Government has engaged directly with institutional investors, banks, credit rating agencies and the European Investment Bank (EIB) to assess the range of alternative financing options available to support infrastructure delivery and the credit requirements and project characteristics required to meet investor requirements.
PF2 will be structured in such a way that it:
• facilitates access to the capital markets, capitalising on the appetite of institutional investors and of other sources of long-term debt finance. Capital markets, whether public or private, have a deep pool of investors who are attracted to the relatively low risk infrastructure asset class;
• provides deleveraged capital structures, facilitated by public sector co-investment, combined with better risk allocation and the removal of certain operational risks which are expected to facilitate access to institutional investor capital; and
• continues to encourage alternative financing sources including loan, guarantee and credit support products provided by commercial banks, the EIB and other financial institutions.
To achieve this, the tender process will require bidders to develop a long-term financing solution where bank debt does not provide the majority of the financing requirement. Institutional investment will, therefore, become an important source of finance for PF2.