Financial Models for Infrastructure

Project information

  • Acronym: HS FMI
  • Financial Models for Infrastructure
  • Sector: Passenger
  • Project start date: 01/01/2024
  • Duration: 36 months
  • Project director: Bertrand Minary
  • Project manager: Michele Gesualdi
  • Status: ongoing project
  • Project code: 2024/PAS/866

Project description

The decision-making process for transport projects often takes longer than the actual construction due to the complexities involved in developing a suitable financial scheme and managing associated risks. Transport projects typically involve substantial financial investments, making risk allocation a critical issue. The chosen financial model significantly impacts how risks are shared and managed, influencing the project’s overall feasibility and success.

There are three primary categories of financial schemes used in transport projects: Conventional state-owned ownership, Franchise models, and Build-Operate and Maintain (BOT) arrangements. In the Conventional model, the state assumes the financial and commercial risks. In the Franchise model, the franchisee bears the commercial risk, alleviating some of the financial burden on the state. BOT models and their variants, where the tendering authority retains the commercial risk, offer a different approach by involving private sector expertise and efficiency in the project’s operation and maintenance phases.

Given that these financial models have been widely tested globally across various transport sectors, including high-speed rail, it is beneficial to analyse their strengths and weaknesses. Conducting such a benchmark study can provide valuable insights and guidance for future transport infrastructure investments. By understanding the performance and challenges of each model, decision-makers can make more informed choices, ensuring the successful implementation and sustainability of new high-speed rail projects.

Project objectives

The primary objective of this project is to conduct a comprehensive global inventory of transport projects utilising each of the three main financial models: Conventional state-owned ownership, Franchise, and Build-Operate and Maintain (BOT). This inventory will include a brief history of each project to provide context and background for further analysis.

Following the inventory, the project will analyse the risks associated with each financial model. This involves identifying, categorising, and allocating risks to the appropriate stakeholders involved in each type of project. By understanding how risks are managed and distributed in various financial schemes, the project aims to offer clear explanations and insights into the risk management processes.

From this detailed analysis, the project will draw lessons to determine the most suitable typologies of projects for each financial model. This will help in identifying which types of projects are best aligned with specific financial schemes, ensuring more efficient and effective decision-making for future transport infrastructure investments. Without this project, individual UIC Members might undertake similar studies independently, potentially leading to less accurate and less efficient outcomes. By centralising the effort under an international body like UIC, the project ensures a more coordinated and comprehensive approach.

Project structure

WP1 - Identifying transport projects: In this phase, we’ll examine various transport projects (not limited to high-speed rail) based on different financial models. We’ll describe the story behind each project and evaluate their success factors.
WP2 - Risk Assessment and Stakeholder Endorsement: We’ll list the risks associated with transport infrastructure projects, identify which stakeholders bear these risks and analyse the efficiency of risk allocation.
WP3 - Comparative Analysis of Financial Schemes: We’ll compare similar projects executed under three different financial schemes. By assessing strengths and weaknesses, we’ll gain insights into each scheme’s effectiveness. This analysis will guide future decision-making.
WP4 - Workshops with Experienced Actors: We propose organising workshops for each financial scheme. Participants will include actors with firsthand experience in these schemes. These workshops will foster knowledge exchange and practical insights.
WP5 - Synthesis and Recommendations: Our final step involves synthesising findings from the previous phases. Based on our analysis, we’ll provide actionable recommendations. These insights will contribute to informed decision-making.
WP6 - We’ll explore the mobility market’s relevant ranges: After conducting a workshop and drawing conclusions, we’ll compile a comprehensive report. This report will inform strategic planning and policy development.

Project members

Share this
Wednesday 29 May 2024