This presentation was made by Thierry Lemaignen, Sumitomo Bank, at the at the 10th Annual Meeting of the OECD Network of Senior PPP & Infrastructure Officials held in Paris on 21 March 2017.

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Harnessing private financing to Boost
Infrastructure
21 March 2017
10th Annual Meeting of the OECD Network of Senior PPP and Infrastructure officials

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Europe, Middle East & Africa
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Corporate Profile
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Project Finance
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SMBC Global Project Finance Coverage
(Project Finance)
Marketing: 50 officers
Credit Control: 35
officers
(ECA & Advisory)
Marketing: 10
officers
London
Marketing: 1 officer
Johannesburg
Marketing: 4 officers
Amsterdam
Marketing: 1 officer
Dusseldorf
Marketing: 3 officers
Milan
Total
377 officers
(as of Sep 2016)
(Project Finance)
Marketing: 29 officers
Credit: 19 officers
(ECA)
Marketing: 8 officers
Tokyo
Marketing: 10 officers
Seoul
Marketing: 4 officers
Credit: 1 officer
Hong Kong
Marketing: 34 officers
Credit (inc. Agency): 14 officers
Singapore
Marketing: 1 officer
Jakarta Marketing: 16 officers
Credit: 9 officers
Sydney
Marketing: 1 officer
Hanoi
Marketing: 1 officer
Bangkok
Marketing: 1 officer
New Delhi
Marketing: 5 officers
Dubai
(Project Finance)
Marketing: 64 officers
Credit Control: 22 officers
(ECA)
Marketing: 8 officers
New York
Marketing: 3 officers
Mexico City
Marketing: 3 officers
Bogotá
Marketing: 5 officers
São Paulo
Lima
Marketing: 2 officers
Santiago
Marketing: 4 officers
Marketing: 2 officers
Toronto
Marketing: 7 officers
Paris
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Market Trends
• Total project values were similar in 2016 to
2015 at cUS$650bn but several very large
deals contributed $136bn and the number of
deals was down
• Europe remains most active region
• Bank debt was down as a proportion with
bonds and equity filling the gap
• Share of renewables is increasing (13%)
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$27,177
$279,944
$208,615
$99,819
$19,058
$25,082
$109,121
$6,541
Global PF - Transaction Values By Sector (IJGlobal)
Mining Oil & Gas Power Renewables
Social & Defence Telecoms Transport Water

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Market Trends (IJGlobal)
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• Infrastructure financing and Public debt
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Historical overview of S&P Sovereign debt ratings of Selected OECD Countries, 1970-2017
Country
Year of
first rating
1970 1975 1980 1985 1990 1995 2000 2005 2010 2012 2017
Austria 1975 NR AAA AAA AAA AAA AAA AAA AAA AAA AA+ AA+
Belgium 1988 NR NR NR NR AA+ AA+ AA+ AA+ AA+ AA AA
Canada 1949 AAA AAA AAA AAA AAA AA+ AA+ AAA AAA AAA AAA
Denmark 1981 NR NR NR AA+ AA+ AA+ AA+ AAA AAA AAA AAA
Finland 1972 NR AAA AAA AAA AAA AA- AA+ AAA AAA AAA AA+
France 1975 NR AAA AAA AAA AAA AAA AAA AAA AAA AA+ AA
Germany 1983 NR NR AAA AAA AAA AAA AAA AAA AAA AAA AAA
Greece 1988 NR NR NR NR BBB- BBB- A- A BB+ CC B-
Iceland 1989 NR NR NR NR A A A+ AA- BBB- BBB- A-
Ireland 1988 NR NR NR NR AA- AA AA+ AAA A BBB+ A+
Italy 1988 NR NR NR NR AA+ AA AA AA- A+ BBB+ BBB-
Japan 1959 NR AAA AAA AAA AAA AAA AAA AA- AA AA- A+
Luxembourg 1994 NR NR NR NR NR AAA AAA AAA AAA AAA AAA
Netherlands 1988 NR NR NR NR AAA AAA AAA AAA AAA AAA AAA
Norway 1958 NR AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA
Portugal 1988 NR NR NR NR A AA- AA AA- A- A BB+
Spain 1988 NR NR NR NR AA AA AA+ AAA AA A BBB+
Sweden 1977 NR NR AAA AAA AAA AA+ AA+ AAA AAA AAA AAA
Switzerland 1988 NR NR NR NR AAA AAA AAA AAA AAA AAA AAA
Turkey 1992 NR NR NR NR NR B+ B+ BB- BB BB BB
United Kingdom 1978 NR NR AAA AAA AAA AAA AAA AAA AAA AAA AA
United States 1941 AAA AAA AAA AAA AAA AAA AAA AAA AAA AA+ AA+
AAA A BB+ Non-Investment Grade
AA BBB Source: DB, S&P, SMBC
• Understanding debt consolidation rules
• Public / private partnerships’ main
objective is not to manage public debt
• Assessment of sovereign risk is a key point
when analysing infrastructure projects
Source: DB, S&P, SMBC
Source: OECD
A Banker’s view

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• Public / Private financing decision
• No political consensus on usage of PPP across countries
and political forces
• Stable deal flow required to maintain visibility
expertise, teams, liquidity and investors’ appetite
• Sound and stable regulatory framework is key
• Transparency / understanding / acceptability of the
model by the public sector and the populations
• Contracts need to be balanced (risk sharing)
• Education / competence of all parties involved
• The transaction does not end at signing of the Public /
Private contract: sound and fair management of the
contract over time
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A Banker’s view

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• Regulatory environment for banks and investors significantly impacts the amount of liquidity
available for infrastructure projects (Basel 3-4, Solvency 2, etc.)
• Infrastructure consists of long term assets and long term funding availability is a key element of
the viability of infrastructure projects
• Facilitation of long term financing can be sought (repo / refinancing solutions, permit different
pools of liquidity, FX provisions, etc.)
• Limited liquidity for volume, traffic or merchant risk. Consider backstop provisions to mitigate
the risk and increase the liquidity available for these projects?
• Better use of public funds available for the sector / Understanding of the financial markets is key:
• Understanding of rules and regulations imposed to the financial sectors (Basel, Solvency
etc.) when seeking use of private funds for new infrastructure projects
• Assess necessity to inject funds from public / sovereign institution in a context of abundant
liquidity
• How can public funds be used as seed capital to develop new infrastructure markets?
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A Banker’s view

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• Traditional infrastructure needs will remain high but the main challenge of Infrastructure
Financiers in the next years will be to finance the transition to a low carbon economy
Smart Grids Smart Cities
Low Carbon Energy
Digitalisation
Battery Storage
Source: Engie
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A Banker’s view