Forms of Direct Funding that IIB Offers

The forms of direct funding under project finance we offer are:

• Facility / Funds
• Equity Investments
• Guarantee

2.1 Facility / Funds

IIB-DG funds to the public or private sector projects usually start from a minimum of €100 million up to €Billion and Billion. The average amount is €500 million. The IIB-DG’s funds are structured with a high degree of flexibility to provide loan profiles that match client and project needs. This approach determines each loan currency and interest rate formula.

The basis for a loan is the expected cash flow of the project and the ability of the client to repay the loan over the agreed period. The credit risk can be taken entirely by the IIB-DG . Funds may be secured by a borrower’s assets and/or it may be converted into shares or be equity-linked. Full details are negotiated with the client on a case-by-case basis.

Lines of Credit

IIB-DG, therefore, provides Lines of credit to national and regional institutions , micro finance institutions and local banks to enhance its support to SMEs and new projects.

Loan Features

• Usually range between €100 up to €100 Billion or more
• Fixed or floating rate., rate between 1% to 1.5%
• Senior, subordinated, mezzanine or convertible debt.
• Denominated in major foreign or local currencies.
• Short to long-term maturities up to 25 years
• Project-specific grace periods may be incorporated, 5 Year Grace Period

An initial Grace Period of Five (5) years from Date of Term Sheet Signature and after the agreed Grace Period, client shall be granted a further 15-25 years to repay , at which time a fixed interest rate of 1% -1.5% percent per annum shall be charged on the outstanding Balance only.

Interest Rates

IIB-DG funds are based on current market rates and are priced competitively. Following a successful enquiry and once a project has been presented to the IIB-DG, financial terms can be discussed in detail with IIB-DG Financial staff.

As the type rate directly affects profitability, a project’s financial structure may include both floating and fixed rate loans. The mix is evaluated with respect to client and project sensitivities to interest rate movements.

Fees and charges ( No upfront fees, no hidden charges)

A margin is added on to the base rate. The margin is a combination of country risk and project-specific risk. The IIB-DG does not charge any upfront fees.

Other funding terms : Full funding terms are negotiated with the client for each project.

Non- Recourse : Secured by collateral, Client is not being personally liable for further compensation if the debt is not repaid.

Insurance

IIB-DG requires project companies to obtain insurance against normally insurable risks. Examples include theft of assets, outbreak of fire, specific construction risks. The IIB-DG does not require insurance against political risk or non-convertibility of the local currency.

Security

The IIB-DG usually requires the companies; it finances to secure the loan with project assets. These can include:

• Mortgage on fixed assets, such as land, plant and other buildings.
• Mortgage on movable assets, such as equipment, other business assets.
• Assignment of the company’s hard currency and domestic currency earnings.
• Pledge of the sponsor’s shares in the company.
• Pledge over the company’s bank accounts.
• Assignment of the company’s insurance policy and other contractual benefits.
• Security in the form of pledges, mortgages, etc.
• Issuance of at least 35% financial instruments(Sblc, BG ,Bonds, etc.)

Funds provided must be used in strict accordance with the aims stated in the original business plan.

Covenants

Typical project finance covenants are required as part of the loan package. Such covenants, limiting indebtedness and specifying certain financial ratios and various other issues, will be negotiated.

Loan Repayment

Repayment is normally in semi-annual instalments. Longer maturities may be considered on an exceptional basis, for example, up to 30 years for large infrastructure operations.

Hedging possibilities

IIB-DG can help manage financial risks associated with a project’s assets and liabilities. This covers foreign exchange risk, interest rate risk and commodity price risk. Risk hedging instruments include currency swaps, interest rate swaps, caps, collars and options and commodity swaps.

2.2 Equity

2.2.1 What we do in equity

IIB-DG as an equity Investor ,with equity stakes between 30% to 70% in the SPV, and investing between 100% required funding. The flexibility to invest in a wide range of instruments and a focus on impact investing, we provide growth capital, IPO and pre-IPO financing. We also take part in co-investments with private equity and strategic investors in change of control situations.

Alongside financial returns, we create positive, measurable, social, economic and environmental impact in the countries where we work.

We are one of the largest and longest standing equity investors in the countries where we work, looking to invest up to billion annually through straight equity, mezzanine products, preference shares and other instruments.

We provide equity financing primarily investing or co-investing along with funds focused on infrastructure, the environment, or small- and medium-sized enterprises and mid-size corporations. In some cases, IIB-DG also provides direct quasi-equity financing to support innovative companies in seek of financing to grow.

Private and listed investments

In addition to private equity, we also invest in public equities to promote the development of capital markets in our regions by participating in pre-IPO financing, IPOs, capital increases and other public transactions.

We have a wide mandate that allows us to invest not just in growth capital opportunities but also in investments with longer investment horizons, privatizations and others.

Patient capital

Investing from our own balance sheet allows us the flexibility to be long term, patient investors, with longer investment horizons than typical private equity holding periods.

Comprehensive sector coverage

We have extensive experience of equity and debt investments in the following sectors, a wide network of internal and external sector specialists, an unmatched presence on the ground through our subsidiaries and a successful history of co-investments with strategic and financial investors from our regions and beyond.

2.3 Guarantees

We also provide guarantees to help borrowers gain access to financing through our Trade Facilitation Programme. The programme aims to promote foreign trade to, from and within the IIB regions and offers a range of products to facilitate this trade, including guarantees and trade-related cash advances. In general, that strengthens the ability of local banks to provide trade financing, and through these banks gives entrepreneurs throughout our regions the support they need to increase their access to the import and export trade.

We provide guarantees covering the risks of large and small projects. We also provide loan portfolios to make your projects more attractive to other investors

1 Credit enhancement for project finance

Subordinated financing, funded or unfunded guarantees and contingent credit lines designed to enhance the credit quality/credit rating of the senior debt. Credit enhancement may attract additional private finance from institutional investors or improve access to bank financing.

Four key benefits

Here are the benefits of our credit enhancement for project finance

• Improved rating : Improves the credit quality/credit rating, increasing the protection of the senior debt, thus attracting additional financing.
• Bespoke financing : Coverage tailored to the project needs, which can include the construction period.
• Project support : We offer expertise in the financial and technical aspects of preparing a project.
• Signaling effect : The IIB’s financing is often seen as a quality stamp, helping the project being so attractive.

The IIB guarantees unlock additional financing for small- and medium-sized enterprises or mid-caps by covering a portion of possible losses from a portfolio of loans also, as long as there is an underlying project. Key focus is to provide mechanisms of extra-budgetary funding and assistance for infrastructure projects particularly those that may not have access to commercial banks and insurers, primarily owing to a long project term, country risk, an inadequate return rate, or a limited local banking sector.