There are various multi-lateral institutions and donor agencies that may provide project finance for infrastructure projects are set out below. Finance may be provided in the form of debt or equity, depending on the project and the donor agency involved. Multilateral institutions may also provide assistance other than direct contribution to the project company. For example, it may provide financing for the government's equity contribution to the project company, where there is a shortage of foreign exchange.
Different donor agencies will have different criteria for investment and different terms of financing. If multi-lateral institutions and donor agencies are to be sought as sources for funding, then information should be sought from the institution directly, or from an adviser who is familiar with the institution.
Common multilateral institutions are ADB (in Asia), IFC (US arm of the World Bank, operates worldwide), EBRD (mainly for Eastern Europe) and EIB (mainly for Europe infrastructure projects.
The World Bank is a major source of finance for infrastructure projects in developing countries, therefore funds available through this channel is briefly described here. The World Bank provides loan finance through the IBRD and the IDA. The loan documentation for IBRD and IDA generally consists of two agreements; a "General Conditions" agreement and a relatively short agreement detailing the specific conditions of the loan. IBRD has two "General Conditions Applicable to Loan and Guarantee Agreements", one for Fixed-Spread Loans and Single Currency Loans. IDA has a "General Conditions Applicable to Development Credit Agreements."17
In addition to loans provided by IBRD and IDA, the World Bank may also provide guarantees. A government's financial obligation that flow to commercial lenders may be credit-enhanced by the World Bank using a partial risk guarantee. The World Bank guarantees are partial in a sense that they cover the minimum amount of risk and smallest amount of debt consistent with successful implementation of a project. This means where the host government fails to pay an amount due under a concession agreement (for example), the World Bank would pay this amount to the beneficiaries of the guarantee. This would raise the governments payment obligation to AAA in the eyes of project lenders.18 The host Government would still be required to repay the World Bank if the guarantee was exercised.
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17 These General Conditions are available from the World Bank at its website at www.worldbank.org.
18 See Scott Sinclair, World Bank Guarantees for Oil and Gas Projects, December 1998, 15.