Publication: Financing of Private Hydropower Projects
Loading...
Date
2000-07
ISSN
Published
2000-07
Author(s)
Editor(s)
Abstract
This study provides an overview of the issues and challenges related to the private financing of hydropower projects in developing countries. From the very limited pool of projects that have already reached or are nearing financial closure, ten have been chosen for the study from five countries with the most active in promoting private hydro development. Collectively the case study projects provide a reasonable cross-section of private hydro schemes that have been or are being developed. The financing of greenfield private infrastructure on a limited-recourse basis in developing countries faces certain common issues irrespective of the type of project. However, hydropower faces additional difficulties caused by the site-specific nature of projects, high construction risk and long construction periods, their capital-intensive nature with a high proportion of local costs, unpredictable output subject to river flows and broader water management constraints, complex concession process to achieve transparency in the award and pricing of output, and environmental sensitivities. The study suggests the need for longer-term financing to better suit hydropower characteristics, a regulatory framework and realistic public-private risk-sharing arrangements responsive to the requirements of hydropower projects, and the careful preparation of projects by the public sector to enable their formulation on an adequate technical and contractual basis for development as a private concession.
Link to Data Set
Citation
“Head, Chris. 2000. Financing of Private Hydropower Projects. World Bank Discussion Paper;No. 420. © World Bank. http://hdl.handle.net/10986/15190 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Facets of Globalization : International and Local Dimensions of Development(Washington, DC: World Bank, 2001-10)The chapters in this volume underscore the transformative role of globalization and urbanization, and show the interplay between these forces. Trade reform and liberalized foreign investment regimess have contributed to the spatial reallocation of economic activity toward cities, especially those cities that can attract and nurture human capital and strong connections to other markets. Global factors have, therefore, reinforced agglomeration economies in shifting economic clout toward cities, and in so doing they may be exacerbating regional disparities in incomes. The rise of cities is changing political dynamics in developing nations. It is forcing a reappraisal of existing constitutional structures and center-local relations, as well as the important--and perhaps more mundane-- arrangements for funding and organizing investment by subnational entities. At the same time, democratization is reinforcing the pressures for local autonomy. This perspective shifts the debate away from whether or not globalization is undermining the role of the central state and toward one about the appropriate allocation of responsibilities and resources to different layers of government. Strong arguments support the position that municipalities can, with the appropriate resources and political structures to ensure their responsiveness to local needs, make substantial improvements in the well-being of urban residents. Experience suggests that some state functions ought to remain with government.Publication Managing the Real and Fiscal Effects of Banking Crises(Washington, DC: World Bank, 2002-01)The study provides two recent analyses, spurred by the recent East Asian crisis, of government responses to financial distress, and, also presents a comprehensive database on systemic, and borderline banking crises. In the first chapter, the authors review the tradeoffs involved in public policies for systemic, financial, and corporate sector restructuring. They find that consistent policies are crucial for success, though such consistency is often missing. This consistency covers many dimensions, and entails among other things, ensuring that there are sufficient resources for absorbing losses, and, that private agents face appropriate incentives for restructuring. The authors also find that sustainable restructuring, requires deep structural reforms, facing upfront, political economy factors. In the second chapter, the authors use cross-country evidence to determine whether specific crisis containment, and resolution policies, systematically influence the fiscal costs of resolving a crisis. They find that accommodating policies - such as blanket deposit guarantees, debtor bailouts, and regulatory forbearance, etc. - significantly increase fiscal costs. The third chapter, is a comprehensive database on systemic banking crises that have occurred since the late 1970s. The database also includes information on borderline (non-systemic) banking crises during the same period.Publication The Environmental Implications of Privatization : Lessons for Developing Countries(Washington, DC: World Bank, 2002-04)Governments worldwide have increasingly recognized the economic potential and fiscal advantages of privatization. What is less well recognized is that, under the right conditions, privatization can also yield environmental benefits and contribute to sustainable development. This report reviews a number of case studies to draw lessons about the environmental implications of privatization. It emphasizes that privatization offers an opportunity for making strategic decisions with longer-term impacts; streses that integrating environmental and social considerations into the privatization process leads to better, more sustainable outcomes; and recommends approaches to building on the positive linkages between privatization and environmental protection.Publication Agricultural Trade Liberalization in a New Trade Round : Perspectives of Developing Countries and Transition Economies(Washington, DC: World Bank, 2001-09)This discussion paper contains seven studies, designed to a) review, and assess the impact of the implementation of the Uruguay Round (UR) Agreement on Agriculture, and, b) to analyze the key issues, interests, and options for developing countries in the new World Trade Organization's (WTO) round of multilateral trade negotiations in agriculture. Six regional case studies are presented: Sub-Saharan Africa, South Asia, Latin America, Eastern Asia, Central and Eastern Europe, and industrial countries. A quantitative analysis of the dynamics of multilateral liberalization in food, and agricultural trade is also presented. Among some of the key conclusions, it is suggested that much preparatory work was achieved in bringing agriculture fully into the multilateral trading system during the UR, and, a significant achievement was the development of a broad framework for reductions in trade-distorting policies. The UR was also successful in negotiating reduced volumes of subsidized exports, and in providing at least, minimum levels of access to markets. There were, however, a number of limitations in both what was agreed to, and in how the Agreement in Agriculture has actually been implemented, as the analyses show that the work achieved during the UR, will be of limited value, unless market distortions in agriculture can be reduced substantially. If liberal agricultural trade is to succeed, its limitations should be addressed, and policy induced distortions to agricultural production, be substantially reduced.Publication Electronic Finance : A New Approach to Financial Sector Development ?(Washington, DC: World Bank, 2002-03)In recent years, electronic finance, especially online banking, and brokerage services, has reshaped the financial landscape. This paper reviews these developments, and analyzes their implications for consumers, governments, and financial service providers. First, it reviews the e-finance (r)evolution in emerging, and other markets, and projects its future growth. It then analyzes e-finance impact on the structure of, and competition in the financial services industry. After that, it assesses how e-finance, and globalization more generally, affects financial sector policies in emerging markets, including the need for changes in the approach to financial sector development. The paper then examines governments' changing role in the financial sector, and identifies opportunities that e-finance offers countries to leapfrog. Finally, the paper includes for policymakers, and others involved in financial sector reform in emerging markets, detailed information, and Web links on public policy activities related to e-finance.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Peru : Overcoming the Barriers to Hydropower(Washington, DC, 2010-05)Hydropower has been the major source of electricity in Peru, traditionally supplying more than 80 percent of electricity requirements, and serving as a source of independent generation for major mines and industries. With the development of natural gas in the early 1990s, and the opening of the Camisea pipeline, the Government of Peru's (GOP's) attention turned to providing incentives for the use of natural gas in power generation. This resulted in a virtual moratorium on hydropower development as a result of the very low price of natural gas (below economic cost). With the development of export markets for gas and increased attention to the impacts of climate change, the Government has recently begun to pay renewed attention to hydropower. Recent developments include: (a) introduction of accelerated depreciation for hydropower investments; (b) introduction of a "discount" to permit hydropower to compete with gas-fired plants in auctions; and (c) announcement of a special hydropower auction to be held in 2009 by ProInversion, the state agency for promoting private investment. The intention of this report is to assist the GOP in assessing the potential role of hydropower in the sector and the measures that could be taken to encourage its continued development as appropriate. The study was done at a particularly challenging time. First, there was considerable volatility in energy prices and investment costs, which needed to be incorporated into the analysis. Second, financial markets were in disarray and it was difficult to predict when conditions were likely to normalize. Third, the GOP recently introduced many new policies and regulatory measures through supreme decrees that are changing the regulatory system and may interact in unexpected ways.Publication Peru Opportunities and Challenges of Small Hydropower Development(World Bank, Washington, DC, 2011-03)Peru is favored by a stable and growing economy and the availability of indigenous sources of energy for electricity generation, including hydro and natural gas. The Peruvian electricity sector is among the few in Latin America and Caribbean (LAC) that has not confronted a crisis in recent years. The power sector in Peru was reformed and restructured between 1991 and 1993, followed by a privatization and concession process. A modern legal and regulatory framework was established in the electricity concessions law of 1992-93. This report contains the following chapters: (1) introduction; (2) resource potential and technical capacity for development of small hydropower in Peru; (3) economic and financial viability of small hydro development in Peru; (4) institutional and regulatory environment; (5) identification of barriers to small hydropower development and mitigation measures; (6) international experience with small hydropower development; and finally (7) conclusions and recommendations.Publication Enhancing Development Benefits to Local Communities in Hydropower Projects : Technical Workshop(Washington, DC, 2010-06)The technical workshop on enhancing development benefits to local communities in hydropower projects was held in Washington, D.C., on June 26, 2008. It was hosted by the Social Development Department (SDV) and Water Anchor (ETWWA) of the World Bank. The workshop aimed to provide a platform for a discussion of past and current practices, as well as how to construct development benefits mechanisms within the specific context of hydropower projects. It also provided a forum for sharing knowledge as to how development benefits mechanisms may be applied to Bank-financed projects. The workshop had five sessions and brought together more than 60 experts from different sectors in different regions of the World Bank. Sixteen speakers gave presentations. The workshop had discussions on enhancing development benefits to local communities in hydropower projects and also covered issues pertaining to the broader range of benefit-sharing, including World Bank engagement in hydropower projects, legacy of hydropower, notion evolution, approaches and mechanisms, and good practices in benefit-sharing of hydropower projects. A range of mechanisms are available to enhance and share benefits. Benefit-sharing consists of a combination of monetary and non-monetary mechanisms adapted to specific project contexts. Monetary development benefits are linked largely to economic rent, fair distribution, full compensation, entitlements, national priorities, and optimization of opportunities, and include basically taxation, royalties, preferential rates, revenue sharing, development funds, and joint ownership. The non-monetary development benefits include, for example, allocation of fishing rights in reservoirs; priority hiring of local community members during construction; start-up support for local companies; capacity building; multipurpose infrastructure; rural electrification; and access to improved infrastructure.Publication Rehabilitation of Hydropower : An Introduction to Economic and Technical Issues(World Bank, Washington, DC, 2011-09)Section one provides a concise summary of the results of the study and includes an overview of the conclusions as well as lessons learned based on the assessment of the case studies. Section two gives the context for the study including the definition of a set of hydroelectric project development options as background to related discussions of rehabilitation later in the report. Section three provides an overview of the contents of this report. Section four discusses the development and application of an assessment tool to facilitate the rapid assessment of regional hydropower inventories. This assessment tool has been applied to a data base and inventory of generating station information in the African and Central American regions to identify possible candidates for rehabilitation. The characteristics of the two inventories are outlined in the section and details of the approach and the results of the application of the tool to the two regions are given in annex A. Section five presents a screening-level economic assessment model which quantifies potential costs and benefits associated with hydropower rehabilitation, concluding with generally accepted economic parameters. Details of the development of the economic model are given in annex B. Section six summarizes the application of the economic model to the two data base and inventory of generating station information for the two regions (Africa and Central America). The application of the economic model is not intended to provide site-specific economic parameters for each station since there is insufficient information in the data base for this. The objective of modeling is to provide an order-of magnitude market assessment of the potential for rehabilitation based on the limited data available in the data base. Section seven presents a summary of the important elements of a number of case studies involving historical rehabilitation and expansion projects. The section is the source of a list of overall lessons learned which is presented in the conclusions section. Section eight is a summary of issues which covers the spectrum of Incentives to Barriers associated with the rehabilitation of hydro projects under three broad categories: technical, financial, and environmental or institutional.Publication Enhancing Development Benefits to Local Communities from Hydropower Projects : A Literature Review(Washington, DC, 2009-05)The World Bank began a three-year pilot initiative to develop a framework for enhancing development benefits to local communities in hydropower projects. There has been a wide array of approaches in the past two decades that all have in common the objective of designing and implementing means and mechanisms to ensure local communities a more equitable share of project benefits. The World Bank intends to design and test a framework of enhancing development benefits that can be applied to hydropower projects and that can be tailored, at the same time, to the particular circumstances and characteristics of individual projects. This initiative is based on the hypothesis that hydropower projects planned in environmentally and socially sustainable manner can provide a large range of development benefits to local communities. Structure of this report: chapter one provides an introductory background to the literature review briefly explaining the current context of hydropower projects, the scope of the assignment and the structure of this report. Chapter two offers the core of the intellectual discussion by describing the approach and methodology utilized for the literature review, by describing the existing literature on benefit sharing in hydropower projects, by stating the constraints in enhancing development benefits and the existent gap in the literature. Finally, chapter three offers the main conclusions on the outcome of the literature review on enhancing development benefits to local communities.
Users also downloaded
Showing related downloaded files
Publication Lebanon Economic Monitor, Fall 2022(Washington, DC, 2022-11)The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication The Journey Ahead(Washington, DC: World Bank, 2024-10-31)The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.