COMMERCIAL FINANCE FOR INDIAN CITIES

COMMERCIAL FINANCE FOR INDIAN CITIES

India: Poor Urban Service Provision and Low Investments Water and Wastewater Utilities 100% 80% 60% 40% 20% Solid Waste Sewage Treated (As a % of sewage generated) 30% 100% 100% Solid Waste Collected (As a % of waste generated) 72% 100% 100% 0% India China Brazil South Africa % of population served by water utilities Russia % of population served by wastewater utilities Turkey 1 2 3 1 2 3 Current in India s Cities Basic Service Standard Best in class Urban Transportation 2 Source: GWI Share of public transportation (As a % of mass public transit) 30% 50% 82% 1 2 3 Vehicular congestion (Peak vehicles per lane kilometer) 1 2 3 Current in India s Cities Basic Service Standard Best in class 170 112 85 Large External Investments Required to Improve Urban Service Level Investment needs of urban local bodies (ULBs) are enormous and growing with increasing urbanization pressure: HIPEC Estimate (2011): INR 39.2 trillion (USD 600 billion) McKinsey Estimate (2010): USD 1.2 trillion of capex needed till 2030 In 2007 2008, cities spent only INR 180 billion (US$2.75 billion), of which, only 3% were borrowings

Key Action Points for Municipalities to Improve Service Municipal capacity building Capacity to conceptualize, design and implement projects Capacity to identify and procure commercial financing Use of Private-Public Partnership (PPP) to attract private capital and skills to the urban sector Use commercial financing to leverage budgetary resources 3

Main Sources of Commercial Financing for the urban sector Market Based Financing Municipal bonds without a state government guarantee (Indian ULBs have raised a cumulative total of US $230 through issuing municipal bonds) Loans from Indian commercial banks and Multilateral institutions Land-Based Financing Several land based financing methods like higher Floor Space Index (FSI), Transfer of Development Rights (TDR), Impact Fee, Area Linked Development Charge, External Development Charge, Betterment Levy, etc. have been used as tools for financing urban development in India Public-Private Partnership 4

Considerations for Municipalities in raising Commercial Financing Creditworthiness To be discussed further in the creditworthiness presentation Municipal capability to conceptualize, design and implement projects efficiently Capacity of municipality s finance department to identify, negotiate and procure commercial financing Timely availability of the municipality s financial accounts Municipality s track record in raising and servicing commercial debt Market reputation of the Municipality 5

6 A Decade of IFC Urban Engagement

IFC s Urban Engagement: Products and Sectors Supported Products Loans Guarantees Credit enhancement of bonds Mobilization of third party resources Resilient infrastructure grants Sectors Supported Municipal - Other 41% Subnational - Water & Wastewater 13% Transport 46% Total Investment (2008- Current): $1.6 Bn Municipal-Other includes projects for : Hospitals, Clinics, Laboratories & Other Integrated utilities Education Other municipal general capex 7

How IFC Works with Cities Access to Finance: Bond Issuances 8

IFC Support for Bond Issuance City of Johannesburg, South Africa IFC provided a US$ 30 equivalent partial credit guaranty, which boosted the city s credit rating and helped extend tenor of its $150 bond from 9 to 12 years City of Ekurhuleni, South Africa Direct purchase of US $50 (equivalent in South African rand) in local currency bonds issued by CoE IFC s involvement in the project is expected to encourage a wider spectrum of international investors to provide long-term financing to municipalities and cities in South Africa Dakar Rabat Bamako Freetown Monrovia Abidjan ATLANTIC OCEAN Algiers Tunis Ouagadougou Abuja Lagos Accra Mediterranean Sea Douala Kinshasa N Djamena Bangui Lusaka Johannesburg Beirut Jerusalem Cairo Bujumbura Juba Kigali Amman Antananarivo Maputo Nairobi Dubai Sana a Addis Ababa INDIAN OCEAN Dar es-salaam IFC Hub Offices IFC Country Offices

How IFC Works with Cities Access to Finance: Mobilization of Commercial Finance 10

Recaudo Bogotá S.A.S Concessionaire Gulf of Mexico Mexico City Port-au-Prince Santo Domingo Kingston Guatemala City Tegucigalpa San Salvador Caribbean Sea Managua Port-of-Spain ATLANTIC OCEAN Bogota peso linked loan $55m IFC + $121m mobilization Bus system upgrade PACIFIC OCEAN Lima La Paz Rio de Janeiro São Paulo Bogota Colombia Buenos Aires IFC Hub Offices IFC Country Offices

IFC Hub Offices IFC Operational Centers IFC Offices 50m loan + 60m mobilization Metro line Istanbul Turkey London Frankfurt Paris Rabat North Sea Brussels Tunis Vienna Warsaw Zagreb Sarajevo Tirana Minsk Kiev Moscow Belgrade Bucharest Pristina Tbilisi Sofia Black Sea Istanbul Yerevan Beirut

How IFC Works with Cities Long-term Partnership 13

IZMIR AND IFC A DECADE LONG PARTNERSHIP 2010 2012 2013 2014 2015 2017 TCE Ege Traffic & Emergency Sea Transport IZSU Wastewater Astra Dorms Tramway Izmir Railcars Hexagon IZSU Impact Study Izmir Waste IZSU Sewerage Electric Buses IZSU Sewerage* Loan Loan Mobilization Loan Equity Loan & Mobilization Loan & Mobilization Loan & Equity Advice Advice Loan Advice Loan $20 $59 $68 $36 $10 $167 $58 $70 NA NA $12 NA NA Port Expansion TMS & new ambulances 15 new ferry boats Treatment plant expansion New dormitory rooms New tramway lines 85 new metro cars Waste-tofertilizer E&S impact of sewers Support of waste project New sewerage lines Analysis of electric buses Network & treatment plants 1 2 3 4 5 6 7 8 9 10 11 12 13 *Expected in 2017 14

IFC : Support Beyond Financing Custom financing and advisory solutions for creditworthy municipalities (examples) Creditworthiness Municipal creditworthiness academy Technology & innovation Intelligent traffic lights Bogotá Waste-to-fertilizer Izmir Loans Guarantees Core financial products Enhancement of bond issuances Mobilization of 3 rd party resources Resilient infrastructure grants Community Mitigation plan for displaced workers in BRT concession Cartagena Private Sector PPP advisory for street lighting Rajasthan Workshops on financing models Cape Town Environment & Efficiency Market & technology analysis on electric busses Izmir Green building certification program India Non-revenue water audit & investment feasibility Lima 15