arise: a new public-private partnership for infrastructure investment
DESCRIPTION
By David Jhirad, ProfessorDirector of the Energy, Resources and Environment (ERE) ProgramThe Paul H. Nitze School of Advanced International Studies (SAIS), Johns Hopkins University. Presented at Transforming Transportation, January 26, 2012. Washington, D.C.TRANSCRIPT
Presented at “Transforming Transportation 2012”, Washington DC
A N E W P U B L I C - P R I V A T E P A R T N E R S H I P F O R I N F R A S T R U C T U R E I N V E S T M E N T
ARISE
Dr. D
avid
J. Jhira
d01/2
6/2
012
Source:
THE IMPERATIVE FOR MULTI-FACETED INNOVATION
Source: IEA WEO 2011
INFRASTRUCTURE INVESTMENT NEEDS
Investment in new power plants and infrastructure in the New Policies Scenario
Source: GEF STAP
INCREASING DEMAND FOR TRANSPORT INFRASTRUCTURE
Source: Columbia CGT
THE NEED FOR LONG-TERM INVESTORS
WHY ARE SWF A GOOD FIT?
• Uniquely positioned as long-term investors• Can leverage their large asset base• Have the intergenerational outlook necessary for large-
scale infrastructure investment• Prefer to invest in large projects >$500m• Natural to expand their mission from preserving financial
wealth to include the preservation of environmental wealth by mitigating climate change
• Have access to the massive amounts of capital required for transformation to a low carbon economy
Source: Deutsche Bank
WHICH COUNTRIES HAVE AN SWF?
Source: SWF Institute
WH
ICH
AR
E T
HE
LAR
GES
T S
WF
Total Capital of around 3.6 trillion USD
WHAT ARE SOME KNOWN BARRIERS TO SWF INVESTMENT IN INFRASTRUCTURE?
• Comparatively larger risk than traditional investments
• Lack of relationship similarly long-term providers of debt financing to match SWF equity stake
• Lack of knowledge of international infrastructure investment markets and investment environments in target countries
• Lack of relationship with project development entities
• Can be perceived as not in line with mission of preserving and multiplying wealth for future generations
ACCELERATING RESILIENT INFRASTRUCTURE INVESTMENT FOR SUSTAINABLE ECONOMIES
• Launch a process and a working group consisting of Sovereign Funds, Multilateral Development Banks and other stakeholders;
• Focus on resilient and sustainable infrastructure investment with social and economic returns supplementing financial returns;
• Aim to mobilize an international infrastructure project preparation fund for Rio +20 launch;
• Employ cutting edge geospatial information systems to support project design and implementation, and the strategic switch from conventional to green infrastructure.
ARISE TOWARDS RIO
• Identify and Remove barriers to investment.• Facilitate dialogues between Sovereign Funds, Multilateral
Development Banks, financial institutions, companies and other stakeholders in a high-level working group
• Define “resilient and sustainable infrastructure”.• Develop qualitative and quantitative benchmarks to
define social, economic, and environmental sustainability and resilience of infrastructure projects.
• Develop metrics and methodologies to assess the suitability of potential infrastructure investments against these benchmarks.
• Develop a package of infrastructure projects to attract capital investment
ARISE LAUNCH AT RIO +20
• Announce a new and innovative public-private partnership to invest in resilient and sustainable infrastructure, including the Sovereign Wealth Funds (SWFs), Multilateral Development Banks (MDBs), foundations, and the private sector, in direct collaboration with beneficiary communities.
• Create a forum in which SWFs and MDBs will determine how to mobilize debt and equity in a timely manner on a project-by-project basis
• Attract innovative financing sources such as debt guarantees and grant funding to minimize technological risk and to overcome the initial capital cost hurdle of new technology.
• Commit funding and resources to an international project preparation fund to determine investment feasibility, including financial, social, economic and environmental risks and returns.
• Support policy and regulatory reforms to create an enabling environment for resilient and sustainable infrastructure development.
POTENTIAL INITIAL PARTNERS
ARISE
ILLUSTRATIVE PROJECT EXAMPLES
• Bus Rapid Transit Systems:• Dedicated lanes and bus stops
with easy access• Local, Express and Feeder
Services• Tickets integrated across whole
system and affordable for general public
• Reliable user information system• Clean buses with low emissions,
e.g. using CNG• Integrated into zoning to enable
transit-oriented hubs
CONCENTRATED SOLAR POWER PLANT
• Around 50MW Capacity
• Project cost of $300m• Annual power sales of
$ 50m• Cash-flow positive
within 24 months• Ideally sited where
some form of renewable energy sales credits or subsidies are available