MIL OSI Translation. Region: Russian Federation –
On June 22, the Government decree expanded the list of support measures for the MSW management industry. The document was signed by Prime Minister Mikhail Mishustin. Now the Russian environmental operator will be able to finance the creation of facilities for processing and recycling of waste through the purchase of bonds.
“This is one of the steps to expand support measures, which we will direct to the creation of facilities for waste processing, the development of a system for handling MSW. Initially, the measures were not effective; in fact, they were limited to entering the authorized capital of enterprises. The new instrument will be the redemption of bonds, in practice it is repayable financing of the creation of infrastructure for waste management. In the future, we consider preferential leasing of equipment, reimbursement of part of the cost of a bank guarantee, and others as a measure of support. New support mechanisms for a still developing industry should give the necessary impetus, ”said Deputy Prime Minister Viktoria Abramchenko.
Investors in MSW processing and disposal facilities will be able to issue their bonds to raise funds to finance the project.
The Russian environmental operator, at the expense of a subsidy provided to it from the federal budget in the form of a property contribution, will be able to redeem these securities on the following conditions: the maturity of bonds is no more than 10 years, the coupon rate (interest rate on bonds) is 3% per annum, the amount of redeemed The REO of bonds will amount to approximately 28.9% of the total project cost – based on the ratio of 1 ruble of budget funds to 2.46 rubles of private investment.
The allocated funds are repayable. This means that after the money from one project is returned to the REO, it will be reinvested by the company in the waste management industry to implement a new project on the same terms.
“This is a market-demanded support tool that allows you to create comfortable conditions for participation in projects both from private investors and from financial organizations and PPK REO as a development institution,” said the head of PPK REO Denis Butsaev.
The measures to support the industry will allow creating new capacities for processing and recycling waste on conditions comfortable for investors and financial organizations, as well as creating debt financing in the MSW sector and laying the foundation for the introduction of green standards in the creation of infrastructure. “Measures of state support will also help to reduce the social burden on the population, avoid an increase in tariffs and, of course, will advance the waste management industry itself to fulfill the goals of the national project“ Ecology ”, on which the well-being and health of the country’s residents depends,” said the Deputy General Director of the EcoLine Group »Elena Vishnyakova, – Thanks to the decision of the Government, operators will receive a real instrument of support in the implementation of projects, without which further development of the waste management industry is impossible. And this is a tangible help – interest rates on bank loans are almost 3 times higher, and in the future we plan to take advantage of this opportunity ”.
In addition, as the head of the expert and analytical platform “Infrastructure and Sustainable Development Finance”, Director for Sustainable Development of JSC Citymatic Svetlana Bik notes, new measures to support market participants from the PPK REO through the redemption of bonds of companies that invest in the sphere of MSW management , can become not only drivers for creating a modern infrastructure in the industry, but also a source of stimulating deeper ESG transformation processes in a rather complex sphere of entrepreneurial activity.
“The implementation of such a large-scale program of state support will expand the available sources of financing for MSW projects, and, to a certain extent, reduce the debt burden on financed projects at the expense of a preferential interest rate applicable to the subsidized part of the debt, which, in turn, may have an indirect positive impact. on the credit quality of such projects and related financial instruments. We believe that the concept is capable of arousing the interest of market participants, especially since the proportion of financing of 30% to 70% is familiar and understandable to many participants in the project finance market, ”says Alexey Mukhin, Managing Director of the Analytical Credit Rating Agency (ACRA).
In addition, as the expert emphasizes, the decision will potentially contribute to the diversification of available forms of structuring financial instruments issued for the purpose of funding the industry, including with the introduction of internal mechanisms to support credit quality (such as tranches), which in turn can also lead to cheaper costs. financing projects. “This is especially important at the investment stage of the project, when it is quite difficult to find investors in the project because of the risks of the construction stage, which not all market participants are ready to accept,” says Alexey Mukhin.
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and or sentence structure not be perfect.