Publication: Assessment of the Impact of the Crisis on New PPI Projects : Update 5
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Date
2010-02
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2010-02
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New private infrastructure activity in developing countries recovered selectively in the third quarter of 2009. This review of new PPI projects sheds some light on recent activity and on the short-term impact of the financial crisis. Projects reaching financial or contractual closure face more difficult financial market conditions. Local state-owned banks, as well as multilateral and bilateral agencies, continue to be key financiers, and infrastructure sponsors are looking for new sources of funding such as local financing. Projects continue to be delayed or, to a lesser extent, canceled. The rate of project closure varies across developing regions, with investment in the third quarter higher in South Asia, stable in Latin America and East Asia and Pacific, and lower in the other three. The rate also varies across country income groups, with investment in the third quarter higher in lower-middle-income countries, stable in upper-middle-income countries, and lower in low-income countries. Greenfield projects continue to show growth in investment (and debt raised), while concessions and divestitures show a decline. Developing countries continue to tender and award new PPI projects. In conclusion, PPI investments have recovered in only few economies. While these success stories have boosted the totals, the vast majority of developing countries remain severely affected by the crisis. If large projects (US$1 billion or more) were excluded, almost all developing regions would have seen investment decline in the first three quarters of 2009 compared with the same period of 2008. South Asia was the only exception, thanks to the high level of activity in India. Among sectors, energy is the only one where investment grew for all project sizes, thanks to the activity in new power plants. There is also evidence of new projects being postponed and canceled because of the financial crisis.
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“Izaguirre, Ada Karina. 2010. Assessment of the Impact of the Crisis on New PPI Projects : Update 5. PPI Data Update, Note No. 35. © World Bank. http://hdl.handle.net/10986/10941 License: CC BY 3.0 IGO.”
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Publication Assessment of the Impact of the Crisis on New PPI Projects : Update Five(Washington, DC, 2010-02)Investment commitments to infrastructure projects with private participation (Private Participation in Infrastructure (PPI) projects) reaching closure in developing countries grew by 22 percent in the third quarter of 2009, and by 10 percent in the first three quarters of the year, compared with the same periods of 2008. These growth rates indicate a strong recovery from the 54 percent decline in the second half of 2008 compared with the same period of 2007. But investment grew selectively, concentrated in large energy projects in a few countries: Brazil, India, and Turkey. The Russian Federation, by contrast, saw a sharp decline in investment as a result of the global financial crisis and the end of the RAO UES privatization program. If these four countries were excluded, investment in developing countries would have fallen by 49 percent in the third quarter of 2009, and by 5 percent in the first three quarters, compared with the same periods of 2008. Among sectors, energy was the only one with investment growth in 2009, thanks to activity in greenfield power plants. Across sectors, large projects (US$500 million or more) accounted for the investment growth. Private activity as measured by number of projects remained slower than before the full onset of the financial crisis. The number of projects reaching closure was 27 percent lower in the third quarter of 2009, and 10 percent lower in the first three quarters, than in the same periods of 2008. These trends suggest greater project selectivity. Indeed, the large projects that are reaching closure are characterized by strong economic and financial fundamentals and the backing of financially solid sponsors and governments.Publication New Private Infrastructure Activity in Developing Countries Recovered in the First Half of 2009 Thanks to the Electricity Sector, But the Crisis Continues to Impact Projects(World Bank, Washington, DC, 2009-10)New private activity in infrastructure continues to take place in developing countries despite the financial and economic crisis. New projects are being tendered and brought to financial or contractual closure. Measured by amount of investment, the rate of project closure grew by 2 percent in the first half of 2009 compared to the first half of 2008, indicating a strong recovery from the decline of 48 percent experienced in the second half of 2008. This recovery, however, was driven by large projects. Measured by number of projects reaching closure, the rate of project closure continues to be slower than before the full-scale onset of the financial crisis. The number of projects reaching closure in the first half of 2009 was 20 percent lower than the number reported in the first half of 2008. This trend suggests greater project selectivity. Indeed, those projects that are reaching closure are characterized by strong economic and financial fundamentals, the backing of financially solid sponsors and governments. Developing country governments' continuing commitment to their public-private partnership (PPP) programs is confirmed by the number of new projects tendered and awarded. However, current market conditions are forcing governments and investors to restructure projects to improve financial viability. Local public banks as well as bilateral and multilateral agencies continue to be active in project finance, providing a critical amount of funding. 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