Urban areas are faced with multiple challenges of providing a sustainable Development infrastructure that meets the needs of a rising urban population, with limited public resources. Project Finance and long-term investments in urban infrastructure must be urgently leveraged to achieve sustainable economic growth within the carrying capacity of the planet’s systems and resources.

In recent decades, European and international discussions have given rise to new concepts of project finance for urban developments require significant sources of long-term financial resources, such as investment loans. These tools are being actively developed by the joint efforts of representatives of the public, private and municipal sectors. These capital-intensive investment projects focus on the construction of sustainable urban infrastructure that will improve the quality of the living environment and address the complex set of economic, social, environmental, demographic and other challenges.

Havelet Finance Limited offers long-term financing and bank lending for sustainable urban infrastructure development projects in all countries of the world. Contact us

Inventive Mechanisms for Financing urban infrastructure

Urban environments usually include financial engineering tools, which are most often implemented in the form of project finance and public-private partnerships. Both forms are especially relevant for European cities, given their many advantages over grant funding and the benefits from their implementation.

Other recognized international standard for funding an urban development is public-private partnership. It remain the leading tool for financing investments in the construction of public infrastructure facilities and the provision of related services in the absence of the necessary resources in the state and municipal budgets. Environmental protection as an integral part of public policy at the local, national and international level requires close cooperation between the public and private sectors to create sustainable assets in cities and municipalities.

Project Finance for Urban infrastructure Projects

Project finance is a method of financing an urban infrastructure project, public infrastructure and public service projects in which the source of debt repayment and return on equity involved in the project is the cash flows generated by this project.

This concept can be applied in the process of financing investment projects carried out within the framework of financing the development of municipal infrastructure. A specific feature of project finance is a very high share of loans in the financial structure (up to 90% of the project cost). This requires the establishment of an independent company, referred to as a special purpose vehicle (SPV) or special purpose company (SPC).

Other Entities Involved in project finance for urban Infrastructure projects are listed below:

Operator: The management and maintenance of the project remains obligatory to specialized companies with experience, Upon completion of the project, it will take over the full range of tasks for managing this project, including the current operation of the facility. The operator can be a project sponsor, a specialized municipal company or a contractor.

General contractor: Project finance schemes usually include a single general contractor who, alone or in cooperation with subcontractors, is responsible for launching the project. It should be noted here that the general contractor can simultaneously act as a sponsor of the project.

Lenders: When financing urban infrastructure projects, the lenders are most often local banking institutions that provide financial support directly to the Special Purpose Vehicle. Other Lending institution should also be recognized in the project finance for Urban Infrastructure.

Sponsors: In essence, these are the initiators of the project (private companies, organizations, municipal enterprises or local government) who promote the investment project and receive support from the authorities and the local community or other key organizations. Sponsors also ensure the integration of the activities of all subjects of the project finance, as well as proper control over the implementation of the project.

Municipal authorities: The local government takes responsibility for creating the proper legal conditions for the proper implementation of investments.

Public-private partnership for project finance for Urban Infrastructure

The efficacy of public-private partnership (PPP) tools in financing urban infrastructure tend to be used in the most capital-intensive projects, which would otherwise be a heavy burden on the municipal budget. When it comes to large urban projects, experts identify the following main advantages and potential benefits of PPP

• Participation of a private partner takes part absolutely at all stages of the project, construction, financing, maintenance and operation of the facility.
• Improving the efficiency of investment projects.
• Better management of facilities and provision of better services of public interest.
• Transfer of experience and knowledge from the private sector.
• Rational distribution of risks.
• Growth of innovation.

Green Bonds financing for Urban projects

The Most addicted form of investment project financing by municipalities is direct financing from the capital market through the issuance of debt instruments such as bonds. Since the 2000s, green bonds have been an important innovation in the development of municipal debt instruments, introduced in Europe with the first issuances by public institutions such as the EIB and the World Bank, followed by some municipalities to finance sustainable urban development projects. According to the United Nations Development Program (UNDP), green bonds are innovative financial instruments for mobilizing resources from local and international capital markets for projects that bring environmental benefits to society.

Bonds are guaranteed by the cash flows of projects that bring environmental benefits. According to current sustainability requirements, environmental projects are classified into several categories related to climate change, depletion of natural resources, pollution of water, air and soil, etc. In most cases, these urban projects are aimed at promoting renewable energy, energy efficiency, control pollution and green buildings. According to analysts, in recent years the green bond market has grown exponentially from $13 billion in 2013 to $500 billion in 2021.

The role of green bonds for financing Urban Infrastructure can be summarized as follows:

Help issuers move towards more sustainable business models and launch sustainable financing through a green bond financial models.

Ensuring that investors and intermediaries have access to disclosed information regarding the real positive impact of investments and the movement of the market in the direction of certain environmental or social expectations

Promoting transparency in cash flow management, as well as transparency in assessing the expected environmental impact of the project, supported by quantitative and qualitative indicators (reduction of harmful CO2 emissions, water quality indicators, increase in the number of citizens with access to a green environment, and others).

In addition to traditional green bonds, there are also special instruments on the debt instruments market. For example, so-called pure play bonds issued by organizations that are fully committed to environmentally sustainable activities.

Havelet Finance Limited offers a 100% percent funding for the implementation of Urban Infrastructure projects and alongside the following;
• Long-term investment loans.
• Project finance (PF) scheme.
• Credit guarantees.
• Investment engineering.
• Investment consulting.
• Financial modeling.
• Project management. etc.

We are also currently structuring a convertible debt and loan financing and other project financing and international loans at of 2% interest repayable annually with no early prepayment penalties.

Website: https://www.havelet-finance.com
Email: credit@havelet-finance.com