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Constitute a trust fund
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Collaterals over shares and over the assts
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During the construction period, guarantees are needed (credit letters or corporate guarantees)
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Guarantees from the contractor in case of incompliance
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20% own capital contribution
There is no minimum size, but because of the complexity of these forms of finance, no projects of less than 15 million US$ have been approved. PROMAGUA of FONADIN (National Infrastructure Fund). FONADIN is a trust fund, established by the Ministry of Finance but within BANOBRAS and managed by BANOBRAS. The fund is replenished by the profits from toll roads, and can be used for concessional finance, junior debt, guarantees and risk capital. Moreover, it can be used to provide subsidies and non-repayable finance to projects with a high social return. Above all, it is used for projects with financial risks that the market is not able to take. One of the programmes under FONADIN is PROMAGUA, which includes: •
Providing concessional and non-repayable finance of up to 49% of projects under PPPs.
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Providing non-repayable finance of up to 50% of the costs to prepare projects, studies, tendering documents and project closures. Even though it provides these conditions, only 20% of the projects financed through this, have concluded successfully.
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Still under consideration is using this programme to create earmarks for the modernization of the commercial departments of utilities.
Recipients of non-repayable finance from PROMAGUA include States (through the CEA) and municipalities, as well as OO. One of the main advantages of this programme is that it reduces the pressure on local public finance, as it combines with private capital. This fund has been used for some 33 projects in the water sector. With the equivalent of €420 million in non-repayable finance, an investment total of €937 million has been generated. Moreover, some 47 grants for studies and Project preparations were approved. Risk assessments As part of its due diligence process, BANOBRAS does a risk assessment for the various types of finance. In terms of financial risks the following applies: •
For credits to local governments, the laws on fiscal discipline apply, which indicate the level of debt a local government can take on
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For credits to an OO, the OO needs to have a certain revenue flow from tariffs to cover both operational costs, and the paying-back of the credit.
Moreover, environmental and social risks are assessed, as part of the Environmental and Social Policies of BANOBRAS. Within that, a specific point of attention is climate change mitigation and adaptation. BANOBRAS is in the process of being accredited as Direct Access Entity for the Green Climate Fund (GCF). The GCF has the objective of catalyzing climate change mitigation and adaptation projects, in alignment with the SDGs, through concessional finance channelled through accredited entities. BANOBRAS is being supported by the World Bank, IDB and GIZ (amongst others) in this accreditation process.
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