Mapping the evolving complexity of large hydropower project finance in low and lower-middle income countries

The structure and key actors in large hydropower project financing has changed considerably over the past 50 years, particularly in low and lower-middle income countries (LICs and L-MICs). Exclusively public projects, typically financed by the host country government with support from multilateral development banks (MDBs), have become less common, while public-private-partnerships (PPPs) and new forms of bilateral finance arrangements have become more prevalent. However, fully privately financed projects with no public or MDB finance remain unusual in large hydropower projects. This paper traces the evolution and complexity of hydropower financing in LICs and L-MICs from the early 1970s to the present day, showing how the types and roles of various actors have changed over time and how new types of financing packages have surfaced to meet the growing need for large energy infrastructure projects. Examples from various LICs and L-MICS are used to describe the features of three of the most commonly used models of hydropower project financing: fully public finance, PPPs, and new bilateral finance. Comparative assessment of the key characteristics of different financing models and their strengths and limitations is provided to enable LICs and L-MICs to make informed choices over the allocation of their scarce financing resources in their struggle to balance urgent development needs with long-term sustainability objectives and economic impacts.