high demand of energy, oil-producing countries have rushed to increase their productions. Thus, developing countries have been and continue to be a favored destination for international oil companies mainly because financial constraints have hindered these countries' ability to commit its financial resources to the development of their infrastructures. Project finance has developed in response to this critical need. It offers the prospect to appeal both domestic and international private investment, in addition, it allows the developing countries to harness private sector's skills, expertise, the necessary technology, and know

The success of construction contractors largely depends on the specific terms and the availability of sufficient funds for realizing planned projects. Financial issues in construction have been discussed since mid 1970s, yet no consensus about progress has been reached in the construction finance literature. A systematic analysis of 259 finance related studies in construction is undertaken to identify research trends, critical topics, and performance of journals and authors. To map the productivity in construction finance field, Scopus database was searched for the entire period for which this database provides online coverage. Results reveal that “financial health” category, in particular one group of studies aiming to monitor and assess the financial performance of construction organizations for broader strategic issues pervaded the construction finance research. However, notably the “identification of capital structure, determinants and financing instruments” category received le...

The research aims at exploring the critical variables that affect public works contractors’ working capital in the delivery of infrastructure projects. Effective financial management has long been recognized as the ‘lifeblood’ of construction contractors, especially during economic periods of recession. The main reason for insolvency in the built environment is the lack of working capital to support contractors’ site operations. Therefore, it is vital to accurately predict the project working capital requirements at the pre-tender stage and closely monitor project cash-flow during the physical production process. The proposed methodology entails the development of a cash-flow/ working capital calculation process based on spreadsheet modelling and the Gantt chart for the derivation of project disbursements S-curves, revenue step function curves, and maximum/net cash-flow profiles. The model is implemented to a recently delivered typical infrastructure project – the construction of a ...

Over the past decade, Public - Private Partnership Policy has increasingly been adopted by governments over the world and the Ghanaian Government is no exception. This paper explores the key reasons for adopting PPP for construction projects in Ghana. In an empirical questionnaire survey respondents were invited to rate their perception on 17 reasons identified from literature. The results show that five most important reasons for adopting PPP are: ‘reduces public sector administrative cost’, ‘allows for shared risk’, ‘reduces the problem of public sector budget constraint’, ‘private sector possess better mobility’ and ‘private sector has ability to raise funds for project’. A significance test using one _ way
ANOVA indicates that ‘offers benefit to local economic development’, ‘increase access to the public sector market’, ‘provides tax exemption and reduction’ and ‘provides incentives to new market penetration’ receive different views from the public and private organizations as reasons for adopting PPP policy. Factor analysis also shows that the factor groupings for the 17 reasons are: innovation enhancement and economic benefits, private sector efficiency, opportunities for market penetration and innovation, effective project risk management and business growth incentives for the private sector.

La mia Tesi per la Laurea Specialistica in Architettura, sul Project Financing, tesi discussa e preparata con l'Arch. Jacopo Casadio

Il Programma Integrato di Intervento, strumento attuativo della pianificazione territoriale in Lombardia. Una sua applicazione con l'impiego delle tecniche della finanza di progetto.

Relatore: Prof Michele Rossi
Anno Accademico 2007-2008
Studenti ed Autori: Bonnì, Casadio

Sea loan or pecunia traiecticia belongs to the heritage of Roman legal thought. It seems to occupy a distinctive position in the conceptual framework of private law and few researchers are interested in investigating it. One of them is Z. Benincasa who has analyzed the topic in her general monography on risk in maritime journeys till the 2nd century AD. This article has been inspired by her book, however it is also the result of own studies on sea loan not only in the ancient Roman law but also in the medieval, modern and contemporary legal thought. Thanks to broad insight into the history of sea loan it was possible to take an approach which was only mentioned before. Namely that Roman sea loan provides the solution which today seems to be present in Project Finance. It was reasonable to start the broad comparison again from ancient Roman law. First of all, it has shown that sea loan served not only as a method of taking over the risk by a creditor, but it was also a kind of speculative investment and opportunity to gain a great profi t from maritime trade. At the same time it enabled a debtor to organize
a risky journey. There were two kinds of sea loan. One was a loan given on the condition that a debtor would successfully reach the port of his destination. The other one was a loan with the same condition, but also with an added time limit, e.g. 200 days of navigation – so called dies incertus sensu stricto. Secondly, the profi t of a creditor was strictly attached to the gains from maritime trade and depended on the success of a maritime journey. On the one hand, debtors’ personal liability was moved as far as possible, in order to satisfy creditors just from profit or items acquired during the trade expedition. On the other hand, the way to enter into the contract to attach high interests and fi nally to sue a debtor
and his heirs was very fl exible. Thirdly, emperors were interested in sea loan and provided in their constitutions balanced position of a creditor and a debtor. It can suggest that pecunia traiecticia was important for Roman economy, maybe in the same way that Project Finance is for our times. This work seeks to broaden previous studies on western legal tradition and Roman law and is an attempt to find out whether the Roman concept of sea loan is applicable also nowadays.

The introduction of the 'Cash-Lite; a cashless policy, by the Central Bank of Nigeria in 2011 has changed the modus operandi of the construction industry. This is because the industry is one of the few industries that deal mostly with cash. Hence, this study is aimed at examining the development and implementation of the Nigerian 'Cash-Lite' policy, with a view to ascertain its effects on construction practice. The study examined 300 construction stakeholders using questionnaires. Data obtained from these sources was analysed using charts, table of frequency, mean scores and Z-test. However, the data analysis was aided by a computer database software packages-SPSS Statistic. The study observed that the integration of cashless policy into construction work will boost productivity/construction output via reducing the rate of visit to banks, reducing theft/corruption, reducing project time and encourage prompt settlement of transaction. In addition to this, the study observed that the structure of the industry encourages the integration of this policy to construction but security (cyber theft), lack of knowledge, cost of installation and operation, reliability of the service and supporting services and low public acceptance are the major challenges affecting its adoption in construction. Finally, the study recommends that construction workers and other construction stakeholders should be properly sensitized on the use of cashless tools.

The success of construction contractors largely depends on the specific terms and the availability of sufficient funds for realizing planned projects. Financial issues in construction have been discussed since mid 1970s, yet no consensus about progress has been reached in the construction finance literature. A systematic analysis of 259 finance related studies in construction is undertaken in order to identify research trends, critical topics and performance of journals and authors. In order to map the productivity in construction finance field, Scopus database was searched for the entire period for which this database provides online coverage. Results reveal that 'financial health' category, in particular one group of studies aiming to monitor and assess the financial performance of construction organizations for broader strategic issues pervaded the construction finance research. However, notably the "identification of capital structure, determinants and financing instruments" category received less and only recent attention from scholars, despite the significance of capital structure decisions under firm and country specific determinants in preventing company failures.

The research aims at exploring the critical variables that affect public works contractors' working capital in the delivery of infrastructure projects. Effective financial management has long been recognized as the 'lifeblood' of construction contractors, especially during economic periods of recession. The main reason for insolvency in the built environment is the lack of working capital to support contractors' site operations. Therefore, it is vital to accurately predict the project working capital requirements at the pre-tender stage and closely monitor project cash-flow during the physical production process. The proposed methodology entails the development of a cash-flow/working capital calculation process based on spreadsheet modelling and the Gantt chart for the derivation of project disbursements S-curves, revenue step function curves, and maximum/net cash-flow profiles. The model is implemented to a recently delivered typical infrastructure project-the construction of a new peripheral highway reinforced concrete bridge-and a sensitivity analysis is conducted to reach useful conclusions concerning the significance in infrastructure working capital of the following variables examined: the retention percentage, the 'front-end rate loading' by the contractor, and the premium advance incentive by the owner. The lowest maximum working capital requirement results from the provision of an advance mobilization payment by the owner to the contractor at project start-up and the selection of the latest start times site work execution program. The herein presented study is expected to assist both researchers and practitioners operating within the public construction sector in decision-making towards more effective financial management of infrastructure projects.

This study sought to explore the challenges and barriers facing Small and Medium Construction Firms (SMCFs) in Ghana in their quest to access finance from financial institutions for their business purposes. This study was a cross-sectional survey that used semi-structured questionnaire to collect data from the sample. 50 questionnaires were distributed to construction firms in Kumasi and Accra Metropolis through a convenience sampling technique. The findings are that the key challenges that make it difficult for SMCFs to access finance include policy regulation, inadequate financial infrastructure, stringent collateral security requirement, and lack of institutional capacity of SMCF sector. The key barriers identified include informational barriers, lack of managerial skills with SMCFs. Limitations of the study have been noted and recommendations for developing innovative approaches to making finance accessible to SMCFs in Ghana have been discussed. The study contributes to the body...

Nigeria is a West African country, often referred to as the "Giant of Africa" due to its population of over 177 million and an estimated GDP of over US$587 billion; abundant natural resources including one of the largest natural gas and crude oil reserves. Despite these strong fundamentals, Nigeria has found it difficult to convert her unique advantages into economic and social benefits for the country. This necessitates diversification of the economy which will require huge investments in infrastructure. In China, Nigeria has found a partner and financier. Despite the importance of Chinese finance for African infrastructure, relatively little is known and or ascertain about its socioeconomic value and impacts. The aim of this research work is to identify and discuss the socioeconomic impacts of Chinese Government Finances in Infrastructural Development Projects in Nigeria. Secondary sources of data were used to review literature. The result shows that Infrastructural Development Projects in the long run have direct influence on socioeconomic development, and the majority of economic activities depend one way or the other on road networks, airports, railway transportation systems and power generation projects.

Monte Carlo Simulation (MCS) and Real Options Analysis (ROA) is undertaken for a materials manufacturing company.  MCS and ROA offers a comprehensive process for advanced project valuation and project risk management via the formal quantification of and management of uncertainty. An ROA exercise is conducted based on an active R&D project to develop a process to turn fiber into bioethanol using advanced yeast.