Surbana, CGIF team up on greenfield project bonds

CGIF and Surbana Jurong form partnership to boost infrastructure funding in Southeast Asia.
CGIF and Surbana Jurong form partnership to boost infrastructure funding in Southeast Asia.PHOTO: SURBANA JURONG

Consultancy Surbana Jurong is linking up with a unit of the Asian Development Bank (ADB) to offer guarantees on bonds that will fund major infrastructure work in South-east Asia.

The bonds will be issued in the currency of the country where the work will be carried out. Each project will also be appraised in terms of construction risks and the bonds then backed by credit guarantees.

They are aimed at financing greenfield infrastructure projects - new projects that have not begun construction.

Surbana's partner in the scheme is Credit Guarantee & Investment Facility (CGIF), set up by the Asean+3 countries - the 10 Asean members along with China, Japan and South Korea - and the ADB.

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Under the partnership announced yesterday, Temasek Holdings- owned Surbana will provide technical assessments to validate infrastructure projects by looking at aspects such as time, cost and quality.

It will only screen projects that aim to issue bonds with the support of CGIF's Construction Period Guarantee. This is a framework that guarantees that infrastructure work backed by the bonds are completed.

CGIF will then offer irrevocable and unconditional credit guarantees to projects deemed by Surbana to have robust construction programmes. These guarantees can stretch up to an equivalent of US$140 million (S$194 million) for each project, and are designed to give conservative long-term investors the confidence to buy the bond that will finance the work.

Surbana group chief executive Wong Heang Fine noted yesterday: "Perceived risks in such projects in Developing Asia deter investors, and infrastructure development is, in turn, often severely hampered."

Mr Wong noted that the collaboration between Surbana and CGIF - believed to be the first such partnership in the region - allows them to develop a system that can assess construction risk which will, in turn, assure new investors in greenfield infrastructure project bonds and boost investment in much- needed development.

"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," he said.

CGIF chief executive Kiyoshi Nishimura added: "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 income levels rise. However, these savings are not well tapped to finance critically needed infrastructure assets.

"Catalysing these institutional investors' support for infrastructure projects... fits the aspirations of CGIF's contributors, which include the Singapore Government, to find new methods to narrow the widening infrastructure gap in the region".

The ADB's latest forecasts noted that Developing Asia will need to invest US$26 trillion from 2016 to 2030, or US$1.7 trillion a year, in order to maintain the region's growth momentum, eradicate poverty and respond to climate change.

Jacqueline Woo

A version of this article appeared in the print edition of The Straits Times on May 25, 2017, with the headline 'Surbana, CGIF team up on greenfield project bonds'. Print Edition | Subscribe