European Infrastructure Finance Yearbook - Investing In Bonds ...

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PROJECT FINANCE/PUBLIC-PRIVATE PARTNERSHIPS 128 ■ NOVEMBER 2007 Surveillance Of The Capital Charge The capital charge is dynamic and all projects that have a monoline wrap have been surveilled since 2005. This surveillance enables an adjustment to the capital charge if the underlying project’s default risk or recovery prospects improve or worsen. The Capital Charge And New Ratings Project debt issuers and monoline insurers are encouraged to begin dialogue with Standard & Poor’s at an early stage in the project-financing process to help avoid any surprises later on. Early dialogue is particularly important because most projects are rated at the lower end of the rating scale, where the capital charge is substantially higher and can affect the premium payable to the monoline. Borderline differences in rating outcome can have a substantial impact on the applicable capital charge. Standard & Poor’s is often asked by monoline insurers to give indicative capital charges, sometimes even before the rating process is initiated. We provide this indication based on estimated default risk and recovery levels. Only once the rating (default risk) has been assigned to a project and the recovery rate determined is the final capital charge calculated. The final capital charge can therefore differ from the indicative one, as the latter is based on estimates and on very limited information. ■ STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
Publication Date: Nov. 2, 2007 Primary Credit Analyst: Lidia Polakovic, London, (44) 20-7176-3985 Secondary Credit Analysts: Karin Erlander, London, (44) 20-7176-3584 Michael Wilkins, London, (44) 20-7176-3528 SWEDEN MOVES CLOSER TO PPP MODEL AS ALTERNATIVE FINANCING FOR INFRASTRUCTURE ASSETS Sweden is making significant steps in developing a model for public-private partnerships (PPPs) to provide an alternative means of financing public infrastructure. On June 18, 2007, a joint working group commissioned by the Swedish government--made up of the public rail authority (Banverket), the public road authority (Vägverket), and the Swedish National Road and Transport Research Institute (VTI)-published a proposal for a Swedish PPP model and identified a number of potential future PPP projects. Recently, the country’s public road and railway authorities announced the deferral of a substantial number of state-funded investments. A solution involving PPP financing could minimize future delays in necessary infrastructure developments. For private investors, the existence of a project pipeline detailing projects in terms of both number and size is important, given the relatively high costs associated with PPP bidding. It is also important for the public sector, to keep transaction costs low. For now, however, it is not clear if the PPP model will be selected and used on a larger scale, and, if so, how long implementation will take. Large Investment Needed, But Grants Might Not Suffice Currently, transportation infrastructure investments are funded mainly through the state budget on a year-by-year basis. State budget grants for road investments for the 2006-2009 period total about Swedish krona (SEK) 70 billion (SEK17 billion-SEK18 billion per year), while earmarked spending on rail for the period comes to about SEK52 billion (SEK11 billion-SEK14 billion per year) (see table 1). While the need for investment in infrastructure, Table 1 - Major Rail Projects In State Budget Project Investment (bil. SEK) Details Malmö city tunnel 9.5 (4.6 used) Financed by the government, the municipality of Malmö, the county council of Skåne, and EU contributions Hallandsåsen railroad tunnel 7.5 N.A. Citybanan line in Stockholm 13.7 (1.0 used) SEK4 billion to be financed by Stockholm municipality and Stockholm county council Botniabanan railroad in northern Sweden SEK--Swedish krona. N.A.--Not available. 13.2 (9.5 used) N.A. STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK PROJECT FINANCE/PUBLIC-PRIVATE PARTNERSHIPS mainly roads and rail, is evident in certain regions to develop economic growth, in other areas investment is needed to alleviate congestion. In these cases, the approval of projects via the budget on a year-by-year basis could prove too slow to meet increasing demand. In addition, budgeted state contributions for the infrastructure sector have remained largely unchanged, failing to reflect cost increases. Recently, both the Vägverket and the Banverket announced significant investment reductions due to insufficient funding. As an example, total Vägverket investment grants for 2007 amount to SEK42.5 billion, unchanged from 2004, while construction costs have increased by 16% since 2004. Consequently, the Vägverket has had to cut spending on projects by a similar amount. Although investments can be delayed on a shortterm basis, the Vägverket is concerned about the long-term effects on road quality and safety if this situation continues. The rail sector faces a similar situation, with capacity shortages in major cities and traffic disruptions. If investment spending remains unchanged, investments in infrastructure are likely to slow further. The current system, in certain cases, allows public authorities with access to budget funds to finance major projects by taking loans from the national debt office. Total debt issued by the national debt office to the Vägverket and the Banverket stood at SEK32.4 billion at year-end 2006. In some cases the government (Kingdom of Sweden; AAA/Stable/A-1+) has guaranteed private debt, as in the case of the Öresund bridge between Sweden and Denmark. In rare cases, infrastructure investments are financed by charges paid by the user (for example the train link between Stockholm and Arlanda airport and the Svinesund bridge between Sweden and Norway). NOVEMBER 2007 ■ 129
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November 2007 Infrastructure Financ
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CONTENTS Introduction STANDARD & PO
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INTRODUCTION 2007: New Challenges A
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ject Finance Rating Distribution: I
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COMMENTARY Publication Date: Sept.
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(Bil. ) 140 120 100 80 60 40 20 0 F
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UTILITIES EUROPEAN UTILITIES Once a
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UTILITIES approach to ownership unb
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UTILITIES 16 ■ NOVEMBER 2007 tran
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UTILITIES 18 ■ NOVEMBER 2007 Limi
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UTILITIES 20 ■ NOVEMBER 2007 •
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Publication Date: osenergoatom (sta
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UTILITIES 24 ■ NOVEMBER 2007 Tabl
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UTILITIES 26 ■ NOVEMBER 2007 supp
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UTILITIES 28 ■ NOVEMBER 2007 pres
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UTILITIES 30 ■ NOVEMBER 2007 Tabl
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UTILITIES 32 ■ NOVEMBER 2007 The
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UTILITIES 34 ■ NOVEMBER 2007 thei
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UTILITIES 38 ■ NOVEMBER 2007 Evol
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UTILITIES Publication Date: Aug. 29
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UTILITIES Publication Date: Nov. 12
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UTILITIES Publication Date: Sept. 3
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UTILITIES Publication Date: Aug. 17
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UTILITIES Publication Date: Sept. 3
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UTILITIES 50 ■ NOVEMBER 2007 stro
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TRANSPORTATION INFRASTRUCTURE 54
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TRANSPORTATION INFRASTRUCTURE BAA L
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Termination events under the swap a
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Page 146 and 147: RATINGS LIST RATINGS LIST Utilities
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Page 152 and 153: CONTACTS KEY ANALYTICAL CONTACTS Fr
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