Aug 29, 2017
While there are plenty of opportunities to get involved in P3 projects in developing countries, players in the infrastructure industry, such as construction companies, banks and engineering firms, are often hesitant to seize those opportunities. According to an article by Paul Greenwood in 2017 Lexpert Special Edition – Infrastructure, one of the reasons for their caution is the lack of credit in the developing world; in other words, they worry about not getting paid. Danna Donald, Osler partner and P3 expert, suggests that companies can reduce that risk by working on projects sponsored by international organizations such as the World Bank, the International Monetary Fund and the African Development Bank, explaining that they may provide some of the financing as well as guaranteeing financing put forward by other lenders.
“Say you have three banks who are all going to chip in $1 million and then the World Bank says, ok, we will backstop the money that’s there or we will guarantee a certain amount more,” Danna says, and sometimes that’s the difference between a project that is financeable and one that is not.
Danna also offers advice on deciding who is going to work on the project. “[Some lawyers] will say, if you are doing a development project internationally you need to pick a large international firm, with a depth of experience in financing these sorts of projects,” she says. “[Others] will say you need a local firm who is on the ground and who understands the culture, the permitting, the politics and all those pieces.
“But the answer is, you need a team. It’s actually not one or the other. The people who are the most successful at getting these projects done will have a team of lawyers, and they will use their lawyers to open doors, all over the world – so in Washington at the World Bank but also on the ground, connecting them with local counsel. [That way they will know] this is what the permitting website says, how long will this actually take and what is the risk that my competitor who is also buying up land next door will get their permit ahead of mine?”
To learn more about emerging market P3 projects, read Paul Greenwood’s full article “Taking a chance abroad” in the 2017 Lexpert Special Edition – Infrastructure.