Using the private finance initiative for energy efficiency projects at the urban scale

Abstract

Purpose – The purpose of this paper is to suggest the usage of the project finance (PF) scheme as a suitable mechanism to fund energy efficiency projects at the urban scale and present its advantages and adoption barriers. Design/methodology/approach – A case study is developed to renew the traffic lighting system of an Italian town via replacement of the old lamps with new light-emitting diode (LED) technology. Several partners are involved in the case project to construct a viable PF arrangement. Findings – The case study presents the viability of the proposed PF scheme that provides for acceptable financial returns and bankability. However, it also shows that the need for short concession periods may call for a public contribution to the initial funding to make the project more attractive to private investors. Practical implications – This case study is a useful guideline for governments and promoters to using the PF arrangement to fund energy efficiency investments in urban settings. It helps designing an appropriate PF scheme and understanding the advantages of PF to reduce risk and, consequently, increase the debt leverage and profitability of energy efficiency projects. Originality/value – This paper contributes to bridging the gap about the lack of works addressing the implementation of the PF mechanism in the energy efficiency sector in urban areas. The importance of this paper is also associated with the shortage of traditional public finance faced by many cities that forces to seek for alternate forms of financing.

Risk factors influencing the debt leverage of project financing initiatives in the energy industry

“…In periods of bad economy, the shortage of public finance and limits imposed on public budgets, have been forcing many countries to cut traditional investments in energy projects (De Marco et al, 2016). as a consequence, there is an increasing interest in the application of PF schemes in the energy sector.…”

A Time-Efficiency Study of Medium-Duty Trucks Delivering in Urban Environments

“…The concept of transport efficiency is vastly investigated in city logistics [6]. It can be evaluated from a service provider perspective, from a customer point of view, or from a public sector and sustainability perspective [7].…”

Macroeconomics Effects on Project Finance Performances and Sustainability

“…It is obtained from the relationship between DSCR and the LLCR. In general, a project realized through the project financing formula should mitigate risk through a high degree of bankability, high debt leverage, and low level of equity capital (De Marco et al, 2016) The practice of project financing as a financing technique has very distant origins. In Texas in the 1920s, specific contractual structures were used to mitigate the risks associated with the research and exploitation of oil fields (John & John, 1991).…”