Infrastructure Finance in Developing Countries by State and Multilateral Development Banks

Infrastructure concession is an alternative widely used by governments to increase investment. In the case of the road sector, the main characteristics of the concessions are: long-term projects, high investments in the early years of the contract and high risks. A viability analysis must be carried out for each concession and consider the characteristics of the project. When the infrastructure is located in a developing country, political and market growth uncertainties should be add in the concession project analysis, as well as economic instability, because they present greater risks. This paper is an analysis of state bank participation in road infrastructure finance in developing countries. For this purpose, we studied road infrastructure financing and its associated risks, and also the features of developing countries. Furthermore, we considered the issue of state banks and multilateral development banks that perform an important role by offering better credit lines than the private banks, in terms of cost, interest and grace period. Based on this study, we analyzed the Brazilian Development Bank - BNDES – and their credit supply to road infrastructure concessions. The results show that BNDES is the main financing agent for long-term investment in the sector, offering loans with low interest rates in Brazilian currency. From this research we argue that a single state bank should not alone support the increasing demand for finance in Brazil. Therefore, we conclude that there is a need to expand the supply of credit in Brazil, by strengthening private banks in the long-term lending market.

State of the Art and Future Trends in Grid Codes Applicable to Isolated Electrical Systems

Isolated electrical systems lack electrical interconnection to other networks and are usually placed in geographically isolated areas—mainly islands or locations in developing countries. Until recently, only diesel generators were able to assure a safe and reliable supply in exchange for very high costs for fuel transportation and system operation. Transmission system operators (TSOs) are increasingly seeking to replace traditional energy models based on large groups of conventional generation units with mixed solutions where diesel groups are held as backup generation and important advantages are provided by renewable energy sources. The grid codes determine the technical requirements to be fulfilled by the generators connected in any electrical network, but regulations applied to isolated grids are more demanding. In technical literature it is rather easy to find and compare grid codes for interconnected electrical systems. However, the existing literature is incomplete and sparse regarding isolated grids. This paper aims to review the current state of isolated systems and grid codes applicable to them, specifying points of comparison and defining the guidelines to be followed by the upcoming regulations.