quinta-feira, abril 11, 2013

Towards for Non Bank Funding of European Infrastructure

A key objective of the  Workshop on Non-Bank Funding of Growth and Jobs in Europe in Dublin, 8th December 2012 was to begin a debate around possible solutions — both pragmatic and innovative — to the challenge of stimulating increased non-bank financing of long term investment in infrastructure and listed below are the main suggestions  that emerged from the workshop discussions.

Project Pipelines: In order to build investor confidence in transaction flow, there is a need to encourage greater transparency in the pipeline of national and pan-European projects and ensure that this pipeline is not determined by shorter term political horizons.
Procurement Rules: It was suggested that local and regional authorities need to focus on ensuring a simpler, more efficient and standardised bidding process for infrastructure projects. Procurement rules could also be adapted to enable the financial industry to take advantage of instruments such as bond solutions and
variable credit spread pricing.
Targeting Investors: A number of participants alluded to the need to develop strategies and actions that are customized and tailored to the needs of both fixed income investors and public/private pension funds.
Capabilities and Quality Data: Building a more robust capital markets industry for project finance will necessitate considerable investment in building the requisite competencies and skills across the entire financial system including in banks, institutional investors and asset managers. There is also a need to ensure that there
is sufficient quality data on the return and performance from long-term investment in infrastructure.
Regulatory, Fiscal and Legal Framework: Representatives of the financial industry were strongly of the view that there is an overwhelming need to ensure that the regulatory, legal and fiscal regimes at both the national and supra-national level embrace a stronger market orientation.
New EU Financial Instruments: It was suggested that there was considerable potential in developing innovative EU financial instrument with sufficient capacity to leverage and enhance private sector investment in infrastructure. This would necessitate an increased emphasis on a pooling of resources to create fewer,
simpler and more demand driven risk sharing instruments at supra-national level.
Financial Instruments and Products: Industry experts from various financial institutions proposed the following financial initiatives as possible innovative solutions to the infrastructure funding gap;
o Initiating European scaled infrastructure debt funds with the capacity to deal simultaneously with greenfield and brownfield as well as primary and secondary projects ;
o Creating a genuine monoline Pan-European insurer for major infrastructure projects.
o Ensuring a consistent REIT framework across the EU.
o Supporting bank financing of the initial construction phase of projects, initiating a (Goverment) guarantee mechanism assuming the risk of subsequent placement on the investors market.
o Developing whole business securitisations, with Heathrow Airport Holdings cited as an example of how securitisation technology can be successfully applied in the infrastructure sector.
o Creating a real Pan-European municipal bonds market, targeted at local and regional governments that would facilitate increased retail and institutional investment in infrastructure projects,
o Scaling up the EU-EIB project bond initiative and adopting a more flexible approach to providing assistance to member states with projects seeking funding which may not have previously met their requirements in terms of issues such as project type or credit issues.

The various instruments and initiatives suggested by workshop delegates suggests that there is no one silver bullet for addressing the challenge of financing long-term investment in infrastructure and that rather the solution will lie in the development of a range of customized and tailored financial mechanisms. There was awareness that some of the possible solutions may already be in situ, as in the case of the EU-EIB project bonds, but that these now needed to be scaled up, and in some cases recalibrated or adjusted. It was recognised however that developing new innovative financial instruments must be done in manner that
accords with the emerging post crisis regulatory regime.
More on project bonds

See more about The Reluctant Investor chasing the "risk-free" illusion