This was stated by the Minister in his opening address at the MEED Project and Infrastructure Finance Conference, held under his patronage in Bahrain on Tuesday. The conference discusses market – driven solutions to structuring and funding projects in the Middle East, Africa and Turkey.
He identified one area where the fundamentals have changed, the availability of debt financing, from banks. Whereas tenors of up to fifteen years were previously available, now it is difficult to obtain committed bank financing for periods beyond seven years. Some previously major European players in the project finance field have simply disappeared.
Also cited were entities with good risk management cultures such as insurance companies or sovereign wealth funds. “These entities also have greater patience than their colleagues the hedge funds. In project finance, patience is virtue, since projects may run for 20 years or more,” the Minister, said.
The Minister highlighted the significance of project and infrastructure finance, which has become more important in 2014 than ever before. He stressed that the notion of development is not confined to economic development, but social development as well. “Schools, hospitals, social housing, roads and desalination plants have all featured strongly as successful projects over the last 20 years. Infrastructure finance is very important because such projects all contribute to the strengthening of the social fabric of society,” he said.
He also emphasized the crucial need for new social infrastructure in the Middle East, Africa and Turkey, which all have strongly growing and demographically young populations, in contrast to certain G20 countries (such as Italy or Japan).
Referring to the potential package of projects in the region over the next 10 years as “huge”, he commended the role of the conference in providing suggestions and solutions to realizing the many different projects that are on the table.
The Minister put good planning at the heart of project finance and formulated three golden rules for success in this domain as you cannot eliminate risk. You can only manage it, monitor it, measure it and control it; nothing in life is free. No matter how much you outsource, there are still costs and responsibilities to be borne by the originator in project finance. Recognize those costs and responsibilities or the project will inevitably fail; be transparent and tell everybody your concerns, your intentions, your constraints and ask others to do the same.