Project bonds deviate from regular corporate bonds in that they are issued to finance a specific project. In this case, the bond proceeds are paid exclusively from the cash flow generated by that project instead of the overall revenue of the issuing entity.
Low - limited evidence available
Enabling conditions and success factors
- Particularly suitable for countries with a growing institutional investor base.
- Open up an alternative debt funding avenue to source financing for infrastructure-related projects.
- Offer an opportunity for institutional investors to participate in infrastructure projects through listed, tradable securities that can offer superior risk-adjusted returns.
Challenges and risks to implementation
- May be unattractive to investors with a lower appetite for risk.
- Not all debt portions of these deals will be able to take advantage of this funding source.