outline · • ijara, leasing (equipment, plant, machinery) • istisna‘a, construction finance...
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Islamic Development Bank 1
IDB and Infrastructure Department
Financing Instruments
Public-Private Partnership Criteria of Infrastructure Financing
through PPP Due Diligence and Enabling Environment,
Risk Management in Infrastructure Financing: Process, Supervision, and Project Risks Snapshot
Potential Collaboration on Infrastructure Projects in Indonesia
Outline
Islamic Development Bank 2
ABOUTIDB
Est.1975AuthorizedCapt.of$150B&SubscribedCapt.of$75B
1,128 staff distributed across entities & regional/Gateways offices
A Unique Model of South-South Cooperation
Membership 56 Countries Spreading over 4 Continents
4 Regional offices
AFRICA 27
LATIN AMERICA
1ASIA 26
EUROPE 2
AAA rating by all three rating agencies
Rabat, Morroco(1993)
Dakar, Senegal(2006)
Kuala Lumpur, Malaysia ( 1993)
Almaty, Kazakhstan ( 1997)
5 new Country Gateway offices starting with Indonesia & Turkey
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ABOUTIDB
Endofyear1435H(2014‐2015)
– BalancesheetsizewasID14.79billion(approx.USD20.72billion)
– EquitywasID7.44billion(approx.USD10.42billion)
– NetIncomewasID141.70million(approx.USD198.38million)
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Total Operations : 1,130
Active Operations : 230
Department Staff : 47
Total Financing : US$ 30 bn
Active Projects : US$ 15 bn
Infrastructure Department
Infrastructure Scorecard
WalidAbdelwahab
Director,Infrastructure
IrfanBukhari
DivisionManager,
Public‐PrivatePartnerships
MohammedAlsayed
DivisionManager,
Energy&ICT
WalidA.Fagih
DivisionManager,
Transport
NizarZaied
AcWngDivisionManager,
UrbanDevelopment&Services
OrganizaLonalStructure
SovereignGuaranteedOperaLonsNon‐SovereignOperaLons
Mandate The Infrastructure Department is Responsible for Developing and Implementing the Bank's Strategy in the Infrastructure Sector and PPP Projects Related to Energy, Transport, Urban Development and ICT
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IDB’SPPPINVESTMENTOPERATION
• MorethanUSD3.3Billionapprovedsofar
• Atotalof48projects,including13linesoffinance• CurrentcommitmentismorethanUSD2.82Billion*
*IncludingprojectsthatarecurrentlyunderdocumentaWonprocess
16%
48%
29%
6%
Energy
Industrial
Materials
UWliWes
LOF
9%8%
59%
2%
14%9%
Materials
UAE Mauritania SaudiArabia Iran Morocco Tunisia
9%
43%
7%
30%
9% 1%
UWliWes
Bangladesh Pakistan Jordan Qatar Morocco Senegal
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ISLAMIC FINANCING INSTRUMENTS FOR INFRASTRUCTURE PROJECTS
Islamic Debt Finance: • Ijara, Leasing (equipment, plant, machinery) • Istisna‘a, Construction finance (civil works) • Installment Sale About 55% of IDB debt financing is through Istisna'a, 30% through I.S and 15% through Leasing
Sukuk (Islamic bonds): • Sovereign Sukuk (by Governments, MDB’s for general budget use) • Corporate Sukuk (by corporates using their balance sheets) • Project Sukuk (by project companies, SPV, to finance specific projects) IDB issued its first local currency Sukuk (Ringitt) to finance toll road in Malaysia.
Equity Finance: • Direct equity participation (Musharaka, profit sharing) • Infrastructure Equity Funds
o Global, e.g., IDB Infrastructure Funds I and II o Regional, e.g., IDB-ADB Islamic Infrastructure Fund
IDB sponsors and invests in infrastructure funds managed by external Fund Managers.
PPP
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Public‐PrivatePartnership(PPP)
A long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant r isk and management respons ib i l i ty, and remuneration is linked to performance
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BenefitsofPPP
• Improve public sector capacity in terms of developing integrated efficient solutions for the society;
• Introduce creativeness and innovation to infrastructure projects;
• Introduce both time and cost savings in project implementation;
• Create equitable risk sharing between the public sector and the private sector;
• Bring in large and highly experienced bidders to the projects;
• Create transfer of skills, experience and technology to the public sector.
8
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IDB’SINFRASTRUCTUREFINANCINGCRITERIA‐PPP
Limited/non-recourse long term finance in infrastructure projects
Risk due diligence is in line with the global Project Finance industry practice
IDB takes senior and pari passu role
Financing in compliance with Sharia’ based principles
Financing is generally extended in USD or Euro and for long term with maximum tenor 18 years
Untied financing to projects in all IDB member countries
Sponsors can be from either member or non-member countries
Co-finance with other Islamic and/or conventional lenders
IDB participation is maximum 25% of the project cost
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DUEDILIGENCEFOCUS
• IDB’sRiskAssessmentTool–TheRiskMatrix
• Sponsors
• Governance(Standards)
• ProjectcompleWon(Sponsor,EPC,EHS,Financeetc.)
• Structureoftheprojectcontracts
• Demand&SupplyDynamics
• Environment,Health,andSocialAspects
• Financialviability
• Country®ulatoryregime
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CapacityinthePublicSector:– Clearrules/precedenceforInfrastructureconcessions;– Abilitytoselectbankableprojects;– Wellpreparedprojectswithcredible&adequatedata;
– TransparentandcompeWWveprocurementprocess;and
– Oversightregimeandprocedure.
LegalandRegulatoryFramework:
– Rightsoftheinvestorsandlenders;– SectorPolicies;– Fiscalandforexregime;and
– IslamicFinance.
WhatWeLookFor(ENABLINGENVIRONMENT)
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RISKSININFRASTRUCTUREFINANCING:EQUITABLERISKALLOCATION
ProjectRisk– ConstrucWon– OperaWons– Financial‐Market
– Technological– ForceMajeure
Country– Regulatory,PoliWcal– MacroEconomics
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ProjectRisks
RiskMiLgaLonTools
SovereignGuaranteedProject
Non‐SovereignGuaranteedProject
SovereignStructure PPPStructure
Country:a. WarandCivilCommoWonb. TransferandConverWbility
GovernmentGuarantee • ImplementaLonAgreement• ConcessionAgreement
Legal:a. EnforcementofJudgmentsb. CourtProcedures
GovernmentGuarantee • ImplementaLonAgreement• ConcessionAgreement
ConstrucLon:a. EPC/othercontractsb. SiteCondiWons
GovernmentGuarantee• EPCBonds&Guarantees
• SponsorGuarantees• EPCContract
OperaLon:a. OperaWonsb. Inputs(uWliWes)c. EconomicEnvironment
GovernmentGuarantee • O&MContract• O&MBonds
Financial:a. RepaymentCapacityb. MarketRisk
GovernmentGuarantee
• Assignmentoverprojectcash‐flows• ImplementaLonAgreement
• ConcessionAgreement• Off‐takeAgreement
Risk Rigor: A Comparison Sovereign vs. Non-Sovereign
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MulWsourceFinancing
MarketDemandPriceRisk
Interestrate&forexrisk
InfrastructureProject
Sponsors–PrivateRiskCapital Government‐Concession
Stakeholders
HumanResourcesUWliWes
Supply/InputsLogisWcs
EPCContractPoliWcalRiskInsurance
Regulatory&fiscalregimeEnablingenvironment
UnderlyingRisksinInfrastructureFinance
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Intra‐Departmental
Review
Inter‐Departmental
Review
ManagementReview
BoardofExecuWveDirectors(BED)
APPROVAL ExecuWon
IdenWficaWon IniWalReview Structuring&DetailedAssessment Approval ImplementaWon Monitoring&
Supervision
ProjectConceptDocument(PCD)
ProjectRiskAssessment&
RecommendaWons
• Review of feasibility study and available project docs
• Appointment of consultants
• Coordination with lenders
• Initial Concept Clearance
• Approval from Credit Committees and Board of Executive Directors (BED)
• Due Diligence: Technical, Legal, Environmental, Social, Financial, Insurance
• Site Visit • Meetings with stakeholders
• Credit Assessment
• Negotiations of Project Docs & Terms and Conditions
ProjectStage
Deliverable
Comments
ProjectProcessing/
CreditCommikees
Project
PROCESS: Typical Project Lifecycle
DeskReviewbyacross‐funcWonal
team
Results
Analysis
• Member Country Partnership Strategy (MCPS)
• Receipt of Request
• Country Programming and inclusion in the yearly work program
• Subsequent to BED’s approval Financing Agreements are finalized.
• Signing • Satisfaction of conditions precedent to disbursement
• Disbursement
• Regular monitoring by Project Officer through KPIs specified in the Results Analysis
• Impact Analysis carried out by ‘Group Operations Evaluation Department’ after project completion
FinancialClose&Disbursements
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MulWsourceFinancing
ProjectCompany
CommonSecurityPool
(IDB)IslamicFacility ConvenLonalFacility
1.CommonTermsAgreement2.SharedSecurityAgreement
IDBOwnedAsset
IntheeventofaliquidaWonthe
commonsecuritypoolissharedbyalllendersonapari
passubasisLease
LeasedAssetsAddedtothePoolbytheICA
CommonSecurityPool SharingofProceeds:PariPassu
SECURITYRISK:PARIPASSUWITHOTHERLENDERS
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SUPERVISION: RISK MANAGEMENT
ThePormoliohasbeencarefullystructuredtominimizeinherentrisk
AllProjectsareratedandmonitoredonaregularbasis
Projectsinthetop5exposurecountries(comprisingabout70%ofthePormolio),collecWvelyhaveaninvestmentgraderaWng
AnEarlyWarningSystem(EWS)Frameworkhasbeendevelopedwhichentailsanalysisof:
FinancialPerformance
OperaWonalissues Insurancemakers
RegulatoryCompliance ThirdPartyConsultantTechnicalAssistance
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KEY PROJECT RISKS
KeyfocushasbeenonIPP/generaWonprojects
Thermal,run‐of‐riverhydro,windpower
Minimumoff‐take&backtobackfeedstocksupply
FXriskmiWgaWon Feedstocksupply,hydro/wind
resourcerisk
TariffcompeWveness
Governmentsupport
Landandreseklement
CounterparWes18
Regulatory and legal aspects Concession, scope and local
regulation Counterparty dependencies and
risks Conflict of interest: Project
company vs. EPCC EHS, mitigation, resettlement Existing baseline number and
cashflow vs. greenfield Quality of traffic survey, WTP Traffic forecast, tariff rate &
escalation ability, ramp up Substitution risk Soil tests and detailed design Exchange rate and inflation Financial model
POWER SECTOR TRANSPORT SECTOR
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IDBPPPPOWERPROJECTS
19
Country Project MainSponsors IDBCommitment(equivalentUSDMillion)
Qatar RasLafanC(IWPP)
QatarPetroleum,QEWC,Mitsui&SuezEnergy
150
Jordan Qatrana KEPCOXenel
80
Pakistan PatrindHydro K‐Water,Daewoo 60
Pakistan NewBongEscapeHydro HubPowerCo. 37
Pakistan UchIIPower IP/GDFSuez 90
Pakistan FoundaWonWind FaujiFoundaWon 140*
Bangladesh SummitBibiyanaIIPower
SummitGroup 60
Uzbekistan Khauzak‐ShadyUzbekistan
LukOil 95
Senegal St.LouisRuralElectrificaWon
ONE 8.7
*including70milliontrancheguaranteedbyADB
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IDBPPPTRANSPORTPROJECTS
Country Project MainSponsors IDBCommitment(equivUSDMln)
Jordan QueenAaliaAirport J&PAvax,AbuDhabiInvestmentCo.,NoorFinancials,others
100
Malaysia KL‐SelangorExpressway BinaPuri,AreanIramaBhd 100
Malaysia SKVExpressway Dato’RahmatAbuBakar 90
DjibouL DoralehContainerTerminal PortAutonome,DPWorld 65
KSA HajjTerminal,Jeddah SaudiBinladinGroup 100
Senegal AeroportInternaWonalBlaiseDiagne SenegaleseGovernment 91
Asia TinWn(codename)(equityinapormoliooffourtollroadassets)
n/a PEFund:50Indir.IDB:28
20
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PotenLalCollaboraLononInfrastructureProjectsinIndonesia
• IPPsProjectstosupport35,000MWelectricityprograminIndonesia
• SeaportandAirport(TransportInfrastructure)underConcessionAgreement
• TollRoadProjectConcessions• WaterandUrbanDevelopmentProject
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