Concrete Finance’s business focuses on the implementation of successful infrastructures in emerging markets, through the origination and financial structuring of complex projects. Infrastructures are the pillars upon which any economy develops: from transportation and communication, water and sewage, to power and its distribution. Infrastructures tend to be high-cost investments and are always a challenge to fund. Multiple forms of funding can be explored: public; private; and public-private partnerships. The choice is based on the function of the underlying infrastructure (e.g. revenue/non-revenue generation), the legal framework available (e.g. enabling environment), the country political and economic outlook, etc.
Concrete Finance is focusing on infrastructures that are key to the development of emerging countries, leveraging CMC’s long experience as a main contractor able to play a catalytic role vis-à-vis local and foreign SMEs. The business concept is the “value- chain”: the coordination of suppliers of specialized services and technologies in specific sectors and regions of the emerging world, to provide unique solutions to development projects and challenges.
Emerging Markets need adequate infrastructures to raise productivity and to attain solid growth. Efficient transport, reliable energy, safe drinking water and modern telecommunication systems are instrumental in attracting foreign direct investment, expanding international trade, and achieving long-term investment and growth. Infrastructure demand is concentrated in the developing world (home to 85% of the world’s population), where access to basic services falls well below the levels in the developed world: this is both a development challenge and a business opportunity.
The infrastructure needs of Sub-Saharan Africa will exceed US $93 billion annually over the next 10 years. Power and electricity will require between 45% and 60% of total funding, followed by water and sanitation (15-30%), transportation (15-25%) and telecom (10-15%). Currently, less than half that amount is being provided, leaving a financing gap of more than US $50 billion to fill. A recent study by the World Bank on private-public partnerships (PPPs) argues that such a need “raises infrastructure services from a good investment to a moral and economic imperative”.
Finance for infrastructure can take several forms: public, private and any combination of the two. Public capital, in turn, can be made available at various levels: multilateral; national; regional and local; by single government institutions. Development finance is being offered by National Development Banks (NDBs); Multilateral Development Banks (MDBs), such as the World Bank, Regional Development Banks (RDB); bilateral development financial institutions. They account for about three of every four infrastructure dollars, while the private sector provides the rest. In the aftermath of the financial crisis, governments have seen their fiscal deficits grow and their budgets shrink, increasing the need for private funding.
Typical borrowing can take the forms of sovereign or public borrowing and private borrowing, corporate and project specific. Project finance structures, including Public–Private Partnerships (PPP), are gaining importance as a mean to deliver a project or a service traditionally provided by the public sector. Participants to the PPP share the risks in ways that are project-specific. The goal of Concrete Finance is to identify and organize the best possible financial structure for its clients, bringing to fruition its financial know-how and a rich network of relations with private and public financial institutions.
Our Strategy in four pillars
Government and institutional relations
A wealth of government and institutional relations, both in the emerging countries of operations and in advanced countries. Extensive network of relationships with governments, policy-makers, private investors in client-countries. Historical links with providers of financial and insurance tools. Concrete Finance has working relations with all major multilateral, regional and bilateral development banks, national export credit companies, private banks and insurers.
Network of commercial relations
An extensive network of commercial relations on both sides of commercial transactions: the clients and the suppliers. Individual companies and SMEs can be organized in value-chains along sector and country initiatives, under the leadership of a main contractor such as CMC. Value-chains can mobilize highly specialized expertise and technology both from foreign as well local partners. They can offer integrated solutions to complex issues.
Experience of structuring complex deals
Long and diversified experience of structuring complex deals: from straight procurement to EPC with financing; from public-private-partnerships to project finance structures; from M&A to joint ventures. Concrete Finance team has a cumulated experience of working in multilateral organizations, export credit agencies, multinational firms, construction companies and advising emerging markets governments in policy and project matters (see team composition).
Ability to follow through the project cycle
The unique ability to follow through the project cycle: from the initial sector studies and project feasibility, to the preparation of procurement documents; from contract drafting and negotiation, to project implementation and monitoring. The approach follows the Public Private Partnership principles: Concrete Finance aims to be the connecting link between the client (buyer and borrower), the main contractor as well as the other players (banks, insurances, etc.) involved. Its reward is the timely and efficient project finalization.
The business model
Together with the client, Concrete Finance can identify the most efficient solution to the developing challenges of a country. A number of value-chains are already active in the following sectors: water and water treatment; logistic (roads, railways, ports and airports); social housing and smart infrastructures; social facilities and hospitals. The value-chain can cover the feasibility/design of the project, the construction phase, all the way through to the project management.
In parallel, Concrete Finance works with the client and the value-chain in identifying and mobilizing the most efficient funding mechanism for the project. In this approach, funding comes at the beginning of the project cycle. Far too often projects are prepared and launched for procurement, just to realize that the funding is not available in the amount, terms and conditions suitable for the project.
To raise the funding for the projects Concrete Finance will leverage its own network of contacts as well as the national platforms, such as major Export Credit Agencies supporting their national exporters, part of the value-chain through direct guarantees, co-insurance and re-insurance schemes; development finance institutions, providing equity and debts for private investments; cooperation programs offering grants and technical assistance. Concrete Finance can also work with multilateral organization, both global (e.g. The World Bank Group) and regional. Finally, Concrete Finance often raises funds from commercial lenders as part of larger and complex financial structures.
The project is deemed successful on two criteria: its efficient and timely development and implementation; its ability to create a follow through by involving all participants in a long term strategy. This might entail creating local capacity, providing technical assistance and training, as well as replicating the project formula to other initiatives. In summary, the value-chain will develop into a domestic player with its local partners. In the key African markets, Concrete Finance partners are now present with local investments and operations.