Conceptual paradigm and rethinking project finance strategy for highway projects financing in Ghana

Abstract

Project finance (PF) strategy is a finance process for infrastructure projects that integrates a mixture of equity and debt financing from different sources, which derive their return from the revenue steam of the project over a long-term period with equity component consisting of 20% - 40 % whereas the debt component is of 40% - 80%. Most theoretical and empirical studies on project finance strategy focus on adoption of project finance strategy in financing large capitaldriven projects such as petrochemical projects, mineral extractions and exploitation of 'green' ventures in developed and emerging economies. Meanwhile, the demand for basic infrastructure projects delivery, more especially, highway projects in developing economies such as that of Ghana are in excesses of what the governments' budget allocations can afford. The paper utilized literature and theory to examine the position of highway construction financing and provides rethinking into possible exploitation of project finance strategy as an alternative means of financing highway projects in Ghana. The paper concluded that revenue-generating mechanisms from the project should be set up characterized by potentially low-risk grading in order to attract PF investors. The originality and value of the study is the integrated and holistic approach of viewing the problem between theoretical and empirical interface. The paper's key contribution to knowledge is the identification of influential variables in a typical PF deal in the context highway projects funding.