Page 57 - A U4SSC deliverable - Guidelines on tools and mechanisms to finance Smart Sustainable Cities projects

Box 20: Revenue models 2

Source Type Description
Amounts received from public institutions to pay the costs
Financing (including finance), recover the expenses and receive the agreed
payments
returns.
Payments linked to the performance of the private-sector operator and
Public sector payments conditions.
Availability
the availability of the service/asset in line with the agreed performance

Some services could generate measurable and accountable savings for
Savings
share the public sector that guarantee a budget to help fund the asset or
service.
Based on utilization of the service/asset, the public sector pays the
Tolls
private operator. Continuous payment schemes apply, to reduce risk.
Services charged directly to users in a recurring way or on a
Public and third party Pay-as-you-go “pay-as-you-go” basis, depending on the contracts with the final user.
The bill of the operator may include the collection from users.
Unlimited users pay a fixed amount for the service, regardless of
Subscriptions

Advertising level of use.
Selling advertising space on assets generates revenue.
Third parties User fees Direct payments of end-users for the service (e.g. road tolls).
Private operators get paid for specific services/assets
Rate type
(e.g. water and power utilities) with the revenues the administration
collects from the public.

Risk: why the “no-go” decision

The performance of every participant in a project (investors and contractors, sponsors and lenders,
public administration bodies and asset operators) poses a risk to the performance of the real asset
which the project will create. Each of these participants must decide which risks, coming from
other stakeholders and circumstances, they can manage, and at what level. While conducting due
diligence, cities should have defined and made assumptions about elements that could affect the
project’s performance and threaten the cash flows necessary to enable the project to pay back its
debts and sustain the service for citizens.

Stakeholders, especially internal, should consider the location, project size, availability of resources
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(including human resources), sector, revenue model and, ultimately, the expected performance.
These are all sensitive factors that affect the perception of risk.

U4SSC: Guidelines on tools and mechanisms to finance Smart Sustainable Cities projects 39