global infrastructure facility - world...

A PARTNERSHIP PLATFORM FOR GREATER

INVESTMENT IN THE INFRASTRUCTURE OF

EMERGING MARKETS AND DEVELOPING

ECONOMIES

GLOBAL INFRASTRUCTURE FACILITY

Global InfrastructureFacility

COLLABORATION

FINANCE

LEVERAGE

IMPACT

GLOBAL INFRASTRUCTURE FACILITY • 1

OBJECTIVES AND OPERATING PRINCIPLESThe Global Infrastructure Facility (GIF) is a global, open platform that facilitates the preparation and structuring of complex infrastructure public-private partnerships (PPPs) to enable mobilization of private sector and institutional investor capital. The GIF platform coordinates and integrates the efforts of Multilateral Development Banks (MDBs), private sector investors and financiers, and governments interested in infrastructure investment in Emerging Markets and Developing Economies (EMDEs).This approach enables collaboration and collective action on complex projects that no single institution could achieve alone. The GIF’s engagement begins with upstream support on market structure and project identification and appraisal, continues through transaction preparation, and integrates financial structuring and credit enhancement. The GIF operates according to the following core principles:

• Providing public goods: Focusing on enabling investment in core infrastructure, particularly those infrastructure projects that are climate-smart or trade-enabling.

• Mobilizing the private sector: Concentrating on financing and implementation modalities that draw together the comparative advantages of the public and private sectors to expand investment and improve infrastructure services.

• Achieving value for money: Selecting viable projects that are expected to achieve value for money for recipient country government(s) and service users; then, through sound project appraisal, design, structuring, and procurement, helping ensure that value for money is achieved in practice.

• Promoting sustainability and inclusiveness: Ensuring that projects adhere to best practice standards for social and environmental responsibility.

• Collaborating for best results: Mobilizing partners’ technical and financial resources in an innovative and flexible way to achieve greater leverage and address the complex infrastructure financing challenges that are beyond the resources of any individual partner.

• Augmenting partners’ capacity: Complementing individual partner efforts by supplementing existing resources.

By contributing to the stock of high quality and well-structured infrastructure projects, the GIF can be expected to help develop EMDE infrastructure as an asset class attractive to the full range of private investors seeking diversification into long-term assets in faster growing economies. Until now, these investors have been presented with limited infrastructure investment opportunities that meet their risk tolerance and investment profiles.

An Introduction to the Global Infrastructure Facility


THE GIF PARTNERSHIPThe GIF Partnership Program offers governments, multilateral development banks, private sector investors and financiers a new way to collaborate on complex projects that no single institution could handle on its own. The GIF platform provides project support from start to finish, drawing on technical and advisory partners. This group, which includes private investors, ensures that well-structured and bankable infrastructure projects are brought to market. This unique collaborative approach has won strong support from institutional investors and donors.

GIF partners fall into one or more of the following categories:• Funding partners: Partners that provide financial contributions to the GIF Partnership.

• Technical partners: World Bank Group and external partners who provide specific technical advice.

• Advisory partners: Private investors or entities that represent the voice of private sector infrastructure finance. This includes individuals from pension funds, sovereign wealth funds, banks or other financial institutions, as well as public or private partners interested in participating in GIF-arranged credit enhancement structures. (Advisory partners are expected to be involved in early stage project preparation and discussions related to the design and use of risk instruments, with a view to ensure the suitability of projects for private sector investment).

A Governing Council oversees the GIF Partnership Program. The Governing Council supervises strategic programming and funds management and the development of operational policies and procedures. It also holds the GIF management accountable for delivering on objectives and principles. The Governing Council comprises representatives of funding and technical Partners and representatives of EMDEs.

An Advisory Council, comprising all GIF Partners and chaired by the Managing Director and Chief Financial Officer of the World Bank Group, serves as a sounding board on the latest developments in infrastructure finance, with a view to informing the design of GIF interventions. Working groups may also be convened to discuss particular issues.

Donors & WBG MDBs Institutional Investors

Bilateral DFIs*, SDBs**, ECAs***

Governing Council

Global Infrastructure Facility Management Unit

Regional Representatives

Commercial Banks

Developers & Strategic Investors

Advisory Council

GIF PARTNERSHIP PROGRAM

Funding Partners Technical PartnersEMDE

Representatives Advisory Partners

*(DFIs) Developoment Finance Companies **(STBs) State Development Banks ***(ECAs) Export Credit Agencies


ACTIVITIESThe GIF provides support along the spectrum of design, preparation and transaction to ensure that well-structured and bankable infrastructure projects are brought to market, and it focuses on finance options and structures that are able to attract a wide range of private investors. GIF interventions seek to minimize overall project risk by ensuring that benefits, costs and risks are appropriately considered at each stage of the project preparation and development process. Support provided to a particular project is defined flexibly, to complement the resources and support already available from partner entities and other funding mechanisms.

During the three-year pilot phase, activities will focus on technical assistance to EMDE governments for project preparation and structuring of selected infrastructure projects and programs. This may include advisory support through the following project preparation stages:

• Project or program definition and enabling environment stage. Support to sector planning, investment prioritization, and project and program-level pre-feasibility analysis; support to legal, regulatory, or institutional reforms as required to enable successful project development and/or participation of long-term private capital in project financial structures.

• Project preparation and investment feasibility assessment stage. Support for technical, economic, and other feasibility studies, social and environmental impact assessments, investment appraisal and risk analysis, and public-private partnership (PPP) structuring.

• Transaction design and implementation stage. Support in preparing transaction documentation and implementing competitive procurements, and design of risk mitigation/credit enhancement packages.

• Financing stage. Continued support as a project moves from commercial to financial close, including coordination of public and private sector financing arrangements, and arranging and/or designing risk mitigation instruments to support commercial finance participation.

The chart on the next page provides an overview of GIF activities at each stage of the project cycle.

Many Development Finance Institutions (DFIs) and other prospective partner entities already provide similar support to projects, but often in a fragmented manner, with coordination largely dependent upon coincidental relationships. The GIF coordinates preparation and structuring support more systematically and provides resources to fill gaps. This ensures a high-quality, comprehensive approach, and early consideration of financing options with the potential to attract a wider range of investors. The bulk of the GIF’s disbursements for project preparation and structuring are expected to be recovered through reimbursement upon successful project close.

Following commencement of a pilot phase focused on upstream activities, a “downstream window” will be introduced. A subsequent injection of funding will be sought from the GIF Partners for initial capitalization of this downstream window. This could allow GIF to provide “gap-fill” co-financing or credit-enhancement support to complement products already available from internal and external technical partner institutions. This typically takes place in the early stage, where risk is the highest and traditional players are more reluctant to enter.


PROJECT ELIGIBILITY The GIF works with client EMDE governments to support infrastructure projects. A project may refer to the development, rehabilitation, or expansion of a stand alone infrastructure facility, a series of interlinked assets that together address an identified infrastructure delivery objective, or a coordinated program of investment in multiple infrastructure assets. The GIF can work with client governments that are among the eligible recipient member countries of the GIF’s Technical Partners, or other territories in which those Technical Partners are permitted to operate according to their policies and procedures. The GIF can support projects that will be primarily implemented by privately-operated entities (as under a PPP modality), or by public sector entities operating on a commercial basis—provided in both cases that they are providing infrastructure as a public service (i.e., to multiple users), and that the project has strong potential to achieve financial viability and sustainability and to attract long-term private capital.

Following the principle of providing public goods by enabling investment in core infrastructure, the GIF can support projects across the following sectors and sub-sectors:

• Energy: electricity generation; electricity transmission or distribution; natural gas transmission or distribution.

• Water and sanitation: water supply; wastewater and sewerage; irrigation and drainage; solid waste management.

• Transport: airports; ports; railways; mass transit; highways.

• Telecommunications: landlines; undersea cable.

This list of eligible sectors may be expanded during or subsequent to the pilot phase to capture additional public core infrastructure assets, upon approval by the Governing Council. Within its eligible sectors, the GIF may elect to focus on specific themes. This thematic focus may be reviewed and updated from time to time with Governing Council approval. During the pilot phase, the GIF will support projects with regional or global public good characteristics that are:

• Trade-enabling—projects that facilitate or enhance interconnectivity and trade; and/or

• Climate smart—projects that are low carbon-emitting, encourage energy and/or carbon efficiency in the provision of infrastructure services, and/or strengthen climate resilience.

Examples of climate smart investments include low-emitting power generation; power or gas transmission projects that bring efficiency to energy markets; power distribution projects with significant potential for loss reduction; mass transit projects, including metro, passenger rail and bus rapid transport systems; and water production and/or supply projects which address water scarcity, security, flood management and other aspects of climate resilience. Trade-enabling investments are those that promote efficient commerce such as freight rail networks, seaports and inland terminals, airports and toll roads. Where toll roads are supported, they will presume underlying charges to users to reveal demand so as not to contradict the climate smart objectives.


1 Sector-level legal, regulatory or institutional reform activities are supported only as required and triggered by project-specific preparatory work.

OVERVIEW OF ELIGIBLE GIF ACTIVITIES

Enabling Environment and Project Definition

Project Preparation and

Investment Feasibility

Transaction Support and

Financial Structuring

Financial Arranging and

Credit Enhancement

Investment decision

Indicative project

milestone

Commercial close

Financial close

• System planning to determine least cost options.

• Sector-level reform, including legal, regulatory and institutional assessment and reforms1.

• Project definition and screening analysis—including needs and options assessment; project pre-feasibility studies; initial fiscal analysis; and implementation options analysis (public/private).

Up

stre

amGIF Activity

Do

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• Detailed feasibility studies—including technical feasibility, market analysis, engineering estimates, geotechnical or resource assessments, environmental and social impact assessments.

• Investment appraisal—including financial viability assessment and fiscal impact analysis, and economic appraisal.

• PPP structuring including risk identification and allocation, and commercial appraisal, including initial market sounding.

• Transaction preparation and implementation support—including preparing bid documents and managing the transaction process.

• Early financial structuring—as necessary, develop package of risk mitigation or credit enhancement.

• Financial arranging services—finalize total financing package, including any credit enhancement arrangements.

• Provision of liquidity support to backstop risk mitigation or credit enhancement instruments as needed.


SELECTION CRITERIAPotential projects may be proposed to the GIF by World Bank Group teams, GIF partners, or potential clients. Projects proposed for GIF support are assessed against a hierarchy of criteria based on expected project outcomes as well as the individual and aggregate degree of risk to those outcomes, including:

• Development Impact: Projects that are expected to support the GIF’s overall development goals of poverty reduction and inclusive and sustainable growth in emerging markets and developing economies through improved delivery of infrastructure services. This is defined by higher numbers of people covered, better quality services, lower cost through improved efficiency and/or more climate smart modes of service provision.

• Alignment with Country Priorities: Projects that address a priority investment need and have demonstrable government commitment, including the availability of adequate fiscal resources to develop and implement the project and intention to seek private financing.

• Viability, Sustainability and Value for Money: Projects that are expected to be economically, technically, socially, environmentally and fiscally viable and to achieve value for money for recipient country government(s) and service users. This will be assessed in terms of social and economic returns to a project as well as its proposed mode of implementation (for example, as a PPP).

• Mobilization of Private Capital: Projects that have significant potential to leverage public funds by attracting sizeable capital investment from the private sector .

• Complexity: Projects that require multiple parties to work together to structure, arrange and provide financial support, and/or projects that require a blend of financial or risk mitigation instruments to attract commercial finance 2.

GIF-supported projects are selected to achieve diversity in the overall portfolio of GIF activities, by sector, region and country income level according to pre-defined targets. These diversity targets are used to guide submissions to the Governing Council for approval of GIF activities. During the pilot phase, additional diversity factors may be considered to test the full range of GIF support. For example, attention may be given to projects that can be expected to reach an identified milestone during the pilot phase, and to ensuring that the set of pilot projects includes activities across a range of project development stages.

2 A complex project could: (i) involve multiple discrete operating units (for example, pipeline and plant, or facility and supporting infrastructure) in one or more sectors; (ii) provide services to multiple countries or have a regional impact; or (iii) require new applications of financing mechanisms in a given context (such as the first instance of private financing in a reforming sector, requiring appropriate risk mitigation to attract private sector investment).


MANAGEMENTThe GIF is administered by the World Bank Group through the GIF Management Unit. The GIF Management Unit is responsible for building the facility, leading the consultation and capitalization process, managing and allocating the resources of the GIF, assuring quality of GIF project design, and providing coordinating support as projects progress, particularly with respect to liaison duties with technical and advisory partners.

Implementation of GIF project activities will be led by technical partners. GIF project teams will comprise technical staff from the World Bank Group and technical partner institutions, as well as the engineering, financial, economic, or legal firms hired with GIF resources. Project teams will be composed according to the demands of a particular project, including region and sector focus, and the skills and expertise required for the proposed activities. Joint project teams may also be formed if the GIF is supporting projects in which more than one technical partner is already closely involved, or as needed to meet the full range of demands of the project.


PILOT PHASEThe first three years of GIF operations will constitute a “pilot phase,” during which the GIF concept, activities, and partnership model will be tested. Seed funding for the pilot phase includes an initial capitalization of $80–$100 million over this period. This should allow for support to eight to 10 interventions, which is the level of activity that will enable the model to be tested over a sufficient range of project sectors and types, geographies and country environments. These resources will subsequently “revolve”—that is, reimbursements of grants, fees from fee-based activities, and further downstream, charges for credit enhancement products, will be re-invested into the GIF.

Following an initial allocation from the World Bank in September 2014, the GIF team worked with partners to establish initial Collaboration Arrangements, which were signed in October 2014. These form the basis for full Partnership Agreements that are being developed with partners. Assessment and selection of pilot projects are being undertaken in consultation with internal and external partners, and the GIF became fully operational in April 2015.

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