1 / 10

TAPPING INTO FINANCING OPTIONS

TAPPING INTO FINANCING OPTIONS. Delivering GROWTH BY PARTNERSHIP Sharing UK Capabilities In PPP 19-20 February 2014 Kingston, Jamaica. Options for funding.

dexter
Download Presentation

TAPPING INTO FINANCING OPTIONS

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. TAPPING INTO FINANCING OPTIONS Delivering GROWTH BY PARTNERSHIPSharing UK Capabilities In PPP19-20 February 2014Kingston, Jamaica

  2. Options for funding • - Options depend on what type of PPP, e.g., if design build operate (DBO), up front capital costs are financed by the public sector – so government’s usual finance resources engaged (taxes, capital markets, etc.) • - Example Yarl’s Wood immigration detention centre, England, a DBO PPP project • - This is different to a design-build-finance operate (DBFO), where initial capital costs met by private sector • - In such cases (i.e., as DBOs) the “private” portions of the public-private-partnership (PPP) are: (i) private sector expertise and (ii) single point of responsibility through project company. But not private sector funding.

  3. Financing PFIs (Structure) • Typical structure of a Private Finance Initiative (PFI) project: • (i) special purpose vehicle (SPV) as “Proj Co” (ii) “Hold Co”/sponsors who will provide equity capital to Proj Co(iii) private sector finance into Proj Co(iv) key sub-contracts typically Construction Contract and Operation & Maintenance subcontracts

  4. Financing PFIs (Categories) Categories of financing include: - Equity capital • - Senior Debt • - Mezzanine finance • - Junior Debt • - Enhancements (guarantees, LCs, partial risk guarantees, state support) • - Hedging instruments (interest rates, currency, inflation risks) • - Consider role of insurance (commercial, political risks)

  5. Financing PFIs/Infra projects (Sources) • Sources include: • - commercial banks • - bonds/capital markets; monolines • - development finance institutions (DFIs) e.g., KfW (Germany), IADB, World Bank/IBRD, EBRD (Europe) • -export credit agencies (ECAs) e.g., US-Exim, JBIC (Japan), KEXIM (South Korea), • - multilateral financial institutions e.g., IFC, FMO (Dutch), EIB (European Investment Bank) • - host country government

  6. Role of institutions • - Institutional investors (e.g., pension funds, mutual funds, insurance companies) • - Privately placed or public bonds • - Need for some form of credit enhancement (new mezzanine type approach) • - Examples: • - KPMG’s Hadrian’s Wall Capital Fund (HWC) initiative- Salford social housing project, £72M by pension insurance institution, 2013 • - EU Project Bond Initiative (PBI)- Spanish Castor gas storage project • - Prudential M&G’s Alder Hey hospital project UK using in-house mezzanine enhancement • - ING PEBBLE bank structure- Netherlands Zaanstad prison project • - Still monolines- Leeds social housing deal in the UK, Assured Guaranty, 2013 • - Norwegian bonds (predominantly energy projects) • - View that institutions are the natural buyers of syndicated debt, but after construction

  7. Financing after first financial close • Usually after construction complete- Commercial bank refinancing • -Private equity fund interest in secondary PPP market • - Capital markets

  8. Accounting treatment • - Risk Distribution and Balance Sheet Treatment • - Example ESA95 (Europe) manual on government deficit deals with whether a project will go on or off the Government's balance sheet. • - European PPP Expertise Centre has developed extensive checklist for this • - Differences in accounting under GAAP versus IFRS

  9. Additional information • - Financing process (timetable) • - Parties (bank, agent, trustee, account bank, etc) • - Documents (arranging mandate, term sheet/LoI, main finance agreement e.g., Facility Agreement or bond document/circular, intercreditor agreement, etc) • - Grant of security interests • - Covenants and monitoring; consequences

  10. Contact • Vanessa N. Rizziolivrizzioli@mahoeconsulting.comTelephone (London) : +44 (0) 20 8874 7390Mobile (London): + 44 (0) 780 178 1969Mobile (Jamaica): + 1 (876) 343 3885

More Related