C40 Voices: Scott Henderson, Finance Director
The second edition of Global Energy Basel concluded yesterday after two days of presentations, debate and networking around the topic of sustainable infrastructure finance. Global Energy Basel aims to provide governments, financial institutions, NGOs, academics and others with a platform to understand, troubleshoot and promote the financing of projects that achieve environmental and social goals but also operational targets over time.
As a coordinating partner of Global Energy Basel this year, C40 hosted two closed-door finance working group sessions specifically tailored for C40 Cities. In the first session, Adam Nicolopoulos of ADN Capital Ventures, Inc. provided C40 City delegates with an overview of project finance fundamentals and shared his personal experiences in developing and arranging capital for large-scale transportation and energy infrastructure projects. Key themes that Adam touched on during this session included:
- Project finance is very complex and cities can benefit greatly from utilizing specialists to help them navigate the web of contractual arrangements that need to be negotiated
- Project finance is principally about figuring out how to transfer risk to the parties that are best equipped to handle those risks
- Where project cashflows are not sufficient alone to cover a project’s expenses (including debt service and returns to equity investors), there are alternative models for financing which can be explored
- Given their long lifespans, infrastructure projects should be built on arrangements that are “win-win” for all stakeholders involved
These remarks primed the discussion for our second session, in which two C40 Cities presented actual projects in latter stages of development and in need of financing – a district cooling plant fueled by waste incineration and seawater; and a biogas-to-electricity project for wastewater treatment facilities. Following each presentation, the working group provided candid feedback on the strengths and weaknesses of the project as an investment opportunity, an exercise which participants unanimously reported to be instructive and thought-provoking.
The second session ended with a productive discussion on the C40 Sustainable Infrastructure Finance Network concept. The Network, to be facilitated by C40 staff, will provide C40 Cities with a structured opportunity to better leverage each other’s project development tools, domain expertise and real world experience in funding sustainable infrastructure. It will also attempt to harness the collective power of C40 Cities to procure outside technical support and/or partner with global financial institutions. The Network will be dictated by the shared interests of participating Cities. Stay tuned for its formal launch in the coming weeks…
Beyond the C40 working group sessions, Global Energy Basel’s conference consisted of a series of Policy Roundtables, Workshops and Investment Forums, conducted in parallel tracks and open to the general audience. In particular, the Investment Forums provided city governments, grouped by geography or theme, with an opportunity to briefly present projects in later stages of development and in need of funding. This exercise illuminated several things:
- Cities around the world are working on an outstandingly broad range of sustainability projects including public bike systems (Changwon, South Korea), wetlands restoration (Moscow), utility-scale hydro power (Tirana, Albania) and tax-lien financing for commercial building energy retrofits (San Francisco).
- Cities varied widely in their ability to effectively package and “sell” their projects to investors in the audience. It was clear that some cities could benefit from gaining a better understanding how capital providers evaluate infrastructure project opportunities.
- There is much room for thinking about how to creatively leverage finance to monetize the non-financial aspects of projects that have clear and measurable benefit – e.g. carbon reduction, social gains, job creation
Global Energy Basel was also notable for its significant presence of Chinese city governments and the China Development Bank, its emphasis on mobilizing institutional capital (e.g. pension funds) for investment in sustainable infrastructure, the role of multi-laterals in this area and surfacing larger questions around human behavior as it relates to resource consumption.
On behalf of C40, I would like to thank once again the City of Basel, the Swiss Federal Government and the conference organizers for accommodating and hosting our cities in this much-needed forum.
C40 Cities participating at Global Energy Basel included: Addis Ababa, Beijing, Berlin, Cairo, Changwon, Copenhagen, Dhaka, Ho Chi Minh City, Johannesburg, Karachi, London, Melbourne, Mexico City, Moscow, Rotterdam, San Francisco and Tokyo.