Besides the potential social and economic impact of infrastructure that fails or collapses, governments have to factor in several considerations when deciding how to finance an asset. Whether the infrastructure is to be publicly or privately financed, four main factors are:
∙ the robustness of the financing structure,
∙ the sustainability of the financing,
∙ the regulatory regime of the industry, and
∙ the bankruptcy regime-what happens when either the owner or the asset goes bankrupt.
Table 1: Factors determining the viability of a financing decision
| Issue | Concern | Impact |
| All or a proportion of refinancing | • Capacity issues with market • Concern from lenders with resulting leverage of the borrower • Concern from lenders about the covenant of the borrower | • If the existing facilities default without a refinancing, then the shareholders may need to invest more equity to make up the shortfall or consider selling the opportunity or transferring ownership back to the public sector. |
| Cost of financing available | • General market increase in financing costs • Concern with borrower's performance track record • Concern with the covenant of the borrower | • Shareholders may need to accept a reduction in their dividends. • The business may no longer be economically viable and the shareholders may consider selling the opportunity or transferring ownership back to the public sector. |
| Conditions of financing available | • General tightening of terms • Concerns with borrower's track record and/or covenant | • Shareholders will need to consider the impact of the conditions on the operation of the infrastructure and their interest in the company. |