Iifcl, Idfc, Sbi

FINANCING INFRASTRUCTURE ROLE OF IIFCL
Prof D. C. Pai
India Growth Story continues
Indian economy has shifted to high growth trajectory

GDP growth for 2007-08 was 9% 2008-09 growth was at 6.75% 2009-10 growth forecasted at above 8% Fundamentals remain strong despite global uncertainties / melt downs.
Right policy mix can help sustain the growth momentum
Infrastructure deficit is looming
Robust economic growth has resulted in overstretched infrastructure Infrastructure constraint is threatening to become binding on growth 11th Five Year Plan (2007-2012) has envisaged total investment requirement of infrastructure sector at $515 billion
$150 billion is to come from private sector Large part of remaining is to come as debt component from banks and other institutions
PPP model is being encouraged
Constraints in promotion of PPP

Inadequate availability of long term finance (10 years plus tenor) Lack of capacity in public institutions to manage PPP Absence of shelf of bankable infrastructure projects Need for greater acceptance of PPPs by public - user charges
Slew of measures by Government

Opening of infrastructure sectors for private and foreign investment Promotion of levy of user charges Evolving model concession agreements Viability Gap Funding (VGF) scheme Setting up of India Infrastructure Finance Company Ltd (IIFCL) Establishment of India Infrastructure Development Fund (IIPDF) with corpus of Rs100 crore
India Infrastructure Finance Co Ltd
Following Budget announcement in 2005-06, IIFCL was set up in January 2006 IIFCL is a Special Purpose Vehicle to provide long term finance to eligible infrastructure projects Registered as a Wholly Owned Government of India Company under Companies Act 1956
Objectives
IIFCL shall finance only commercially viable projects implemented by: A Public sector company A Private sector company selected under PPP initiative or Private sector company ( only through refinance mode) Overriding priority to PPP projects implemented by private sector companies selected through competitive bidding process
Financing by IIFCL
Financing modes Long term debt Refinance to banks and FIs for loans with tenor exceeding 10 years, granted by them
IIFCL will rely upon credit appraisal of the lead bank and will not normally carry out any independent appraisal of the project.
The risk exposure of IIFCL shall be less than that of the lead bank in a project
Total lending by IIFCL to any project company shall not exceed 20% of the total project cost Rate of interest charged by IIFCL shall cover all funding costs including administrative and guarantee fee
Activities: Sectors which IIFCL can finance
IIFCL provides financial assistance to

Roads and bridges, railways, seaports, airports, inland waterways, other transportation projects Power Urban transport, water supply, sewerage, water treatment, solid waste management and other urban infrastructure Gas pipelines Infrastructure projects in Special Economic Zones (SEZs) International Convention Centres & other tourism related infrastructure
Activities: Resource Mobilisation
Fund Raising Initiatives

Multilateral / bilateral sources World Bank Asian Development Bank KfW, Germany JBIC
External Commercial Borrowings

Domestic markets
All borrowings of IIFCL have backing of Sovereign guarantee However, IIFCL does not enjoy any special dispensation in mobilization of resources
Sector-wise Financial Assistance by IIFCL (Rs crore)

Sector
Road
Port Power Airport Urban infrastructure Total
No of Projects 55
5 23 2 1 86
Project Cost 31712

3772 93241 14716 70 1,43,511
Loan Sanctioned 5723

580 9913 2150 14 18,380
Sector-wise projects which have achieved financial closure No. of Projects

Road Port Airport Power Urban Infrastructure Total
Project Cost Rs crore 24,292 2,756 14,716 65,421 70 1,07,255
Loan Sanctioned Rs crore 4,465 380 2,150 8,078 14 15,087
45 4 2 18 1 70
STATE
No. of Projects
Project Cost Rs crore
Loan Sanctioned by IIFCL Rs crore
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
ANDHRA PRADESH CHHATISHGARH DELHI GUJARAT HARAYANA HIMACHAL PRADESH KARNATAKA
9 2 1 8
4727.00 866.00 8890.00 30290.00 2501.00 999.00 6307.00
862.00 165.00 1000.00 3539.00 495.00 183.00 842.00
2
2 5
KERALA
MADHYA PRADESH MAHARASHTRA ORISSA PONDICHERRY PUNJAB RAJASTHAN SIKKIM TAMIL NADU UTTAR PRADESH UTTARAKHAND WEST BENGAL
1
8 11 1 2 2 1 2 14 9 3 3
565.00
2374.00 16477.00 1350.00 734.00 883.00 5000.00 8900.00 8039.00 9994.00 2681.00 10568.00
100.00
1195.00 2657.00 250.00 113.00 140.00 500.00 940.00 1475.00 1770.00 514.00 1640.00
Grand Total
86
143511.00
18380.00
Strategic Partnerships
IIFCL has entered into strategic partnerships with 3i Group PLC, one of world leaders in private equity & venture capital & Macquarie Bank Ltd, Australia
MoU
arrangements with 27 banks/ financial institutions for deal flows, syndication & other financial services
Off-shore Subsidiary
Union Budget 2007-08 has set up wholly owned subsidiary of IIFCL which will
Borrow foreign currency funds from Reserve Bank of India and

Lend to Indian companies implementing infrastructure projects or co-finance their ECBs solely for their capital expenditure outside India
IIFC (UK) Ltd has been set up at London

To supplement role of IIFCL in financing infrastructure
IIFCLs experience in financing PPP

Delays in land acquisition Difficulties in provision of State Support Agreement Lack of machinery and skill sets Lack of risk capital Limited number of sponsors Inadequate skills for appraisal of infrastructure projects among banks
Infrastructure development finance corporation
Urban Infrastructure Finance:
New Financing Initiatives & Problems Relating To Old Methods
Presentation Structure
Old methods of financing urban infrastructure projects Common issues in infrastructure financing
New methods
Challenges
Way forward
Old Methods
Of financing urban infrastructure projects
Traditional Financing Methods

By
the Government By the Local Authority By the Utility/ Agency

through budgetary allocation through own resources through loans taken by the State/ LA/ Agency
Characteristics of Old methods

Generally
based on state/ sovereign guarantees Not on a Project Recourse basis, with demonstrated project viability Generally short/ medium tenure
Some concerns with old methods

Improper project selection, on grounds other than inherent sustainability Creation of large capital assets, but with poor operations, maintenance, management
AND - State/ agencies running out of financial resources and guarantee capacity
However...
In
urban infrastructure, the old method still largely continues to be the current practice for raising finances
Infrastructure Investment
As per the India Infrastructure Report, estimated infrastructure investment up to the 11th 5 year plan ending 2011 estimated is about $575 billion. The estimated actual investment is of the order of 30%, all said Adding the backlog of investment, the requirement for further investment in infrastructure is therefore gargantuan
This represents both an opportunity and a challenge
Changing Mindsets
About half of the investment requirement for infrastructure can be raised by the Government/ Agencies
The balance funds have to be raised from private sources
There is rapidly growing awareness at all levels that a partnership has to be forged with the private sector developers and/or investors
Common Issues
In infrastructure financing
Common Issues In Infra Financing 1

Possible
higher cost of services
User willingness-to-pay Or Willingness to Charge? Cost
of Service should consider inefficiencies in existing players

ULBs, Water Boards, etc
Cross
subsidy (existing and possible) to be taken into account

Need
for proper demand estimation
E.g., Water or Energy Demand

Consideration of Competition for services E.g: Alternate sources, cheaper power
Stable
and clear Government Policy regime:

Lack of clarity effects development and investments

Need
for proper Regulatory Structures, generally on a common basis across the country:
Urban Services (including water), Transport projects (roads, airports, pipelines), have no regulatory frameworks in place
Mantras & Magic Bullets

No
Mantras and Magic Bullets!
While there are many essential precepts to establishing and improving urban infrastructure services, the need of the day is a coherent and concerted attempt by all stakeholders working in a partnership
Some Key Precepts

Reform
(of methods and practices)
Accounting Procurement Technical and process control

These are important and vital conditions, but not sufficient in themselves to address the problems on hand
Some Key Precepts

Privatization
of services
Private sector brings in certain efficiencies, skills and investments

But in Urban Infrastructure, it is more essential to forge a strong partnership between the skills, efficiencies and risk appetites of the Government agencies and the Private Sector
Some Key Precepts

User
Pay
User charges have to be kept in line with the cost of providing services
But in Urban Infrastructure there are social issues, willingness-to-charge issues, and questions of affordability for essential services. A clear balance has to be struck between user charges, subsidies, and risk allocation between the Government and the Private Sector
New Methods
Of financing urban infrastructure projects
Project Recourse Financing
Various attempts are being made to convert Urban Services (water, waste-water, Solid waste, etc) into Bankable projects
This is likely to open a new area for investments And a new breed of Operating companies to provide these services But projects have to be systematically identified, structured and developed
Infrastructure Funds
Set
up by a collaboration of government agencies, Financial Institutions (and in some cases, Developers)

Dedicated funds Debt and/or equity Diversified set of infrastructure projects
Private Financing of Public Infrastructure (PFPI)
In this format, the State purchases Services rather than assets

For instance, purchases pre-determined hospital services for the public, on a determinate payment plan for a fixed (long) period Rather than paying up-front for a hospital construction
Would be a fresh approach to involve private sector participation in India, especially in new areas
New Financial Instruments

To
address the typical asset-liability mismatch of long-gestation infrastructure projects To facilitate participation of banks and other commercial institutions which cannot lend long-term money
IDFCs take-out structures are a step in this direction
Pool Finance Structures

Financial Institutions/ Investors
Credit Enhancing Structures (Guarantees, DSRA)
Pool Fund
Set of projects, with diversified risk-return profiles
The Way Forward:
Convergence
Clear Policy/ Legislative Framework

Many
projects are stalled because the policy and legislative framework has not been properly thought-through and/or put in place
This includes the procurement strategy And acceptable risk allocation frameworks
Project Development
State and its agencies have to deploy adequate resources to properly develop a bankable shelf of projects
Else difficult to attract private sector interest Leap into the dark process
State and private sector need to think seriously about setting aside adequate, dedicated project development funds
Equity Funds
Need
for adequate equity investments
Strategic investors in infra projects may not be in a position to raise a substantive portion of the equity
GoI
nominating IDFC as a Nodal Agency for an Infrastructure Equity Fund with participation of other financial institutions is a step in this direction
State and Local Initiatives

More
and more State Governments and even Local Bodies are commencing Public-Private-Partnership initiatives
IDFCs own experience with iDECK (Karnataka), Uttaranchal, TN, Kerala, and many other States reflects the imperative need felt by the States to fast forward infrastructure development at a local level
Suggested Approach
To
fix the leaking buckets
Before opting for large capex projects

Develop
replicable frameworks
Identify GDP drivers From successful pilot projects

Have
a City Focus/ Strategy
Instead of spreading too thin
Last, but not ...

Sustained
will on the part of all stakeholders (including political and social commitment) to implement projects as soon as possible, and put the country on a fast-track development path!
Infrastructure Financing and Commercial Banks
State Bank of India Project Finance-SBU
Infrastructure Financing and Commercial Banks

Infrastructure Development is certain to turn into a growth Driver for future Development. With the concept of universal Banking taking roots in the system and relaxations permitted by RBI from time to time, Commercial Banks have shown enthusiasm in participating in this specialised field of financing. SBI has established a Project Finance Strategic Business Unit. Specialised domain knowledge in power, roads, ports, telecom etc is available.
State Bank of India Project Finance- SBU
Infrastructure Financing and Commercial Banks- contd

There is a large potential for commercial banks to further develop this area of business. Commercial Banks face two major issues in participating in infrastructure projects: a) Assets Liability Mismatch. b) Exposure to market risk.
Asset Liability Mismatch

Banks usually carry short term liabilities. The infrastructure loans are long term in nature, usually 10-12 years. The present financing structure is usually 70% debt and 30% equity, the debt coming from FIs and Banks. To address Asset Liability Mismatch related issues, the worldwide practice is to have bond financing either at initial stage or more often project finance being taken out by bond financing after commercial operation. Advantages of bond financing: - rating required, better disclosure. - closer monitoring, better discipline in reserves maintenance. - better discipline required by project company because cost overrun, delays etc would lead to problems. - Exit option available to the Banks/FIs.
Exposure to Market Risk

Market Risk arises from: (a) Tariff fixation (b) Payment security mechanism (c ) Offtake Risk (d) Toll Fixation (e) Lack of market intelligence Banks have an expertise and appetite for appraising and taking on credit risk. The market risk associated with Infrastructure would need to be addressed.
Exposure to Market Risk- contd

A mechanism needs to be put in place to facilitate banks in mitigating market risk. Power Sector: 1. Payment mechanism. 2. Fallback mechanism. 3. Dispute settlement mechanism. Road Sector: 1. Toll alone may not be adequate to make projects viable. 2. International practice of providing additional revenues from support structures such as real estate, restaurants, shopping, township etc.
Exposure to Market Risk- contd

Hydrocarbon Sector: 1. Level playing field for all players. 2. Independent Regulatory body. Telecom Sector: 1. Level playing field for all players. 2. Issues relating to Inter-Connect Usage charges (IUC). Other Sectors: 1. Revenue shortfall support mechanisms.
Suggestions
Establishing of Project Working Group: Projects often face problems which need to be resolved quickly. A working group of high level functionaries required for each sector to resolve problems in a timely manner. In some ways akin to the erstwhile working group for project exports. Hedge Funds: Hedge Funds may be considered for providing credit enhancement to the Lenders. Projects may contribute to the corpus to assist the future green field projects.
Suggestions- contd
Rating of Projects: All large projects, say exceeding Rs.1000 cr may be rated by external agencies. This would facilitate raising resources from market. Single Window Mechanisms for approvals: All mandatory approvals may be given on a single window basis which would facilitate expeditious commencement of project implementation. Banks may be permitted to provide bridge financing against budgetary support.
Infrastructure FinancingAn Introduction
R.Rengarajan, Consultant Trainer
Agenda
Meaning of infrastructure
Principles for reforms Recommendations of Rakesh Mohan Committee for Financial Sectors
Issues in Infrastructure
Privatisation Unbundling Project appraisal, financing and implementation
4/15/2012 R.Rengarajan, Consultant Trainer D.C.Pai 57
Meaning of Infrastructure
4/15/2012
58
Infrastructure
Umbrella term for social overhead capital.It is a physical framework of facilities through which goods and services are provided to the public. It includes:
Public utilities Public works Transport
4/15/2012
59
Infrastructure
Natural monopoly Public goods characteristics which make revenue collection difficult. Spillovers / externalities both negative and +ve
4/15/2012
60
Principles of private participation in infrastructure financing

Allocation of risks Manage infrastructure like a business and not a bureaucracy Introduce competition Give users and other stakeholders a strong voice and responsibilities Public private partnerships in financing Government will continue to have some role in infrastructure
4/15/2012
61
Recommendations of Rakesh Mohan Committee for Financial Sectors

Rebate in Income tax like then 80CC Introduction of competition in insurance sector Splitting up of EPF Floating of new pension and provident fund Fiscal incentives for contribution to pension funds Introduction of forward and futures Creation of IFDC as the apex authority
4/15/2012
62
Recommendations for Financial Sectors

Debt Market Reforms Creation of bench mark and yield curve Widening and deepening of Debt Markets Regulatory Reforms Setting up of Primary Dealers Reintroduction of Repo Tax free bonds by private sector infrastructure companies Development of Municipal bond market
4/15/2012 R.Rengarajan, Consultant Trainer 63
Aspects of infrastructure financing

Large capital costs withsub stantial sunk cost Upfront commitment of cost before project becoming operational Long gestation period with slowrevenue streams High cost of entry and exit
4/15/2012
64
Aspects-contd.
Services produced are non tradable-no imports for excess demand and no exports for excess supply Vulnerable to Regulatory and policy changes Politically sensitive tariffs Investments are open to certain risks
Aspects-Contd.
Projects are not homogenous, neither are solutions-characteristics differ between sectors and within sectors between different phases of project Finance has to be disaggregated-by origin(foreign or domestic),by sector(public, private, joint)
4/15/2012
66
Aspects-Contd.
By techniques and instruments of finance and by types of finance(new investment,maintenance and working capital)
4/15/2012
67
Traditional Financing of Infrastructure

Tax revenues and Govt. Borrowing Govt.bore the investment risk Finance from bilateral/multilateral countries Govt. funding due to natural monopoly features of many of these facilities Public good characteristic which make revenue collection difficult
4/15/2012
68
Contd.
Large investments and long gestation periods would be disincentive to private initiative Capacity of Govts.to preempt resources at low cost in view of their credibility
4/15/2012
69
Deficiencies of Traditional method

Lack of accountability Poor Management Cost over runs Neglect of operation and maintenance Backlog of unmet demands Macro economic constraints on Govt.like BOP problems and widening fiscal deficit
R.Rengarajan, Consultant Trainer 70
4/15/2012
Contd.
Vulnerability to cuts in Govt.Budget Inadequate cost recovery due to politically sensitive tariff structure These issues called for an altogether new approach to Infrastructure Financing with a focus on Private Participation facilitated by technical/financial innovation.
4/15/2012
71
Issues in Infrastructure
4/15/2012
72
Issues
Privatisation Unbundling Project appraisal, financing and implementation
4/15/2012
73
Issues - Privatisation
Efficiency Resources
4/15/2012
74
Issues - Unbundling
Natural monopoly Vertical unbundling Horizontal unbundling Unbundling of assets Unbundling of services Unbundling of areas Regulation Judiciary
4/15/2012
Unbundling-monopoly-public goods
Contract based BOO BOT BOLT
Licence
Revenue sharing highest bidder competition Regulation
4/15/2012
76
Contract based- Unbundlingmonopoly-public goods

BOO-Build Own Operate -Cellular phones and IPP BOT-Build Operate Transfer : Concessionaire build and operate for certain time to recover his cost and transfer assets to the government - Roads, Enron power BOLT-Built Operate Lease and Transfer- Railways
4/15/2012
77
Issues - Project appraisal Project financing V/s Infrastructure financing

Different from balance sheet financing Future cash and not assets are collateral Creation of SPV Non / limited recourse financing
4/15/2012
78
Risks in Infrastructure financing

Cash flow
Revenue from sales
Less variable cost Less fixed cost
Earning Before Interest and Tax (EBIT) + Depreciation (EBIDT)

Less Interest Less Tax
Net Income (EAT)

Risks in Infrastructure financing
Operational risks
Pre operation Post operation
Market risks
Interest rate risk Foreign exchange risk Price risk and inflation
Credit risks
Guarantees Counter guarantees Escrow mechanism R.Rengarajan, Consultant Trainer
4/15/2012
80
Management of Risks in Infrastructure financing

Sell out risks by way of contracts, guarantees, ownership and escrow. Ownership by stakeholders Contracts , guarantees and counter guarantees by the undertakings, State government and Central Government Escrowing revenue of the undertaking and tax collection

Ownership by stakeholders Contracts , guarantees and counter guarantees by the undertakings, state government and Central Government Escrowing revenue of the undertaking and tax collection

Contract is king

4/15/2012
Concession EPC Equipment Purchase Supply Operation and Maintenance Guarantees


Insurance Financing
Project finance Completion guarantee Equity Subscription Direct agreement Inter credit agreement Subordination agreement
Financing of projects
Creation of SPV Concession Investment by stakeholders Financing by Consortium of banks / FI Tax concession
4/15/2012
85
Financing of projects
Investment by CONCESSIONS FROM GOVERNMENT SPV Government body or department Sponsor Project supplier
public, others
Financing by
Sponsors, Banks, FIs, Mutual fund , Pension fund, insurance .public

Financing of projects by intermediaries

ALM issues Refinancing
IDFC Securitisation
4/15/2012
87
PROJECT FINANCEAn overview
What is Project Financing ?

A funding structure, that relies on future cash flow from a specific development as the primary source of repayment with that developments assets,rights,and interests legally held as collateral security. It is an option granted by the financier exercisable when the entity demonstrates that it can generate cash flows in accordance with the long term cash flow forecasts.
Contd.
It involves Financing of an economically separable capital investment project The providers of funds look primarily to the cash flow from the project as the source of funds to service their loans Provide the return of and return on their equity invested The terms of debt & equity securities are tailored to the cash flow characteristics of the project.
Project Finance-Basic Elements

Lenders
Loan Funds Raw Materials Debt repayments
Purchase Contracts
Suppliers
Supply contracts
Assets comprising the project
Purchasers
output
Equity Funds
Return to Investors
Cash deficiency agreement/ other credit support
Equity Investors
4/15/2012
Investors/ Sponsors
91
Basic Features
An agreement by financially responsible parties to complete the project and make available all funds necessary to achieve completion An agreement (in the form of purchase contract of out put) that on project completion & commencement of operation the project will have available sufficient cash to meet all its operating expenses and debt service requirements, even if the project fails to perform for any reasons
Contd.
An assurance that, in the event of disruption in operations and additional funds are required for restoring it, necessary funds will be made available through insurance recoveries, advances against future deliveries or through some other means It is different from conventional direct financing on a firms general credit. In project financing, the project assets, project related contracts & project cash flow are segregated to a great degree from the sponsoring entity
Contd.
Project financing is not a means of raising funds to finance a project that is so weak economically, that it may not be able to service the debt or provide an acceptable rate of return to equity investors. Project financing requires careful financial engineering to allocate the risks and rewards among involved parties in a manner that is mutually acceptable. The key to successful project financing is structuring the financing part with as little recourse as possible to the sponsor while at the same time providing sufficient credit support through guarantees or undertakings of sponsor so that lenders will be satisfied with credit risk.
Requirements of Project Financing

A project has no operating history at the time of initial debt financing Its credit worthiness depends on the indirect credit support provided by third parties through contractual arrangements Lenders require assurance that once the project is set up and operations begin it will constitute an economically viable undertaking.This calls for a detailed project analysis
Facets of project Analysis

Market analysis What would be the aggregate demand of the proposed product/service in future ? What would be the market share of the project under consideration? Technical analysis Whether the pre-requisites for successful commissioning of the project have been considered? Whether reasonably good choices have been made in regard to location,size, process etc.
4/15/2012
96
Project Analysis- contd.

Financial Analysis
whether the project will be financially viable to meet the debt service burden and the return expectation of providers of capital.It involves:
Investment outlay and cost of project, Means of Financing, Cost of Capital Projected profitability, Break-even point, Cash flow of the project, Investment worth while ness judged in terms of various criteria of merit, Projected financial position, Level of risk.
4/15/2012
97

Economic Analysis Focus on social cost and benefits of project which may be different from its monetary costs and benefits. It involves finding out;
What are the direct economic benefits and costs of the project measured in terms of shadow(efficiency) prices and not in terms of market prices? What would be the impact of the project on the distribution of income in the society? What would be the impact of the project on the level of savings and investment in the society? What would be the contribution of the project towards fulfillment of certain merit wants like self sufficiency,employment etc?
4/15/2012
98

Ecological Analysis What would be the likely damage the project may cause to the environment? What is the cost of the restoration measures required to ensure that the damage to the environment is contained within acceptable limits?
4/15/2012
99
Feasibility study-A schematic Diagram

Generation of Ideas Initial screening Is the idea promising yes Plan Feasibility study Conduct market Analysis
No
Terminate
Conduct Tech. Analysis
Conduct Fin. Analysis Conduct Econ./Ecological Analysis Is the proj. worth while ? yes Prepare Funding Proposal Terminate No
4/15/2012
100
What is a viable project financing? The project must be backed by strong credit backing, Financial viability must be provable Supply contract for product and/or energy must be ensured at a cost consistent with fin. Projections Market for the product or service must be assured at a price consistent with fin. Projections Transportation of product into or out of project must be assured at a cost consistent with projections
Contd.
Expertise of contractor to construct the project facility must be established Financial capability and technical expertise must be available to cover cost over runs Reliability of the process and equipment to be used must be well established The sponsor or the beneficiary of the sponsorship must have available expertise to operate such a facility. Dependence on outside expertise should be discouraged
Contd.
In addition to operating expertise , management personnel must be available, otherwise the project is a suspect. Properties and facilities being financed must have value as collateral Political environment for location of project and type of project must be reasonably friendly and stable
4/15/2012
103
Contd.
The sponsor must make equity contribution consistent with its capability, interest in project and risk in the project An adequate insurance programme must be available both during construction and operation Any required Govt. approvals must be available
4/15/2012
104
Causes for Project Failures

Delays in completion with consequent delay in the contemplated revenue flow, Capital cost over run Technical failure Financial failure of contractor Govt. interference Uninsured casualty losses Increased price or shortage of raw materials Technical obsolescence of the plant Loss of competitive position in market place Expropriation Poor management The 4/15/2012 above risks must be properly addressed and avoided R.Rengarajan, Consultant Trainer
105

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FINANCING INFRASTRUCTURE ROLE OF IIFCL

India Growth Story continues

Indian economy has shifted to high growth trajectory

Right policy mix can help sustain the growth momentum

Infrastructure deficit is looming

PPP model is being encouraged

Constraints in promotion of PPP

Slew of measures by Government

India Infrastructure Finance Co Ltd

Activities: Sectors which IIFCL can finance

IIFCL provides financial assistance to

Activities: Resource Mobilisation

Fund Raising Initiatives

External Commercial Borrowings

Sector-wise Financial Assistance by IIFCL (Rs crore)

Project Cost 31712

Loan Sanctioned 5723

Sector-wise projects which have achieved financial closure No. of Projects

Project Cost Rs crore 24,292 2,756 14,716 65,421 70 1,07,255

Loan Sanctioned Rs crore 4,465 380 2,150 8,078 14 15,087

Project Cost Rs crore

Loan Sanctioned by IIFCL Rs crore

ANDHRA PRADESH CHHATISHGARH DELHI GUJARAT HARAYANA HIMACHAL PRADESH KARNATAKA

4727.00 866.00 8890.00 30290.00 2501.00 999.00 6307.00

862.00 165.00 1000.00 3539.00 495.00 183.00 842.00

Borrow foreign currency funds from Reserve Bank of India and

IIFC (UK) Ltd has been set up at London

IIFCLs experience in financing PPP

Infrastructure development finance corporation

Urban Infrastructure Finance:

New Financing Initiatives & Problems Relating To Old Methods

Of financing urban infrastructure projects

Traditional Financing Methods

the Government By the Local Authority By the Utility/ Agency

Characteristics of Old methods

Some concerns with old methods

This represents both an opportunity and a challenge

Common Issues In Infra Financing 1

higher cost of services

User willingness-to-pay Or Willingness to Charge? Cost

of Service should consider inefficiencies in existing players

subsidy (existing and possible) to be taken into account

Common Issues In Infra Financing 2

for proper demand estimation

E.g., Water or Energy Demand

and clear Government Policy regime:

Common Issues In Infra Financing 3

Mantras & Magic Bullets

Mantras and Magic Bullets!

Some Key Precepts

(of methods and practices)

Accounting Procurement Technical and process control

Some Key Precepts

Private sector brings in certain efficiencies, skills and investments

Some Key Precepts

Of financing urban infrastructure projects

Project Recourse Financing

up by a collaboration of government agencies, Financial Institutions (and in some cases, Developers)

Private Financing of Public Infrastructure (PFPI)

In this format, the State purchases Services rather than assets

New Financial Instruments

Pool Finance Structures

Credit Enhancing Structures (Guarantees, DSRA)