- 2071 Chaitra
Sources of financing large projects
Short answer
Large projects use sponsors' equity, ordinary shares or IPO, retained earnings, preference shares and convertibles, bank and syndicated loans, debentures and bonds, government grants, soft loans from ADB, World Bank, JICA and Exim banks, plus supplier credit, leasing, PPP/BOT, and community contributions. Choice depends on cost, risk, tenor, control, and project cash flow.
What are the sources of financing large projects?
Large projects (hydropower, highways, airports, pipelines) need big long-term funds, which are usually raised from a combination of sources.
| Type | Sources |
|---|---|
| Equity | Ordinary shares, sponsors' equity, retained earnings, public issue (IPO) |
| Quasi-equity | Preference shares, convertible debentures |
| Debt (long term) | Bank and financial institution loans, debentures/bonds, syndicated loans, term loans |
| Government / donors | Government grants and budget, soft loans from ADB, World Bank, JICA, Exim banks, bilateral aid |
| Others | Supplier's credit, leasing, venture capital, public-private partnership (PPP), build-operate-transfer (BOT), community and user contribution, remittance/pooled funds |
- Sponsors' equity: the owners' own contribution, normally 20 to 30% of the cost.
- Commercial bank loans and syndicated loans: many banks share the large loan.
- Multilateral and bilateral institutions: World Bank, ADB, JICA, EXIM banks give long-term, low-interest loans.
- Government funding: budget, grants and viability gap funding; Employees Provident Fund and Citizen Investment Trust invest in Nepali projects.
- Bonds and debentures: long-term borrowings from the public and institutions.
- Public offering of shares (IPO): common in Nepali hydropower companies, with part reserved for local people.
- Supplier's credit and export credit for imported equipment.
- Public-private partnership and BOT: the private party raises funds and recovers them from operation.
- Leasing and venture capital for equipment and risky ventures.
The choice is based on the cost, risk, tenor, control and the project's cash flow.
✓ Answer checked by Claude Opus 5.5 (high effort)
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