Viable projects catalysts for infrastructure development 

 

Regional banking experts agree that while the atmosphere is ideal for infrastructural development in the region to boom, continued viability of projects is of utmost importance.

 

This was the conclusion of discussions at the two-day regional Infrastructure Conference, hosted by the Development Bank of Jamaica at the Jamaica Pegasus Hotel. Held under the theme, “Delivering Economic Growth through Partnership: Private Sector Participating in Infrastructural development” the event hosted a panel that explored “Bankability and key points in Closing the Financing”. This involved allowing lenders an opportunity to share, from their perspectives as debt financiers, key steps towards closing the financing, drawdown of funds and ensuring a project remains compliant with lenders’ requirements. The segment also included discussions on various sources of debt financing while exploring protections lenders seek to mitigate against project failure or risks.

 

Moderated by Vanessa Rizzioli, Director of UK-based Cranwicke Consulting, the panel consisted of Stefan Wright, Senior Investment Officer, Inter-American Development Bank (IDB), Jamaica; Gregory Hill, Managing Director, ANSA Merchant Bank Limited, Barbados; and Stanley Thompson, Manager of Organisation and Structuring, NCB Capital Markets Limited. 

 

Defining Bankability as, the “conditions that lenders will look for to feel secure that they will be repaid for monies that are invested into a project”, Rizzoli noted that there was no shortage of capital in the region as lenders are increasingly able to pick up loan portfolios and public-private partnership and privatisation (PPP) projects as this asset class becomes more familiar. 

 

However, Thompson noted that while there are opportunities for funding and project development, those projects are only efficient if developed in a manner that allows all partners to experience adequate levels of satisfaction, alongside to outside financiers. This he said can be achieved with the proper due diligence, and renegotiation, should this become necessary. He noted that unlike popular belief, lenders like the NCB Group are open to discussion. The NCB Group (through NCB CapitalMarkets Limited and Corporate Banking Division participates in infrastructural development and PPPs, to lead financing, as well as partner with multiple lending agencies and other financial institutions. Both NCB (Corporate Banking) and NCBCM are currently engaged in footwork for a planned 190 megawatt energy facility in St. Catherine through the Jamaica Public Service (JPS). 

 

Following on the point, Hill spoke to the importance of the due diligence process, explaining that much of the assessments done by funders of projects aim to determine commercial viability. He noted that investment in a project that cannot survive in the business landscape, over the long term, would be both risky and likely to result in significant losses.

 

All agreed, however, that lenders may request targeted financing that is part of ensuring financial covenants. These covenants are often used to guide debt levels and dictate acceptable cash flow levels going into an agreement. And, according to Wright, these, along with various insurances and collateral requirements, may be put in place to assist lenders in reducing risks that may arise. In addition, various studies are carried out to create cash flow estimates and influence methods of risk minimisation. These contracted stipulations differ based on the nature of the project. Projects, he continued, stand to benefit from these strictures as they can function as a catalyst for the long-term viability that all partners wish to see; the goal being to secure projects with success that are lasting and replicable.

 

Despite some regulatory limitations that may slow down the process of reaching an agreement, and instances of staggering cash flow associated with projects, the panelists were confident that the region remains conducive to developing low risk major infrastructural projects that could augur well for development.

 

The DBJ Infrastructure Conference was sponsored by NCB Capital Markets Limited (NCBCM), PricewaterhouseCoopers, Caribbean Development Bank (CDB), Canadian High Commission, Ernst and Young, Foundation for Competitiveness and Growth Project, Airports Authority of Jamaica (AAJ), Jamaica Money Market Brokers (JMMB), Port Authority of Jamaica; and PetroCaribe Development Fund.