Revenue levers are the fundamental means of generating cash flows to fund programs and projects. They directly drive the amount of value that will be created by a project, which drives the business case for investors. Below are five revenue levers that can be used to make projects bankable.
Tax-based revenue is a core payment mechanism for infrastructure drawn from public fiscal resources and, generally, structured as a payment stream with a lower risk rating than revenue streams exposed to degrees of commercial risk. The most common forms of tax-based revenue are:
User-based revenue is a core payment mechanism that transfers a degree of commercial risk to the private sponsor of an infrastructure asset by enabling the operator to directly charge customers for services. The most common forms of user-based revenue include:
Ancillary revenue is an additional stream of revenue that is designed to complement the core revenue stream (e.g. tax-based or user-based revenue). It is created by extending the scope of a program or project to include revenue-generating services that support or complement core operations. The ability to generate ancillary revenue is often driven by the structural features of the infrastructure asset, population density around the asset, user income levels, and the ability of project designers to come up with incentives for private participants or sponsors to offer non-core services. Examples of ancillary revenue include:
This is a secondary revenue stream for infrastructure that relies on the ‘capture’ of spillover value created by an infrastructure asset. There are many mechanism of value capture, but common ones are targeted taxation, levies, and rates on spatial zones surrounding infrastructure assets in urban locations. Categories include:
Revenue can be collected from the monetisation of data generated by an infrastructure asset. This is the least mature of the revenue levers, but it is evolving rapidly. Both operational data and consumer data can be monetised, and some infrastructure assets may generate other monetisable data.
Revenue is one of the three lever types in the Funding and Financing Framework. Explore Risk Management and Financing to get the whole picture.
How can governments source revenue for their infrastructure budgets?
Revenue is essential to make projects bankable, but how do governments source revenue for their infrastructure budgets, particularly in times of crisis? Our Solutions for Financing National Infrastructure Programs page reviews good practice in how governments finance large infrastructure programs, especially during ‘exceptional times’ including natural disasters, financial crises, and pandemics.
Hear solutions from project leads, investors, and dealmakers in our New Deals webinar series