The Credit Guarantee & Investment Facility (CGIF) and Surbana Jurong have formed a partnership to boost the use of local currency-denominated project bonds to finance greenfield infrastructure projects in Southeast Asia. CGIF is a multilateral facility established by ASEAN+3 countries and the Asian Development Bank (ADB) to develop and strengthen local currency and regional bond markets in ASEAN.
Under the collaboration, Surbana Jurong will provide technical assessments to validate the time, cost and quality aspects of identified greenfield infrastructure projects aiming to issue project bonds with the support of CGIF’s Construction Period Guarantee (CPG). CGIF will offer irrevocable and unconditional guarantees to projects in ASEAN with robust construction programmes, as screened by Surbana Jurong. These guarantees can stretch up to US$140 million equivalent per single greenfield infrastructure project to facilitate the issuance of long term local currency bonds, said Surbana Jurong.
The CPG, launched in July 2016, is designed to frame risks associated with the construction period to acceptable levels for conservative long-term investors to consider greenfield project bonds. This new collaboration is believed to be the first partnership between CGIF and an urban, industrial and infrastructure consulting firm. CGIF has reportedly undertaken 13 corporate bond guarantee transactions since its establishment in May 2012.
“For many conservative long term investors, construction risk has been the key impediment keeping them from supporting the build-up of infrastructure assets despite their natural appetite for long term bonds. This collaboration marks an innovative attempt to bring to the market high quality greenfield project bonds where construction risks have been adequately appraised and mitigated as guided by the engineering prowess of a firm like Surbana Jurong and backed by CGIF’s guarantees,” said Kiyoshi Nishimura, CEO of CGIF.
“Many ASEAN countries are witnessing rapid accumulation of domestic savings in the non-bank sectors such as pension funds and insurance companies as their economies grow and their income levels rise. However these savings are not well tapped to finance critically needed infrastructure assets. Catalyzing these institutional investors’ support for infrastructure projects perfectly fits the aspirations of CGIF’s Contributors which includes the Singapore Government to find new methods to narrow the widening infrastructure gap in the region,” added Mr Nishimura.
“For a country to develop and grow, infrastructure development is key. However, perceived risks in such projects in developing Asia deter investors, and infrastructure development is, in turn, often severely hampered. Surbana Jurong is delighted to partner the CGIF to develop a robust construction risk assessment and mitigation framework that will provide assurance to new investors in greenfield infrastructure project bonds. This partnership aims to boost infrastructure investment in ASEAN,” said Wong Heang Fine, group CEO of Surbana Jurong. “As one of the largest Asia-based urban, industrial and infrastructure consultancy service providers, Surbana Jurong is always keen to further value-add to our global clients with a complete value-chain of services. This complementary partnership with CGIF allows us to now offer a new dimension of financing solutions for our infrastructure project pipeline. We believe we are the only player in our industry to offer such a solution.”