VEB.RF has developed a model for long-term financing of concession projects

The model, developed on behalf of the President of Russia by VEB together with the National Center RAZVITIE.RF (VEB Group), establishes common fundamental approaches to the preparation of documentation on concession projects for which the parties have decided to use the proposed financing model.
The key objective of the document is to create transparent and standardized conditions for structuring new concessions at the stage of their launch. The document is aimed at attracting new sources of extra–budgetary financing - funds from institutional and retail investors who are not yet actively involved in infrastructure projects.
The main provisions were developed at the RAZVITIE site.The Russian Federation is actively cooperating with the Ministry of Economic Development of Russia, the Ministry of Finance of Russia, the Bank of Russia, financial institutions, rating agencies and market experts.
It is based on a two-stage approach to financing, taking into account the specifics of risks at different stages of project implementation. During the investment phase, construction is financed by credit institutions, and after the facility is put into operation, the loans provided can be refinanced through the public offering of concession bonds.
Concession bonds are an important element of the model and are aimed at forming a long-term financial base for infrastructure projects that have entered the operational stage.
"According to current legislation, bank loans attracted by concessionaires at the investment stage could have been refinanced earlier. Some concession agreements provide for this possibility. However, refinancing cases were rare. Suggested by the WEB.The Russian model of debt securitization, that is, the conversion of assets into securities, when scaled up and actively applied, will allow for more intensive use of the capital market and free up the resources of the banking sector for lending to new projects, which, in turn, will contribute to accelerating economic growth," said Maxim Kolesnikov, First Deputy Minister of Economic Development.
For the first time, the document publicly and comprehensively describes the key terms of the concession agreement, direct agreement and pledge agreement necessary to protect the interests of creditors and holders of securities.
The model is advisory in nature and is intended for structuring projects in which the parties plan to attract market financing using securitization and bond issuance mechanisms.
The text of the document is posted on the Web sites.RF and DEVELOP.RF.
For more information, see the official press release of the Ministry of Economic Development of the Russian Federation.