‘We are most likely going to evolve into
a model utilised in Europe and the US,
where the project funding structure usually
comprises a short-debt tranche and an equity
tranche.’
‘The implication is that South Africa’s R3.4-trillion infrastructure
programme is going to have to look beyond the banking system and
government to secure funding for long-term projects,’ says Pottas.
‘We are most likely going to evolve into a model utilised in Europe
and the US, where the project funding structure usually comprises
a short-debt tranche and an equity tranche. The latter is typically
funded by the project promoter and the debt piece by a bank in
the construction phase, as institutional investors do not like to take
construction risks. Once the project is commissioned and proven, the
funding is refinanced, with an infrastructure fund taking the equity
piece from the promoter. The project bond, often listed, replaces the
bank construction bridging finance and is then sold to institutional
investors, such as pension funds and life companies, with an appetite
for long-dated paper delivering a stable return,’ says Savage.
Savage adds that the life insurance industry is an untapped source
of potential funding for long-term infrastructure projects. However,
alternative solutions to long-term infrastructure funding can be found
when one partners with innovative advisors.
Deloitte has already structured a listed infrastructure project
bond, a first for South Africa, that was issued in April this year
via a special purpose vehicle created by Soitec Solar GmbH (60%),
its empowerment partner Pele Green Energy (35%), and the
Touwsrivier Community Trust (5%) to fund a 44MW Concentrated
Photo Voltaic Solar renewable energy power plant in the Western
Cape. The bond was assigned a Moody’s Baa2.za South African
national scale rating for R1.0 billion of notes issued by CPV Power
Plant No.1 Bond SPV (RF) Limited. The notes have a maturity of 16
years from the date of issue in an amortising repayment profile and
pay a fixed coupon of 11%.
‘There are several considerations that need to be taken into account
in selecting an optimal funding structure for such deals, many of which
are influenced by a complex regulatory environment,’ says Savage.
Affordable housing:
Standard Bank Group
signs an agreement
with a European
Investment Bank
housing. The facility agreed with Standard Bank Group’s subsidiary
that Standard Bank of South Africa Ltd has tenor of up to 20 years.
Simon Ridley, Standard Bank Group’s Financial Director, says: ‘We
are delighted to have raised this funding from the EIB. This is a step
forward in Standard Bank’s continued commitment to funding projects
in the affordable housing market.’
‘The new housing lending programme agreed with Standard Bank
in South Africa will lead to further development of affordable and
social housing in South Africa. This engagement will help achieve the
common objective of increasing financing to build new homes and
upgrade housing across the country,’ says Pim van Ballekom, European
Investment Bank Vice President.
‘The new Affordable and Social Housing Initiative remains the
European Investment Bank’s most substantial financial support for
low-income housing outside Europe, reflecting the importance of
decent housing conditions for further economic and social development
in South Africa.’
This is the second affordable housing loan that The Standard Bank
of South Africa Ltd has signed with the European Investment Bank; the
first was concluded in 2008.
Under the initiative, the European Investment Bank will contribute
up to half of a housing scheme’s cost. Selected housing schemes are
expected to be in place by 2017, with around 6 500 construction jobs
being created.
Standard Bank Group is making available up to EUR30 million for
the financing of affordable housing developments in South Africa.
This is part of the European Investment Bank’s wider EUR150 million
engagement to support investment in affordable and social housing in
South Africa. Four local partners will manage the new programme in
South Africa.
This is part of a framework loan that the European Investment Bank
(EIB), Europe’s long-term lending institution, is making available to a
number of borrowers in South Africa. The funds will be used to finance
the development of affordable and social housing, including student
Edition 8
news.indd 3
BANKER SA
51
2013/12/20 8:12 AM