Feb 23, 2017 (LBO) – Sri Lanka’s cabinet has approved establishing a special infrastructure company to seek funding for critical infrastructure projects, especially focusing on highways.
The Special Infrastructure Company (SIFCO) established under the Road Development Authority will be a public limited liability company incorporated under the Companies Act and the RDA will own majority shares.
In a cabinet note Finance Minister Ravi Karunanayake said the company will own all expressways that are Southern Expressway, Outer Circular Expressway and Colombo Katunayake Expressway.
It is proposed that all completed expressways to date will be bundled into and transferred to this single company where the asset base will be substantial, estimated at Rs243 billion or USD1.65 billion.
It will also undertake future expressway development and recently commenced expressways which require 4 billion US dollars within the next 3 to 4 years.
“With the asset base in place, the SIFCO will be in a position to raise capital from investors or arrange financing for expressways and collateralize all loan agreements using the expressways as collateral,” he said.
“Therefore SIFCO as the borrower will not come within the government borrowing programme.”
Finance Minister says the creation of SIFCO will allow local and international financiers to lend directly to this entity and the company will invest on identified expressway projects.
“While the Treasury will arrange guarantees to the lenders (both implicit and explicit) on a need basis, revenue from the expressways earned by the company will be utilized to repay loans.”
“Government Guarantees will cover only any shortfall should the revenue from expressways be inadequate to service the debt of the company.”
As a start, SIFCO will be used as a transitional vehicle to allow local capital market investors to provide funding to accelerate development of essential Infrastructure projects.
In the long term, it aims to open up foreign and local Investments into infrastructure sector through Takeover, Operate and Transfer (TOT) basis or other internationally accepted investment modalities.
Government said the company aims to create a mechanism to fund and undertake current and future investments in prioritized infrastructure projects such as expressways in the most appropriate manner.