Innovative railway financing: solutions and opportunities
Last week, the World Bank brought together the international railways community in Vienna, as well as the public and private sector to discuss financing challenges and opportunities, critical aspect of rail strategic development. Indeed, railways worldwide have been able to employ a wide range of mechanisms to attract investment capital. However, often governments act as the predominant equity financiers, with debt being supplied by domestic bank credits or borrowing from International Financial Institutions. It is important for railways to explore other financing mechanisms, to increase cash flows from its core and non-core activities, and leverage the value of its assets.
This workshop presented real life examples and best practices of innovative financing in railway projects and operations, as well as successful stories of profitable private sector participation.
UIC participated in the industry representatives’ panel
Zakaryae Boudi, UIC economic development advisor, took part of the opening panel on the topical challenges and opportunities of rail financing. The discussion recalled that railways must find new ways to reverse backlogs in infrastructure spending, renew their rolling stock and invest in more capacity or new projects, in order to tackle the growing demand, driven by rapid urbanization, road congestion and societal demands for a green mobility.
He said, “What is needed is a sound project preparation and structuring, as this is one of the most critical components to reach a fair access to finance, and this includes a clear definition of project scope and goals, a good estimation of implementation delays and project costs, systematic risk analysis and balanced risk sharing, and also quantifying external benefit.”
The global trend confirms the emergence of private sector partnering as a serious component to railway infrastructure financing and management, where models such as PPPs constitute a promising and important solution to attract private participation. However, there are many examples from the rail sector that illustrate the difficulty of setting successful and well-structured PPPs. Private participation possibilities are numerous, and additional PPP schemes could be explored for the structuring of financial deals, including infrastructure and rolling stock operations for HSL, urban rail, signalling, telecommunications, energy supply, terminals, and other asset value development, etc.
Mr Boudi’s address put a clear emphasis on the lack of capacity and experience that is necessary to build sustainable and bankable pipelines, especially in emerging markets. Even in the more mature markets, where promoters are competent and experienced in project preparation, they could still improve their processes by better understanding the various qualification approaches of stakeholders, so they can attract more industry partners and infrastructure investors to provide capital on a greater scale. He said, “Railway companies, investors and lenders would greatly benefit from sharing more information, building stronger relationships, in more structured ways.”
In this regard, UIC project to create a Centre for rail PPPs looks forward to helping stakeholders pro-actively seek the specificities and requirements of each other, in order to improve private investment and long-term management.
Register for the UIC International Workshop on Rail Financing and PPPs, last places available here:
https://events.uic.org/workshop-unlocking-finance-for-railways
