A guidebook on public-private partnership in infrastructure

participation 
• Performance 
guarantee 
These are discussed below. 
Land acquisition:
Land acquisition is a typical problem in most developing 
countries. Any delay or problems in land acquisition could be a major source of risk 
to investors, particularly for road and rail projects and other projects that require 
large tracts of land. In order to remove the uncertainties in land acquisition, the 
government may ensure that minimum amount of land is required and also consider 
the use of public lands for infrastructure projects when such lands are available. If 
necessary, the government may also acquire private land for a project on behalf of 

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A Guidebook on Public-Private Partnership in Infrastructure 
49 
 
the investor. In situations where the investor is required to negotiate with the owners 
for the purchase of land, the government can also assist the investor through its use 
of the right of eminent domain. The land acquisition issue should be settled before 
the financial close.
Capital grant and other forms of financial support:
A capital grant, one-time or 
deferred, may be considered by the government. The government may also consider 
other forms of financial support. These may include interest free or low interest 
loans, subordinated loans, operation and maintenance support grants, and interest 
subsidies. A mix of capital and revenue support may also be considered. 
Revenue guarantee: 
For high-risk projects, the government may consider to provide 
revenue guarantees. The government can guarantee up to a certain specified 
percentage of the projected revenues. Where these guarantees are provided, 
governments normally also limit the maximum amount of revenues that the project 
developer can retain. Any amount in excess of this defined maximum limit is taken 
by the government. The revenue guarantee, however, has a major drawback. When 
such a guarantee is available, debt can be structured around it and may practically 
mean transferring of commercial risks to the government. In such a case, the private 
operator may lose interest in increasing its internal efficiency.