Increasingly, governments have looked to attract private finance for investments in roads. Private finance brings about new dimensions in financing transportation infrastructure as well as new partners around the table. Sources of private finance are equity, the capital held by a company's shareholders or sponsors, or debt, the capital provided by lenders. For both types of private finance international and domestic markets exist.
Private investors apply a project finance approach to road investments: their commitments rely on the performance of the project. The revenues generated over the lifetime of the project need to cover the costs of the initial investment, maintenance and operation and provide for a profit margin in order to make a project "bankable". In case of a 100% privately financed project, revenues can come from direct user charges like tolls. When financing is jointly undertaken by public and private partners, they can come from shadow tolls (an amount per vehicle paid by the client authority), from periodical payments paid by the client authority related to performance (annuity scheme), or a mixture of these.
Read more in the gTKP Finance & Economics Topic Information Sheet on Private Finance.