Typically, for infrastructure projects, the return requirement of investors reduces over time as the risks involved in the project reduces. For example, for a greenfield toll road the risk premium will depend on the stage of the road development. A higher risk premium is required during the early years, recognizing construction and traffic uncertainties. As construction completes and traffic ramps up, risk reduces and equity value increases. With this change in risk profile, also lenders will typically improve a project’s internal rating and be open for refinancing discussions.
