Private Financing Alternatives for Infrastructure of State Owned Enterprises

Abstract

The aim of the article is to examine infrastructure classification and assess private financing alternatives for major groups of physical infrastructure under ownership of state owned enterprises in Latvia. Tasks of the research include examining types infrastructure with a focus on physical infrastructure, explaining importance of physical infrastructure to economy of a country and society, studying physical infrastructure financing challenges and problems, conducting a research on a state owned enterprises in Latvia, which own physical infrastructure, conducting expert interviews to reveal key challenges of private financing alternatives for funding of infrastructure of state owned enterprises in Latvia as well as drawing corresponding conclusion. Methods used are structured expert interviews, analytic hierarchy process, monographic method, document analysis, case study method, and literature review. The empirical research covers ten stateowned enterprises of Latvia, which own physical infrastructure. The major groups of infrastructure covered by the research are transportation, communication and power. Following key private financing alternatives are considered-commercial bank loans, bond issues as well as public-private partnerships. Seven experts were interviewed to reveal key infrastructure financing challenges faced by state owned enterprises. Out of seven experts, one expert represents the power industry, two experts operate in the area of communications and four are financing experts covering all infrastructure areas. At the final stage of the research, preferred alternatives for major groups of physical infrastructure under ownership of state owned enterprises in Latvia derived from expert assessments are presented and corresponding conclusions drawn. Only one company out of ten subject to research is financed not only by bank loans, but also issued bonds to attract funding. None of infrastructure objects belonging to these companies is financed via public-private partnership. The outcome of the article is an expert interview based hierarchy of suitable financing alternatives for studied types of infrastructure under ownership of state owned enterprises of Latvia.