Invest in Russia — invest in Russian regions!
All analytics

Bonds as a Tool to Attract Investment in Infrastructure Projects

Research
4 September 2022
Облигации как инструмент привлечения инвестиций в инфраструктурные проекты
Source
Release date
06/07/2022
Open PDF

In this publication ACRA examines the specifics of using bonds as a means of attracting investment in infrastructure projects.

The Roscongress Foundation presents the salient points of the publication accompanied by fragments of broadcasts of relevant panel discussions from the business programme of international events held by the Roscongress Foundation.

Despite the crisis, Russia still has opportunities for financing and developing new projects.

Russia’s infrastructure market is going through tough times due to the current political and economic instability, but it still has some opportunities for launching new projects and developing various forms of funding. The authors of the publication point out that the country has accumulated considerable experience and built an adequate regulatory framework for a more active use of financial instruments which used to seem ineffective due to difficulties with their implementation. ACRA analysts note that 190 PPP (public private partnership) projects with total investments of RUB 658 billion were launched between 2021 and June 2022. As of the beginning of June, there are 3 031 ongoing PPP projects in Russia, worth RUB 3.7 trillion in total. While roughly 90% of funding comes from commercial banks, some market players also use bonds as a means of attracting financing for infrastructure projects. For example, new construction / construction and financial companies intending to issue corporate bonds to finance their operations and replenish their working capital entered the financial market between December 2019 and 2021. Russia’s federal subjects, too, have a wide range of potential possibilities for financing PPP projects in infrastructure, including infrastructure bonds and green bonds.

Video: https://roscongress.org/sessions/spief-infrastrukturnye-obligatsii-kak-effektivnyy-mekhanizm-razvitiya-regionov/search/#00:38:17.856

Project financing with bonds has a number of special features.

An important feature of project financing deals is the right of bond creditors to interfere with the process of project implementation in case of a substantial decline in project indicators. Another distinctive characteristic is that there is no need to use supplementary mechanisms of state guarantees. Finally, project financing deals must be implemented on the balance sheet of an SPV with a limited bankruptcy risk and rights for one type of business activity only. Importantly, in classic project financing, all key risks are distributed between project participants, which helps manage them effectively.

The authors of the publication emphasize the availability of a wide range of infrastructure project financing tools on the financial market. Bonds come in many forms, so companies can choose the most suitable variant depending on the project and their needs. The type and form of the chosen instrument will determine credit rating agencies’ approach to rating the bonds. Some project financing securitization tools with complex structure have not been widely used up to now, but in the current conditions they can help market players who invest in PPP expand their opportunities to attract external funding.

Video: https://roscongress.org/sessions/spief-2021-infrastruktura-so-znakom-kachestva-kak-menyaetsya-vzglyad-investorov-na-proekty/search/#00:59:30.687

Gain more insights about infrastructure and finance in the Financial market and Infrastructure-based development sections of the Roscongress Information and Analytical System.

Anlytics on the topic

All analytics
Research
26 March 2018
Mobile Money in Emerging Markets: Business Case for Financial Inclusion

Meeting the mobile money needs of the unbanked in emerging markets is a vast opportunity. To succeed, providers need a clear view on what drives mobile money economics, and an innovative mind-set.

Research
18 April 2019
A Brief Introduction to the Russian Bond Market

The Analytical Credit Rating Agency (ACRA) has published an overview of the Russian bond market describing its structure, history, and possible ways of evolution.

Research
30 August 2019
The Comprehensive Plan: Money, Constraints, Prospects

The study prepared by InfraONE Research, the analytical department of the investment company InfraONE, discusses the government’s plan to increase spending on infrastructure in the next six years, administrative and industry-related barriers that might hinder investment, and ways to overcome these barriers. The publication aims to inform market players and other stakeholders about the most pressing issues in infrastructure investment.