Project Financing Essay

1195 words - 5 pages

QUESTION:
Short Notes on Infrastructure Projects.
Introduction
“Imagine one lived in a place where there were no pipes to carry water to your faucet and your toilet, no pipes to carry away your waste, no wires to power your appliances and computers and to light your home, no wires to carry telephone conversations and your internet messages, no roads on which to drive, no railroad tracks to guise trains, and no bridges to cross rivers, Would that be a place where you would want to live?”. These according to Matthy Levy and Richard Panchyk (2000 Engineering the City; How Infrastructure Works), is the story of infrastructure which teaches us about the history of human development from the ...view middle of the document...

1.1 Infrastructure Projects vs. PPPs (Public-Private Partnerships)
Traditionally, infrastructure projects in Kenya were owned and managed by the government or a government undertaking. Given the massive investments required in infrastructure, which plays an important role in economic development, there is now a broad consensus that private sector participation in this activity must be encouraged, hence, the development of PPP’s.
Private initiative in infrastructure projects can take many forms ranging from contracted operation of public utilities to full ownership, operation and maintenance of these facilities. Some of the principle objectives of promoting private investment in the development and operation of infrastructure projects are ensuring greater economic efficiency and better availability of the facility itself. Infrastructure projects are either more or less suitable for private participation and the level of such participation can be varied to reflect the same. Projects that are designed to provide significant social benefits such as low cost urban transportation systems may be more suited to traditional government ownership, whereas projects that have strong commercial attraction, like telecommunication, are more suited for private sector involvement. This is according to Grimsey, Dand Lewis, M.K. (2004) Public Private Partnerships: The Worldwide Revolution of Infrastructure Provision and Project Finance.

1.2 Characteristics of Infrastructure Projects
According to Hayes, Brian (2005). Infrastructure: the book of everything for the industrial landscape (1st Ed.). New York City: Norton; Infrastructure is comprised of highly heterogeneous assets with no two having identical attributes. It is an amalgamation of varying sectors including roads, bridges, dams, ports, airports, power generation and distribution, transmission of electricity, water, gas and utilities. Each sector has its own distinct performance behavior. The performance of infrastructure assets is also closely tied to the stage of the asset lifecycle i.e. Greenfield development versus mature infrastructure asset with proven demand patterns. Despite these differences, infrastructure assets have certain traits in common; Inelastic Demand, Monopoly, Stable Cash Returns, Long Durations, Inflation Hedge and Hybrid Assets.
Benefits of infrastructure projects to other wide sectors of the economy for example, roads facilitate smooth movement of people and goods from point “a” to point “b”, but other benefits spring out such as spurs economic growth such as create employment for road maintenance and garages, development of manufacturing industries e.g. automobiles, cause structural changes in economic models e.g. “just in time delivery” brought about by smooth movement, establishments of learning institutions e.g. Kampala University in Kiengu – Maua – Meru County thus stimulating academic developments and growth of the local populace and social cohesion since...

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