Infrastructure and Major Projects

The energy transition is transforming the way major infrastructure projects are designed, financed, approved, and built. Decisions made today will have repercussions for decades to come, as technologies, markets, regulatory frameworks, and the geopolitical climate continue to evolve. In this context, the ability to manage uncertainty is crucial. For decades, energy infrastructure has advanced in a relatively predictable environment. The technologies were proven, the business models were well-established, and the risks could be assessed based on relatively stable parameters. Today, the projects that will shape the coming decades must be designed with several simultaneously changing variables in mind: Emerging technologies Growing energy demand The decarbonization of the economy Weather events The availability of capital Changes in regulatory frameworks Social acceptability A new geopolitical climate Yet infrastructure evolves at a different pace; it requires substantial capital investment and shapes economies for decades. This discrepancy is one of the major challenges of the energy transition. We have to make decisions today that will have repercussions for 50, or even 100, years—and yet the data needed for us to make them remains uncertain. Waiting for the uncertainty to pass isn’t necessarily the least risky strategy. The cost of inaction must now be an integral part of risk analysis. The energy transition: Managing uncertainty in infrastructure projects The energy transition will likely not be driven by one single technology. Electrification, energy efficiency, renewable energy, dual-energy systems, renewable gases, storage, and carbon capture and removal technologies can play different roles depending on the sector, region, and time horizon. This is changing the way we approach infrastructure investments. Historically, many infrastructure projects were evaluated individually with the goal of minimizing the risk associated with each one as much as possible. Now, the pace of technological advancement calls for a greater focus on solution portfolios. Some technologies are already mature, while others aren’t yet. Some will quickly reach commercial scale, while others will develop differently than we currently anticipate. The energy system’s resilience will therefore depend less on identifying a definitive solution now than on combining different approaches and maintaining enough flexibility to adapt. A project may involve greater technological uncertainty while still creating value system-wide, particularly through: Diversification Additional capacity Security of supply Reduction in emissions Greater resilience Risk analysis, therefore, is no longer solely about seeking to reduce the risk associated with carrying out a project. It must also take into account the risk to the system as a whole of failing to carry it out. Energy transition, competitiveness, and infrastructure resilience While decarbonization remains a key driver of infrastructure transformation, it is no longer the only one. Energy security, supply chain resilience, access to reliable and competitive energy, and geopolitical tensions are now playing an increasingly important role in investment decisions. In Canada, the abundance of certain resources, the expertise developed in the energy and infrastructure sectors, access to largely renewable electricity in several provinces, and the geological potential for carbon storage could become significant industrial advantages. The energy transition must therefore be viewed not only as an obligation to reduce emissions, but also as an economic transformation that has the potential to redefine competitiveness. For companies and investors, this changes the nature of strategic thinking. Decisions regarding energy, infrastructure, and decarbonization now directly affect: Investment strategies Asset location Supply chains Market access Long-term resilience Turning innovation into fundable infrastructure Turning energy innovation into actual infrastructure involves more than just inventing a technology. It’s also important to: Find a site Protect energy security Obtain the necessary authorizations Structure the financing Negotiate trade agreements Establish risk-sharing mechanisms Build lasting relationships with the communities involved In other words, the next stage of the energy transition is as much a matter of implementation as it is of innovation. The issue of “bankability” then becomes central. Early-stage projects that use emerging technologies are often costly and difficult to finance. Their implementation then makes it possible to build expertise, standardize processes, and gradually reduce costs. The challenge, therefore, is to create enough predictability to allow investors to commit, without prematurely locking in technological or regulatory models. Social acceptability: Integrating stakeholders into the project architecture The development of major infrastructure projects requires particularly close collaboration among developers, governments, regulatory bodies, lenders, investors, and advisors. Acceptability isn’t something that’s achieved at the end of a project. Even when a project is technically sound and economically viable, its success also depends on our ability to build a long-term relationship with the communities involved. This aspect takes on greater importance in a context where trust in institutions is eroding and information spreads rapidly. Consultation should therefore not be viewed as an administrative step that takes place at the end of a project’s development. For large-scale infrastructure projects, relationships with stakeholders are an integral part of the project’s very architecture. This approach is particularly important in relationships with Indigenous communities. Early engagement and models that enable meaningful participation in project design, benefits, and governance can profoundly change the dynamics of project development. The same logic applies to local communities. Trust is not based on a promise of zero risk. It relies more on transparency regarding the: Risks Profits Unknowns Mechanisms for resolving problems as they arise This aspect is all the more important given that the public already sees a connection between infrastructure, the economy, and the climate. According to the Global Infrastructure Index 2026, **72% of respondents believe that investing in infrastructure creates jobs and boosts the economy, while 59% believe that such investments make a significant contribution to combatting and mitigating the effects of climate change.**¹ However, this favourable perception cannot be taken for granted. For the organizations leading these projects, the quality of the dialogue and stakeholder engagement is in itself a key aspect of project risk management. Regulatory frameworks capable of supporting the transformation Regulatory frameworks play a vital role in protecting public interest. They must be able to adapt to the pace of the changes they oversee. The challenge is to develop processes that are sufficiently predictable, coordinated, and agile to enable developers and investors to understand the rules of the game and make long-term decisions. Effective regulation must pursue several objectives simultaneously: Protecting the environment and communities Maintaining the security of infrastructure Creating predictability for investors Enabling the integration of new technologies When approval cycles become much longer than cycles of technological innovation or investment, the risk is no longer merely administrative: it becomes economic. Legal considerations also come into play early in the project: risk allocation, the contractual framework, financing, regulations, and governance all help create the conditions necessary for the project’s implementation. Major infrastructure projects: Moving from ambition to implementation The coming years will likely see no shortage of climate goals, capital, and innovation. The key factor will be the ability to turn them into operational infrastructure. This process requires that several conditions be met: A long-term vision Capital and financing Government decisions Technologies Regulations Partnerships Community engagement and stakeholder relations Effective risk allocation In this new environment, the law is no longer confined to the periphery of a project, after business decisions have been made. It helps lay the groundwork for the project to exist. The projects that move forward will be those whose developers have managed to address uncertainty clearly enough to enable the various stakeholders to move forward together. The energy transition thus imposes a new discipline on infrastructure builders: that of thinking in the very long term while retaining the ability to adapt; of accepting risk without compromising on rigour; of exploring multiple solutions rather than seeking a single answer; and of building trust as methodically as the assets themselves. In a world where uncertainty is becoming the norm, the ability to implement projects is itself becoming a strategic advantage.

The fight against climate change calls for a major energy transition, but the undertaking is made even more complex by a growing demand for electricity driven by the proliferation of artificial intelligence and other new technologies. However, the urgency of the problem alone does not make a project to fix it bankable. As we mentioned in our previous article in this series,1 a project is financed on a risk-by-risk basis, based on demonstrable revenue streams and coherently allocated contractual risks. Similarly, environmental criteria must be identified, measured and allocated so that they can be incorporated into feasible projects. This article examines the issue in two parts. First, it outlines the conditions a green project must meet to be bankable. These are the same as for any infrastructure project, but in an environment that now requires a common language, verifiable indicators and guarding against greenwashing. Second, it provides concrete examples of how these stringent standards are put into practice. Making a green project bankable: the same principles, but with greater discipline The fundamentals of bankability do not change simply because a project carries a green label. The principles set out in our previous article—risk allocation, revenue certainty, commercial viability and regulatory stability—apply in exactly the same way. What is added is the need for a framework to assess environmental performance using common, precise and measurable language. This terminology is currently being defined in Canada. The Taxonomy and Transition Council, established by the Business Future Pathways consortium in collaboration with the Canadian Climate Institute, is developing a national sustainable finance taxonomy. In its draft methodology report, open for public consultation until August 13, 2026,2 three categories of activities are proposed: green, transition and abatement. Furthermore, the Council is expected to issue guidelines for six priority sectors by the end of 2027. In Quebec, the White Paper on Sustainable Real Estate, published in April 2026 by Décarbone+ with the support of Hydro-Québec, the CDPQ, the National Bank, Montoni, Lavery and the Pôle IDEOS at HEC Montréal, pursues the same objective in the real estate sector: to provide a collective benchmark based on concrete data and demonstrate that building decarbonization is not only possible, it is profitable.3 In a financing context, a proper taxonomy can facilitate due diligence, broaden the investor base by providing clarity and predictability, and, through the certainty it brings, reduce the rates at which funds are made available. However, a standardized taxonomy is not sufficient on its own, and any environmental claim must be verifiable. According to TD Securities, global sustainable debt issuances stood at just under USD 1.6 trillion in 2025, down 7% from 2024, while sustainability-linked loans fell from 530 to 418 billion.4This decline could be attributed to a tightening of standards, with lenders looking beyond advertised “greenness” to analyze the underlying substance of a project. Since 2017, Québec’s green bond program has yielded nine issuances totalling approximately $5.7 billion,5 and the $1.85 billion issuance for the REM is among the largest in Canada.6According to the Ministère des Finances, “green bonds do not represent an additional source of financing for Quebec. They are simply another means of financing borrowings that would otherwise have been financed through conventional bonds.”7 The innovative aspect of green bonds lies in the allocation, tracking and reporting frameworks built into them, which unlocks access to pools of investors bound by mandates restricting capital to green initiatives alone. If the project company promises a specific level of environmental performance to a public authority, such as a building’s energy consumption, carbon intensity or a proportion of recycled materials, it must be able to secure the same standard from the contractor, operator and suppliers. Definitions, measurement periods, audit rights and remedies must be consistent across all contracts; otherwise, the project company will face a payment reduction with no recourse against the party responsible for the shortfall, exactly as applies to an improperly allocated construction risk. The risk of greenwashing follows the same logic. An unsubstantiated environmental claim is no longer merely a reputational risk. Since June 2024, such a claim can be sanctioned under the Competition Act, with a fine of up to 3% of annual worldwide gross revenues. Furthermore, since June 20, 2025, the Act has also introduced a private right of action, making third parties entitled to bring proceedings before the Competition Tribunal under certain conditions.8In cases of project financing, an unsubstantiated claim represents an unallocated risk trapped within the structure that could jeopardize the project’s bankability. A well-defined scope and verifiable indicators are necessary to effectively analyze and mitigate this risk. From principles to practice Deep Sky: revenue certainty takes precedence over environmental benefits Although direct air capture is becoming increasingly essential to achieving carbon reduction targets, the bankability of these projects remains grounded in revenue certainty, rigorous contracting and the quality of the financial model. The Deep Sky Alpha facility in Innisfail, Alberta, combines several direct air capture technologies with permanent geological storage.9 Its financing was made possible in particular by carbon removal credit purchase agreements concluded with companies such as Lufthansa and ENGIE, with the latter having committed to purchasing up to 15,000 credits.10 These contracts serve the same purpose as power purchase agreements in wind farm projects, for example, by providing the project with the revenue certainty needed to attract financing. However, as with any offtake agreement, the parameters must be clearly defined: price, volume, delivery schedule, removal certification, permanence of storage, replacement of undelivered credits and buyer creditworthiness. Deep Sky also secured an $11-million credit facility from Finalta Capital backed by refundable clean economy tax credits,11 a structure in which the federal tax credit acts as financing leverage. These examples illustrate the principle that a technology is not bankable simply because it is green—it becomes so when its revenues are as predictable as those of a conventional project. Énergir: financing the transition in a shifting regulatory environment Strict standards do not dictate that only assets that are already “perfectly green” can be financed. The Canadian taxonomy recognizes the “transition” and “abatement” categories, reflecting the reality of an economy in which many sectors can only gradually reduce their carbon intensity rather than shifting it overnight. To finance transition and abatement projects, regulatory predictability is absolutely necessary. Énergir’s trajectory is a clear case in point, as are the uncertainties inherent to its environment. Its regulatory obligation to supply gas from renewable sources rose to 5% in 2025–2026 and was set to reach 10% in 2030–2031.12 To achieve this, Énergir launched a dual-energy program combining electricity and natural gas in April 202613 and set up a subsidiary dedicated to residential geothermal energy in December 2025.14However, in July 2026, the Québec government announced its intention to review the regulatory trajectory for gas from renewable sources, requested an opinion from the Régie de l’énergie (slated for fall 2026), and formed an expert committee whose recommendations are expected in early 2027.15 Clearly, if the regulatory targets underpinning a transition project are subject to midstream changes, the project’s financial model is weakened, its revenue assumptions open to challenge and its appeal to lenders diminished. Because the markets and revenue streams of entities such as Énergir are governed by planning approved by the Régie de l’énergie du Québec, projects led by regulated utilities generally benefit from an unusually high degree of predictability. They are largely insulated from occasional shifts in government policy. Furthermore, the same technical system can produce different results depending on the power grid, the climate or the baseline it replaces. The economic viability of different projects using the same system must therefore be assessed jurisdiction by jurisdiction. Measuring Beyond: measuring what is promised Verifying that environmental promises are kept requires a standard of measurement that goes far beyond simply including covenants into contract documentation. The Measuring Beyond Initiative, launched by HEC Montréal in partnership with the University of Oxford’s Saïd Business School, was designed with this objective in mind: to measure ESG performance with sufficient rigour to allow the findings to be built into financial models, not simply relegated to annual reports.16 The initiative is accompanied by the creation of a Chair in Sustainable Finance, a sign that measuring non-financial performance is now a professional discipline in its own right. HEC Montréal’s Sustainable Transition Office, co-led by Dominique Anglade, is also helping train decision-makers to understand and articulate transition challenges. Climate literacy is, in itself, a prerequisite for sound governance. Decision-makers must be able to understand the environmental assumptions they build into a project before they become contractual covenants. For their part, lenders must verify the consistency of the information throughout the project lifecycle, from the tender stage, through construction and operating contracts, to the financing documentation. Ultimately, sound governance is precisely what turns an environmental metric from an aspirational target into verifiable data that financiers can truly rely on. Conclusion To paraphrase Romain Rolland, rising to the challenge of the energy transition requires combining the pessimism of the intellect—which cuts through every illusion—with the optimism of the will. Optimism is needed to devise ambitious projects, while realism (in lieu of pessimism) provides the discipline required to make them bankable. Without such discipline, an environmental label can turn into greenwashing, undermining the very financing it was intended to support. With it, however, the verified sustainability of a project broadens access to capital markets and makes climate-related revenues genuinely bankable. The same logic applies to so-called “smart” infrastructure. Its data and performance indicators must likewise be reliable, verifiable and subject to contractual requirements. This will be the subject of the next article in this series. D. Tournier and J. Menard, 2026. “Our infrastructure contracts: from the ideal project to the bankable project.” Lavery, de Billy. https://www.lavery.ca/en/publications/our-publications/6468-our-infrastructure-contracts-from-the-ideal-project-to-the-bankable-project.html Business Future Pathways, 2026. Canadian Sustainable Finance Taxonomy: Methodology Report. https://www.businessfuturepathways.ca/public-comment-period-begins-on-canadas-sustainable-finance-taxonomy/ Décarbone+, 2026. “White Paper, Sustainable Real Estate.” https://decarboneplus.org/initiatives/atelier-1-immobilier-durable/ TD Securities, 2026. “Sustainable Finance 2025 in Review and 2026 Outlook.” https://www.tdsecurities.com/ca/en/sustainable-finance-2025-in-review-and-2026-outlook Ministère des Finances du Québec, 2025. Green Bond Newsletter. https://www.finances.gouv.qc.ca/documents/Autres/en/AUTEN_MFQ_OblVertes_Bulletin_Nov2025.pdf CDPQ Infra, 2026. “REM successfully raises $1.85 billion through its first green bond issuance.” https://cdpqinfra.com/en/news/pressreleases/rem-successfully-raises-185-billion-through-its-first-green-bond-issuance Ministère des Finances du Québec, n.d. “Additional information.” https://www.finances.gouv.qc.ca/department/financing/green_bonds/additional_information.asp Competition Bureau Canada, 2025. “Environmental claims and the Competition Act.”https://competition-bureau.canada.ca/en/how-we-foster-competition/education-and-outreach/environmental-claims-and-greenwashing Deep Sky, 2025. “Deep Sky Alpha Begins Operations with North America’s First CO2 Storage via Direct Air Capture.” https://www.deepskyclimate.com/blog/history-made-deep-sky-alpha-begins-operations-with-north-americas-first-co2-storage-via-direct-air-capture-2 Deep Sky, 2026. “Deep Sky and Lufthansa Group Enter Carbon Removal Credit Agreement.” https://www.deepskyclimate.com/blog/deep-sky-and-lufthansa-group-enter-carbon-removal-credit-agreement; Deep Sky, 2026. “Deep Sky Announces Partnership to Advance Direct Air Capture with ENGIE.” https://www.deepskyclimate.com/blog/deep-sky-announces-partnership-to-advance-direct-air-capture-with-engie Deep Sky, 2025. “Deep Sky Secures First-of-its-Kind Financing with Finalta Capital to Advance Carbon Removal in Canada.” https://www.deepskyclimate.com/blog/deep-sky-secures-first-of-its-kind-financing-with-finalta-capital-to-advance-carbon-removal-in-canada Énergir, 2026. “Renewable Natural Gas, Your Energy Transition Ally.” https://energir.com/en/residential/renewable-natural-gas Énergir, 2026. Dual-Energy Electricity and Natural Gas Program. https://energir.com/files/energir_common/import/Fichiers/Subvention_bienergie/Guide-Participation_bienergie_EN.pdf Énergir, 2025. “Énergir Geothermal Solution: A New Subsidiary Dedicated to Deploying Residential Geothermal Systems in Québec.” https://energir.com/en/about/media/news/energir-geothermal-solution-new-subsidiary-dedicated-deploying-residential-geothermal-systems-quebec Government of Québec, 2026. “Québec veut renforcer sa sécurité énergétique et réduire la facture pour les consommateurs de gaz naturel.” Press release dated July 16, 2026. https://www.quebec.ca/nouvelles/actualites/details/quebec-veut-renforcer-sa-securite-energetique-et-reduire-la-facture-pour-les-consommateurs-de-gaz-naturel-71977 [in French only] HEC Montréal, 2023. “Measuring Beyond Initiative.” https://www.hec.ca/en/sustainable-and-responsible-management/measuring-beyond-initiative/index.html

There is currently much debate about what is the “best” infrastructure project delivery method. Design-build-finance-maintain? Collaborative model? Alliancing? Another way? Even though the labels may change, one underlying reality remains: The structure best suited to financing, whether private or public, stands the best chance of success.  After exploring the reasons why infrastructure financing needs to be modernized and reviewing emerging models, our series is finally getting to the heart of the matter: the contractual framework and risk allocation. This is where a project transitions from just a vision to reality.  That is because, while risk allocation may be viewed differently by various stakeholders, the requirements of the financier or public authority are what ultimately dictate a project's success or failure. Stakeholders would therefore be well advised to keep this in mind right from the design phase.  The bankability of a project, that is, whether it can actually be financed on acceptable terms, is a matter of contractual discipline aimed at stabilizing costs and revenues, making risks manageable and establishing a management structure that can deal with deviations without letting the project spiral out of control. Put another way, a project is financed risk by risk, each one (supply, construction, operation, or refinancing) must be assessed, mitigated and contractually assigned to the party best positioned to manage it. The same principles apply whether the goal is to secure bank financing or simply stay within a public budget. Given the length of this article, we can only provide a brief overview of these principles.  Project financing in short: special purpose vehicle, financial model and off-balance-sheet  The most common structure, especially in public-private partnerships (PPPs), is a special purpose vehicle (SPV), which, depending on the type of project, is an entity created to contract with the public authority, own the future infrastructure and carry the debt. This entity raises equity capital from developers, builders, operators and investment funds, and debt capital from banks, bond investors and development finance institutions. In limited-recourse project financing, the purpose of an SPV is the resulting compartmentalization: lenders are repaid from the project’s cash flows, without a security interest (or with a limited security interest) in the shareholders’ assets. The idea is not new. A famous predecessor is the Suez Canal Company, a joint-stock company founded in 1858 to carry out a single project by raising capital based solely on the project’s potential.1 What has changed is the financial model underpinning the transaction: It has become far more sophisticated. It is now a complex labyrinth of Excel sheets, with a continuous thread of cash flows under the firm control of the lenders, with all project documentation bringing the model to fruition within a coherent, “closed system.” The model thus dictates how rigorously due diligence is conducted, how cash flow allocation is prioritized (operations, reserves, debt service and distributions), and how strictly dividends are capped as long as safety margins are not met.  This financing structure is not the only possible option. For example, for smaller projects or less liquid markets, we often see full-recourse corporate financing. Here, SPVs backed by corporate guarantees facilitate closing when pure non-recourse financing is out of reach, but the result is that project compartmentalization is reduced and shareholders face more exposure. No matter which model is available or chosen, the project owner and developer must be as disciplined as a lender, even if no financier needs to be brought on board. A project carried out and paid for with public funds must be just as thorough as a private one: A budget must be kept and value for money achieved through the same assessment of risks and the same search for the party best placed to assume them.2 Even when no funds are sought from a bank, a banker’s perspective is still indispensable.  Bankable income  The risk differential is considerable between a model with contractually secured or regulated revenues and one left to the mercy of fluctuations in demand, prices or government decisions. A project’s risk profile will ultimately dictate interest rates, acceptable debt levels and even whether the project can achieve financial close. The solutions depend on the type of project. Examples include pricing regulated by a credible regulator for a transport project; long-term purchase agreements at a fixed price or a price linked to raw materials in the energy or petrochemical sectors; or availability payments in PPPs, where compensation is based on the provision of services under the contract rather than on the number of users. Of course, much civil infrastructure generates no income from users, instead, the public authority compensates the operator for availability. In all cases, the cash flow must be predictable and viable, but the payment mechanism must be enforceable and within the financial capacity of the final paying party.   While availability payments in a PPP shift demand risk, they also concentrate revenues with a single public authority, and that authority’s creditworthiness will dictate whether other guarantees, such as budgetary safeguards and dedicated payment mechanisms, are required.  A toll project is bankable if traffic assumptions are conservative, toll rates are adjustable and social acceptability is addressed in advance. In addition, predictable revenues at a rate that covers debt service open the door to signing a credible—and therefore bankable—operating contract. In an industrial project, a solid offtake agreement must substantiate the financial model’s projections, and when a cost cannot be fixed in advance, it must be linked to the revenues it drives, through indexation or cost pass-through, so that the two vary in tandem rather than in opposite directions.  Assessing, mitigating and allocating risks  The essential preliminary step before drafting any contract is to identify risks, evaluate their probability and impact, and determine appropriate mitigation measures for each. Only then can the contractual framework be established, allocating each residual risk to the party best suited to assume it. Debt financing is only available for risks that have been identified, quantified, and allocated. This is why lenders demand consistency: If the SPV guarantees a service standard to the public authority, it must be able to “procure” this exact standard from its contractors. Otherwise, the SPV will retain the risk and the project will become difficult to finance.  Construction provides the most compelling illustration of this principle. To establish the price of a project, a market-tested cost estimate is conducted (ideally through real bids), and then a fixed-price, fixed-deadline turnkey EPC contract is concluded. Lenders favour this specific structure precisely because it establishes the cost of completion. The contractor includes a margin for its own contingencies, which represents the price of certainty. Any residual default risks are covered by performance bonds to ensure project completion if the contractor falters, letters of credit guaranteeing the reimbursement of advance payments, payment holdbacks and late penalties. These mechanisms ensure that, whatever happens, the project will be delivered on budget, in compliance with the financial model.  However, even though we prefer fixed-price EPCs, they are not used across the board. In Quebec and Ontario, more flexible procurement is often used, such as EPCM, alliancing and progressive design-build, where the contractor is engaged early in the process but the price is not locked in from the outset. A target price is established during the draft-design phase, featuring a risk-and-reward sharing mechanism for overruns and savings, typically capped, to align interests without placing the entire risk burden on one party.3 However, the golden rule of finance still holds true: the less certain the price, the greater the uncertainty, leading the lender to require higher equity, completion guarantees or shareholder support—driving up financing costs to account for the risk.  The contract must be structured for the long term, as infrastructure projects are financed over decades in a changing world. Legislative changes, superior force, climate and geotechnical hazards must all be anticipated to prevent an external event from triggering a default. In addition, lenders are often granted step-in rights through direct agreements with the public authority, allowing them to take back control should the contractor default on its obligations, thereby avoiding termination and ensuring service continuity. When they are well-designed and have precise triggers and realistic remediation deadlines, such mechanisms also serve the public interest by providing a window for corrective action before the government has to step in.  Capitalization and leverage  The level of financial leverage and the quality of the SPV’s capitalization are direct determinants of bankability. Shareholders often have an interest in maximizing debt, as it is generally less expensive than equity and increases returns. The lenders, for their part, want an SPV that is sufficiently capitalized to absorb shocks and maintain incentive alignment. If the equity portion is marginal, financial close is often more difficult and contractual protection requirements may increase. Should the economic balance deteriorate, an operator with limited financial exposure may prefer to withdraw rather than incur prolonged losses, leaving the public authority facing a forced renegotiation. Minimum equity requirements, combined with restrictions on the sale of shares prior to commissioning and a stabilization period, are specifically designed to avoid such misalignment.  Lastly, when a public authority awards a contract before financing is fully committed, the interval between the award and financial close exposes it to renegotiation pressure, because lenders will impose conditions precedent as they finalize their due diligence. To mitigate this risk, the public authority will adopt a banker’s perspective by including credibility requirements for the financing plan right from the tender stage. Where appropriate, it will also incorporate incentive or disciplinary mechanisms, such as bid bonds, more advanced financing commitments, optional pre-arranged financing. Over time, bankability requires that the contract cover the allocation of refinancing risk and the allocation of refinancing gains, if any, so as to avoid difficult future negotiations on value for money.  The mechanics of public intervention  Public intervention is compatible with the market, provided that it is intended to remove specific barriers rather than replacing the market. A public subsidy or loan can fill a viability gap, offset the lack of long-term maturities or mitigate an excessive risk premium. Partial guarantees and credit enhancement, which allow an institutional guarantor to cover a portion of the default risk, help to make private commercial debt available at a lower cost. Other financing structures can go even further. The public authority can waive most of its defences against the lenders once the work has been completed and accepted. This is called “debt assignment,” a typical example being forfaiting, a well-known mechanism used in European PPPs. The public authority’s debt thereby becomes almost unconditional and can be transferred to the banks, which no longer carry project risk, but instead take on direct exposure to the public authority. This drives financing costs down. Of course, the intent is never to use public funds to serve private interests or to manage them any less rigorously. Ultimately, any commitment of public funds calls for the exact same discipline in risk management and contractual structuring.  Conclusion  We can all dream of a better world, but we need to give ourselves the means to build it. Private financing comes at a cost, and that cost justifies the discipline it forces on a project. A non-recourse lender only signs off on what they have assessed, quantified and mitigated, and such an exacting approach benefits the entire project. Whether a banker is involved or not, structuring contracts in this way is the best guarantee of success.  Sir William Cornelius Van Horne, who directed the construction of the Canadian Pacific Transcontinental Railway, completed in 1885 in less than half the planned time, is quoted as saying “It has always been a profound belief of mine that the things which people regard as next to impossible are the easiest things to do”.4 Yet the man was anything but a dreamer. He knew that the subsidies, in money and land, would only be paid as railway sections were completed, inspected and commissioned, and he was known for his iron discipline in payment sequencing and the choice of contracting partners. Still today, such a rigorous approach is what turns a project that exists only on paper into one that is actually built.  Encyclopædia Britannica, “Suez Canal”, https://www.britannica.com/topic/Suez-Canal  OECD, 2012, Recommendation of the Council on Principles for Public Governance of Public-Private Partnerships, https://legalinstruments.oecd.org/public/doc/275/275.en.pdf; and World Bank, 2017, Public-Private Partnerships Reference Guide (Version 3), https://ppp.worldbank.org/sites/default/files/2024-08/PPP%20Reference%20Guide%20Version%203.pdf Gouvernement du Québec (2024), Stratégie québécoise en infrastructures publiques — Des infrastructures de qualité, réalisées plus rapidement et à meilleur coût, https://cdn-contenu.quebec.ca/cdn-contenu/adm/org/sous-secretariat-infrastructures-publiques/publications/strategie/strategie_infrastructures.pdf ; Infrastructure Ontario, Choosing the Right Model for Each Project, https://www.infrastructureontario.ca/en/what-we-do/major-projects/model-selection/ Red River North Heritage, Creating a Legacy: The Van Horne Farm part I, https://redrivernorthheritage.com/creating-a-legacy/; Dictionary of Canadian Biography (1998), Van Horne, Sir William Cornelius, https://www.biographi.ca/en/bio/van_horne_william_cornelius_14E.html Source used throughout the article: World Bank, 2025, Infrastructure Monitor 2024 , https://openknowledge.worldbank.org/server/api/core/bitstreams/de04d2f1-f59f-499d-9aa1-2bf052d74eb3/content 

The first article1 of this series provided an overview of infrastructure financing in Quebec and Canada, explaining why it must adapt to address maintenance backlogs, the imperatives of the energy transition and increasing fiscal constraints. This second article turns to emerging financing models and their concrete applications. Updated, Alternative and Emerging Financial Models Public-Private Partnerships2 Public-private partnerships (PPPs) are a well-established financing and management model for infrastructure projects, under which the private sector may be involved in the design, construction, financing and, in some cases, the operation and maintenance of a public asset.3 In return, the private partner receives payments that are contingent on performance, including the achievement of predetermined milestones during construction and the availability or quality of the service during operation. Contemporary PPPs are distinguished by their contractual mechanisms for performance monitoring and change management, permitting adjustments to financial or operational conditions over time based on the actual performance of the private partner. This approach facilitates an improved distribution of risks among parties, with the private sector typically assuming risks associated with costs, timelines, and performance, while the public sector retains responsibility for defining service levels and ensuring that essential services remain accessible to the population. Modern PPP agreements increasingly incorporate detailed performance clauses and financial review mechanisms based on quantifiable project outcomes, which helps ensure rigorous contract management. These measures enhance transparency and accountability, allow for a more equitable allocation of benefits and increase resilience in the face of unforeseen events. From a public finance perspective, PPPs also offer an important budgetary advantage. Because the private partner provides the initial financing and is repaid over time through service payments, the upfront investment does not always appear in the same way as traditional public debt, depending on the applicable accounting framework. Instead, it is reflected in long-term contractual commitments, which can help governments move forward with priority projects despite tight borrowing limits or annual budget constraints. This should not, however, be confused with the economic rationale for PPPs, which is based primarily on risk allocation, implementation discipline and performance over the project lifecycle.  When maintenance and lifecycle renewal are included in the contractual framework, assets developed under PPPs also tend to be better maintained over time, since these obligations fall on the private partner and are not dependent on future political decisions to allocate maintenance budgets. For example, the Highway 25 PPP agreement expressly provides for the design, construction, financing, operation, maintenance and refurbishment of the infrastructure, and entrusts the private partner with responsibility for the operation and maintenance of the relevant section. That said, private financing often carries a higher nominal cost and is generally more expensive than sovereign borrowing. At the outset, the decision to opt for a PPP should therefore be supported by value-for-money analyses to assess, on a project-by-project basis, whether the premium associated with private financing is offset by the value created. The value of PPPs therefore lies in the transfer of risk, the discipline in project delivery and the more predictable management of the lifecycle – all factors that must be carefully assessed on a case-by-case basis. Performance-Based Contracts4 Performance-based contracts (PBCs) are increasingly used tools in the financing and management of public infrastructure, particularly in the energy, transportation and water management sectors. In such agreements, the private operator is compensated based on the quality of the service provided or the efficiency achieved, rather than through purely fixed or input-based remuneration. This model encourages a results-oriented culture, where payments are conditional on meeting measurable indicators such as asset availability, energy consumption, response times or user satisfaction. By directly linking compensation to performance, PBCs motivate private partners to innovate, optimize processes and maintain a high level of service throughout the project lifecycle. They can also help reduce long-term operating costs and better manage risks related to maintenance and obsolescence by promoting a proactive rather than corrective approach. PBCs and PPPs are not mutually exclusive. In practice,  PBCs can be embedded within PPP agreements (for example, where payments for availability or energy performance are central to the business model) or used on a stand-alone basis in more traditional procurement arrangements, particularly for the operation and maintenance of existing assets. In both cases, the common thread is that of aligning financial flows with objectively measured performance. Blockchain and Automation5 The integration of blockchain technology into infrastructure projects is emerging as a useful innovation, particularly where multiple stakeholders, large payment flows and complex supply chains are involved. Blockchain’s decentralized and tamper-resistant structure allows for the implementation of “smart contracts” — agreements whose key conditions (for example, completion of a construction milestone or delivery of materials) are encoded and can trigger automatic actions once verified. Applied to construction and infrastructure, this can streamline procurement and payment processes. For example, once an independent engineer validates that a bridge pier has been completed in accordance with the plans, a smart contract could automatically release the corresponding payment from an escrow account to the contractor, while updating the project ledger shared by the owner, contractors and lenders. Similarly, deliveries of critical materials can be recorded on a shared blockchain register, ensuring that only approved products are used and reducing the risk of fraud or substitution. By automating these steps, blockchain can reduce administrative delays, limit disputes over invoices and strengthen audit trails. From a financing perspective, this increased transparency and the reliability of project data are of particular interest to lenders and investors. More robust, real-time information about progress, costs and compliance can make it easier to monitor covenants, reduce perceived counterparty risks and ultimately support a more efficient disbursement of funds and potentially lower financing margins for well-structured projects. Crowdfunding6 Crowdfunding has increasingly emerged as a complementary mechanism for financing infrastructure and construction projects—especially smaller-scale, community-oriented ones—by tapping many smaller contributions rather than relying solely on large institutional investors or government grants. For example, the Luchtsingel pedestrian bridge in Rotterdam was partly financed through a campaign in which residents could “buy” individual wooden planks, each engraved with their names. Thousands of small donations collectively triggered a larger municipal grant, proving that citizen-led investment can catalyze broader public-private partnerships.7 While crowdfunding as an alternative source of financing offers greater community engagement and more transparency, it also requires strong campaign design, clear revenue models or public benefit justifications and credible governance to succeed. For the moment, it remains a niche instrument, but one that illustrates how citizens can be directly involved in financing and shaping the infrastructure of their communities. International Case Studies Europe: Green Bonds and PPPs In French public procurement, the prevalent model is the marché de partenariat, an integrated contract by which a private operator, under private project management, undertakes to provide private source financing, design, construction, maintenance, and possibly operation of an asset, in exchange for deferred public payments tied to performance. Created in 2015 by a reform aligning domestic law with EU rules, it unified prior heterogeneous PPP-like schemes into a specific category of public contract, distinct from concessions. The marché de partenariat targets whole -life cost optimization and transfer of relevant risks (design, construction, availability, energy performance) in return for a private financing premium, enforced through performance-based payments, financial adjustment clauses, and reinforced oversight. It suits complex, long-term projects integrating design–build–maintain and smoothing budget outlays.8 These advantages come with governance challenges: the contracts are complex, long-term and often costly to prepare and monitor, which raises issues of transparency, capacity of public authorities to negotiate on an equal footing, and democratic control over commitments that can span several decades. This partnership model is increasingly fuelled by green bonds and other sustainable finance instruments at the European level, which have emerged as central tools for sustainable infrastructure finance and provide a pipeline of targeted capital that can be structured within marché de partenariat frameworks to deliver measurable environmental performance. According to data from the European Environment Agency, green bonds accounted for 6.9% of all corporate and government bonds issued in EU27 countries in 2024, up from 5.3% in 2023-,9 while the European Investment Bank approved over €15 billion in new financing in mid-2025 directed at water, transport, energy, and housing infrastructure projects that support the green transition-.10 This reflects the region’s strategic shift toward the channelling of capital into low-carbon- infrastructure such as public transport, renewable energy, and thermal building renovation. Asia: Digital Modelling and Blockchain The Land Authority of Singapore built the first nation-scale digital twin: a high-resolution 3D model of the entire country created from airborne and vehicle-based laser scanning, covering above- and belowground assets. The platform integrates real-time data (buildings, infrastructure, mobility, environment) to simulate scenarios for urban planning, infrastructure management, sustainability, and emergency response. It enables cross-agency and public–private collaboration, supports data-driven policy, and provides a testbed for Smart Nation services and applications. With the ongoing integration of AI, Virtual Singapore functions as an evolving operational tool for resilient, efficient city management and research, with anticipated partial public access to enhance transparency and civic engagement.11 Complementing this digital modelling infrastructure, the OCBC bank and Land Transport Authority of Singapore have launched a pilot of a blockchain-based conditional payment solution for construction projects. Under this arrangement, the Authority can disburse “mobilization advance payments” to contractors once predefined conditions, encoded in smart contracts, are verified. This innovation streamlines the disbursement process, ensures greater transparency over the use of funds, and reduces administrative friction associated with large upfront payments typical of major infrastructure works. As of the initial deployment, over 22 million Singaporean dollars had already been disbursed under this mechanism.12 By combining digital modelling with blockchain, Singapore has adopted a technologically integrated approach to infrastructure development and financing. The digital twin allows for more precise planning, cost estimation and risk assessment, which helps structure bankable projects and gives greater comfort to investors and lenders. The blockchain-based payment system, for its part, secures and accelerates the flow of funds once milestones are reached. Together, these tools strengthen project transparency, coordination among stakeholders, risk management and lifecycle governance. Latin America: Mobilizing Regional Markets for Infrastructure Financing The Development Bank of Latin America and the Caribbean (“CAF”) has significantly stepped up its role as a structural financier of infrastructure across Latin America and the Caribbean. In December 2024, its board approved US$2.478 billion for sustainable development and infrastructure projects spanning water and sanitation, urban mobility, energy transition, and social infrastructure across 10 countries.13 In 2025, CAF further committed US$1.086 billion to support climate-resilient and strategic infrastructure operations in Brazil, Colombia, Uruguay, and Chile, including urban development, railway reactivation and water security for metropolitan areas.14 Beyond project-by-project financing, CAF has announced a broad long-term commitment. Over the next five years, it aims to mobilize up to US$40 billion to support a “triple transition”: green, digital and social, targeting energy transition, climate resilience, water and sanitation, sustainable mobility, ecosystem preservation and inclusive infrastructure.15 Through these combined efforts, CAF seeks to close the region’s infrastructure deficit and orient development toward sustainability, resilience and social inclusion, while deepening regional capital markets for infrastructure financing. Conclusion The evolution of infrastructure financing is being shaped by a convergence of innovation and technology, on the one hand, and by growing investment needs on the other. From modern PPPs and performance-based contracts to blockchain-enabled automation and community-driven crowdfunding, emerging instruments broaden the spectrum of available capital while improving efficiency, transparency, and accountability. International case studies demonstrate that these innovations are already being applied in practice. Europe is scaling sustainable finance with green bonds embedded into long-term partnership contracts; Asia is pioneering the integration of digital modelling and blockchain to streamline project delivery and provide financiers with more reliable, real-time information on risks and performance; and Latin America is mobilizing regional development banks to close infrastructure gaps through climate-resilient, socially inclusive investment. Taken together, these approaches reveal a global shift toward infrastructure systems that are more data-driven, performance-oriented, participatory, and financially diversified. As governments face rising fiscal constraints and increasing demands for sustainability, the adoption of these new financing models offers a path to delivering projects that are not only bankable, but also resilient, transparent, and aligned with long-term societal goals. Why rethink Infrastructure Financing: https://www.lavery.ca/en/publications/our-publications/6438-why-rethink-infrastructure-financing-.html The World Bank . (2017). Public-Private Partnership Reference Guide (3th ed.). https://ppp.worldbank.org/sites/default/files/2024-08/PPP%20Reference%20Guide%20Version%203.pdf Achats Canada. (2025). Partenariat public-privé. Gouvernement du Canada. https://achatscanada.canada.ca/fr/portail-de-l-acheteur/approvisionnement-specialise/strategique/partenariat-public-prive The World Bank. (2023). Performance-based contracts: Promoting quality road maintenance and economic efficiency. World Bank. https://blogs.worldbank.org/en/transport/performance-based-contracts-promoting-quality-road-maintenance-and-economic-efficiency Waqar, A., Khan, A. M., & Othman, I. (2024). Blockchain empowerment in construction supply chains: enhancing efficiency and sustainability for an infrastructure development. Journal of Infrastructure Intelligence and Resilience, 3(1), 100065. https://www.sciencedirect.com/science/article/pii/S2772991523000403 Construction Placements. (2025). Crowd-funded infrastructure: Can retail investors finance bridges?. https://www.constructionplacements.com/crowdfunded-infrastructure-retail-investors-bridges Petty, J. (2017). Crowdfunding architecture. Architect & Developer. https://architectanddeveloper.com/crowdfunding-architecture/ MEFSIEN. Les marches de partenariat. https://www.economie.gouv.fr/files/files/directions_services/daj/media-document/FT16_Le_marche_de_partenariat.pdf European Environment Agency. (2025). Green bonds in Europe. https://www.eea.europa.eu/en/analysis/indicators/green-bonds-8th-eap EuropaWire. (2025). European Investment Bank Group Unveils €15.5 Billion Boost for Water, Transport, Housing, Energy and Innovation. https://news.europawire.eu/european-investment-bank-group-unveils-e15-5-billion-boost-for-water-transport-housing-energy-and-innovation/eu-press-release/2025/07/18/12/28/51/159075/ OPSI. (2015). Virtual Singapore – Singapore’s virtual twin. https://oecd-opsi.org/innovations/virtual-twin-singapore/ OCBC. (2024). OCBC partners LTA to pilot blockchain-based conditional payment solution for construction projects. https://www.ocbc.com/group/media/release/2024/ocbc-partners-lta-to-pilot-blockchain-based-conditional-payment-solution-for-construction-projects CAF. (2024). CAF approves USD 2.478 billion for sustainable development in Latin America and the Caribbean. https://www.caf.com/en/currently/news/caf-approves-usd-2478-billion-for-sustainable-development-in-latin-america-and-the-caribbean/ CAF. (2025). CAF Board of Directors approves USD 1.086 billion to boost sustainable infrastructure and climate resilience in Latin America. https://www.caf.com/en/currently/news/caf-board-of-directors-approves-usd-1086-billion-to-boost-sustainable-infrastructure-and-climate-resilience-in-latin-america/ CAF. (2025). CAF to allocate USD 40 billion over the next five years to boost green growth. https://www.caf.com/traducciones/traducciones_en/caf-to-allocate-usd-40-billion-over-the-next-five-years-to-boost-green-growth/