PPP FINANCING ARRANGMENTS STRUCTURING FINANCE SUCCESSFULLY IMTIAZ HIZKIL

PPP FINANCING ARRANGMENTS – STRUCTURING FINANCE SUCCESSFULLY IMTIAZ HIZKIL ISLAMIC DEVELOPMENT BANK

Arrangement of Financing – One of the most challenging part of developing a PPP Infrastructure Project – Project has to be Bankable, needs adequate technical and financial resources for preparation – Minimize risks and allocate to the right party – Legal and Regulatory Environment – The need for a track record – the first PPP project is perhaps the most challenging project 2

Attracting Sufficient Project Financing The Strength of Partnership § Managerial § Equity – Project’s Bankability – Track Record for Projects in the Industry – Appetite of Foreign and Local lenders 3

Funding Structure Need to Response to Project Needs – Optimum Debt Equity Ratio – Equity § Sponsors § Capital Market – Long Term Debt § § IFIs - Debt, Political Risk Guarantee ECAs Foreign Banks Local Banks – Long Term Facilities – Reflect Projects Cashflows – Pricing of Debt – Fixed, Variable, Hedging 4

International Financing Institutions – Brings Credibility, Enhanced Environmental and social Assessment – Role of IFI’s – § Where there is a major development impact § Critical for Mega projects and “First” projects in terms of country, sector and technology. – Help bring other funds - Commercial sources, Equity IFIs may participate through different windows § Direct Funding § Special purpose fund § Guarantees 5

Role of Islamic Finance in PPP Infrastructure Projects § Modes of Financing – Installment Sale – Leasing – Istisnah – Equity § No fundamental limitation § Project Finance transactions have combined Islamic Financing and Conventional Financing – Issues have been Resolved 6

Role of Islamic Development Bank in PPP Projects § Aggressively pursuing “Project Finance” Based Transactions § BOT Projects Guidelines Prepared § Workshops on BOT projects in Member Countries § Sukuk Resources Available to Fund PPP Projects in Infrastructure in Member Countries / MENA Countries 7

§ Working Closely with IFIs, Commercial Banks and Local Banks in large and medium scale transactions § Intervention in Power, Oil, Gas, Transportation § Committed to participate in Projects in other areas of Economy § Fully Support Institutional Strengthening § Cooperation with multi-laterals, bilateral and other institutions 8

IDB’s Participation in the first hydroelectric IPP in Pakistan 1. IDB providing US$ 37. 2 million of financing on leasing mode 1. Other participants - ADB and local commercial banks 1. A PPP in hydro-sector is challenging and a good example of sharing of risks by the parties 1. Success of this project will bring many other hydro power PPP type projects in the country 9

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