Presentation Session 4: Arnaud Voisin, cdc ISMED Annual Conference, Defining a Way Forward for Infrastructure Investment in the Middle-East and North Africa (MENA)

1. TF1 : Guarantees and Bond financing
1. Recourse to a Guarantee adviser
2. Promoting cost sharing facilities to lower
guarantee costs
3. Developing public credit enhancement
facilities for the bond financing of
infrastructure projects
4. Developing refinancing vehicles and project
bonds
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2. 1. Recourse to a Guarantee adviser
• Guarantees schemes are as important as technical assistance
for the success of infrastructure projects
• A Guarantee Adviser would address this issue at the earliest
stage of the projects
• Will design, negotiate and if needed provide guarantees
• Task could be performed by existing institutions, public or
private, if not conflicted
• Hired and paid by the purchasing authority
• Guarantee term sheet provided to the project bidders
• Bidders remain free to propose their own guarantee scheme,
if demonstrating a better VfM
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3. 2. Promoting cost sharing facilities to lower
guarantee costs
• Guarantee adviser could be co-financed by
technical assistance facilities
• The cost of guarantees itself could be co-
financed
• Would lower global acquisition costs of the
project
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4. 3. Developing public credit enhancement facilities for
the bond financing of infrastructure projects
• Banks can provide construction loans but are increasingly
reluctant to deliver long term loans
• Alternative is to attract institutional investors into
infrastructure financing
• Credit enhancement is the key for providing them
investment grade bonds
• All private monoline insurers wiped out by the financial
crisis
• Only public institutions could today provide such facilities
• Attractive leverage effect for public funding (x5, increased if
provided by a pool of institutions)
• Bond issuance compatible with ESG principles and Islamic
finance
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5. 4. Developing refinancing vehicles and project
bonds
• Mid-size infra projects are less attractive for bank financing
• Bond financing is mostly associated with big projects, due to
transaction cost
• A financing gap may hamper mid-size project financing
• A vehicle refinancing a portfolio of mid-size projects could
allow for a competitive bond issuance
• Project selection by independent team and investment
committee
• Investment thesis compatible with Islamic finance principles
• Public sponsors taking a credit enhancement tranche
• Institutional investors underwriting project bonds
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