As highlighted in Chapter 1.1, estimates suggest that annual investment in infrastructure needs to be around 5 percent of global GDP or US$ 3 trillion per annum. Currently only US$ 1 trillion per annum of private funding is going into infrastructure. Hence, US$ 2 trillion per annum is needed to fund the infrastructure financing gap.
From a financing perspective, infrastructure opportunities are usually capital intensive, there is a tangible asset to operate and maintain, and the asset is expected to generate cash over the long term. Infrastructure opportunities are classified according to various categories including type of project or enterprise, contractual approach, phase of asset development and stage of market development.
Both equity and debt can be used to finance infrastructure projects. While evaluating the financing of infrastructure projects, careful consideration needs to be given to risk and uncertainty.
Appendix A of this Report aims to provide a "primer" on the infrastructure finance market for those who may be less familiar with it. It offers an overview of different sources of finance (both debt and equity) and how finance providers assess infrastructure opportunities. Such assessments include an analysis of risk, how returns are measured, the role of financing enablers such as multilateral banks and export credit agencies, and a summary of some different contractual approaches. This chapter introduces the concept of capital structure and leverage, cash flow analysis, and the options for the contractual approach.