Financing of  large infrastructure projects creates stable jobs and spurs growth in other sectors of the economy.

Infrastructure development is now a priority for the world’s leading economies.

The state and quality of infrastructure is one of the criteria for socio-economic development and a powerful lever for the growth of social welfare.

Energy, water supply, transport and telecommunications directly affect the quality of life of the population.

The key problem in the implementation of new investment projects is the correct choice of financing scheme. This complexity can be attributed to limited government spending and the growing range of potential funding sources offered by markets (including investment loans).

One of the most important models for financing large infrastructure projects is project finance (PF).

In this case, the planning, financing and management of the project is carried out through a special purpose vehicle (SPV), the shareholders of which are companies interested in the project.

With the growing need for financing large infrastructure projects, dissatisfaction with the current quality of infrastructure and limited resources of the state budget, the PF is becoming an increasingly important instrument that meets the interests of business and society.

A prerequisite justifying the need to use long-term loans for financing of large infrastructure project is the convenience of its use in public-private partnership projects.

CP Finance UK Finance finances infrastructure projects around the world, including Europe, the United States, Latin America, the Middle East, Africa, East Asia and other regions.

We offer investment loans for the construction of roads, pipelines, seaports, electrical substations, wastewater treatment plants and other facilities.

Our finance team helps clients obtain large loans from European banks, attract venture capital and interested private investors. We also offer clients all kinds of financial advice, tax optimization and other services.

The essence of financing for large infrastructure projects

Infrastructure can be defined as artificial, permanently located public facilities that form the basis of economic life due to its functions of moving people and goods, supplying electricity, water, and so on.

Leading economists also highlight the so-called social infrastructure, which indirectly supports the development of the economy, satisfying the intangible needs of the population.

Infrastructure plays a leading role in the functioning of the social system. Infrastructure activities are usually controlled at the local level, as the development of roads, urban transport, seaports, water pipelines and power grids is the responsibility of local authorities.

Financing of large infrastructure projects often requires public participation. In Europe, the importance of this issue is emphasized through co-financing from the European budget.

Infrastructure projects can also be categorized according to their range (eg international, national, regional, local).

Economists often distinguish between public and private infrastructure.

The term “infrastructure investment” refers to the investment in infrastructure assets to obtain specific benefits at the perceived risk.

There are the following types of financing for infrastructure projects.

First, an investor can buy securities of an infrastructure investment company.

Secondly, a financial institution can provide an investment loan for the construction or expansion of the related infrastructure.

Finally, it can be subsidies and grants for strategic projects.

The company can also decide on direct investments, including expansion, modernization, reconstruction or construction of a new infrastructure facility. In the context of infrastructure investment, so-called intangible investments are important, including R&D expenditures, which play a critical role in sectors such as communications and energy supply.

Infrastructure investments can be classified according to the source of funds. Here we are talking about public, private and public-private investments made jointly by both sectors.

Infrastructure is characterized by specific features that determine the planning and implementation of investment projects.

Obviously, these features influence the choice of financing models.

• Specific objectives: infrastructure facilities provide public services in the area of production or consumption, therefore financing of such projects is important for the whole society.

• Structural cohesion: Infrastructure projects usually require the construction of the entire facility to achieve planned functionality.

• High capital intensity: the construction and operation of infrastructure facilities are associated with significant costs with a long payback period.

• Longevity: Once built, infrastructures can define the landscape of production and population systems for an extended period of time, continuing to serve for decades or even centuries.

• Lack of mobility: infrastructure facilities are permanently connected to a specific region, which implies the use of local services.

The above information reflects the specifics of the infrastructure.

Funding models for infrastructure projects should take into account capital intensity, high risk and long investment project cycle.

This limits the financing options available, and sometimes excludes the participation of a private investor who expects a return on capital invested in the shortest possible time.

Fundamentals of financing large infrastructure projects

Funding for socially significant infrastructure projects is based on three principles, which clearly indicate the distribution of responsibilities between private companies, authorities, other institutions and users:

• Principle of financial responsibility: public authorities are responsible for project preparation, while private partners are largely responsible for construction and operation.

• The principle of decentralization: each part of the project is carried out by the participant who is most effective in the given conditions. The state usually provides technical assistance, subsidies and regulation of the process.

• Principle of microeconomic optimization: this principle is widely applied to users who cannot be directly attracted to finance construction.

In the case of financing private infrastructure projects, the situation changes dramatically.

According to these principles, responsibility, including investment risk, is allocated mainly between private companies and users.

The financial participation of the state in the implementation of large infrastructure investment projects is determined by numerous factors, including the economic activity of the state, its propensity to invest in public projects.

In addition to financial motives, the private sector can participate in financing  for large infrastructure projects (investment loans) for the following reasons:

• An infrastructure project is essential to achieving business goals.
• Allocated public funds are insufficient to finance the growing business needs for maintenance and infrastructure development.
• The participation of private equity in infrastructure investments is a significant factor in negotiations with the authorities.
• Companies strive to serve the community by providing infrastructure services at a reasonable price, quality and quantity.

In the 1990s, Europe saw a shift in responsibility for the transport infrastructure network and utilities, from state to corporate, as it required the highest possible return on investment.

Today, private companies build, operate, maintain and upgrade numerous roads, bridges, tunnels, seaports and terminals, water treatment plants, gas pipelines and oil pipelines around the world.

All this reflects a clear trend towards shifting responsibility for public projects to private companies.

Against this background, the search for funds to finance large infrastructure projects has intensified, since business is looking for the most convenient and profitable sources both in the form of investment loans and in the form of combined PF instruments.

Private equity in financing infrastructure projects

In many European countries, the provision of infrastructure services is still the responsibility of municipalities, which determines their key role in such projects.

Municipalities are involved in infrastructure construction in a variety of ways:

• Implementation of projects using the resources of the local community.
• Creation of special purpose vehicles to attract external financing.
• Inclusion of private companies in accordance with applicable law.

Project finance is a principle in which the tasks of municipal authorities are partially shifted to an SPV (Special Purpose vehicle) created for these purposes.

This approach is becoming more common.

As previously outlined, the public sector’s objectives in the provision of public services are changing in recent years. Although such projects are traditionally considered unprofitable, it should be noted that there has been a significant increase in the attraction of private equity through SPVs for the implementation of infrastructure projects.

This method of financing has certain advantages for local authorities.

First, an SPV can raise significantly more funds than the limits set for municipal companies in many countries.

Second, paying off the investment loan disciplines utility companies, making them more efficient.

Finally, attracting private investors through SPVs requires significantly less bureaucratic procedures than financing directly from the budget.

To avoid abuse in the implementation of infrastructure projects with state participation, it is important to ensure maximum transparency of investments with the involvement of professional financial and management teams.

In general, insufficient investment in infrastructure with limited resources of the state budget is today the main motive for finding new solutions that would make infrastructure projects more profitable for the private sector.

The starting point for private participation in infrastructure investment is the emergence of management initiative. According to this principle, the management of a public service provider or the management of a private company should be based on the same principles.

This management approach delivers customer focus, efficiency and innovation with benefits for business and society as a whole.

Despite the current significant differences between the management of public and private entities, in both cases the goal is to improve efficiency and increase the value of the company.

Why does this approach find application in infrastructure investment?

It should be borne in mind that the traditional management of infrastructure and the provision of public services by state-owned companies has become ineffective.

The reasons for attracting private equity may be as follows:

• Failure of the public sector to provide adequate quantity and quality of public services in the municipal sector.
• Chronic budget deficits and insufficient motivation of local government to work effectively on infrastructure projects.
• Growing social expectations and environmental demands.

On the one hand, modern conditions have required public authorities to train the private sector and use effective mechanisms already developed in this sector.

On the other hand, they opened the way for private companies.

Thus, models of financing infrastructure projects have emerged, involving increased participation of the private sector in the ownership and / or management of infrastructure facilities.

Infrastructure service models

Currently, there are different approaches regarding the allocation of costs, risk and, as a result, the sharing of rewards.

We can distinguish four models in the provision of infrastructure services.

In the traditional (German) model, the responsibility lies with the municipality.

The British model combines the functions of owner and operator in a private company. The private initiative to finance infrastructure services or investments is supported by a related UK government program.

Management contracts, leasing, concession are options of the French model, in which the operator is selected by the municipality through a tender. Without losing control over the infrastructure, the commune can ensure efficient management and modern technology.

Finally, the industrial model refers primarily to industrial infrastructure.

Here, a private owner hands over the infrastructure to specialized operating companies in order to improve efficiency and reduce operating costs.

Each of the listed models has its own advantages and disadvantages. Thus, the German approach to infrastructure projects ensures low cost of public services. On the other hand, the British approach is more flexible and less bureaucratic, independent of politics.

The experience of other countries shows the feasibility of using individual models for specific activities. The German model finds particular application in the water supply, sewerage and heating sectors. It is used in Germany, Portugal, the Scandinavian countries and the USA.

The British model is only popular in the United Kingdom in the water and wastewater sector. The French model, which dominates France and the developing countries of South America, focuses on the wastewater, heating and waste management sectors.

Finally, the industrial model is appropriate when a company that owns an infrastructure wants to improve its functioning. Local government policies also play an important role in this matter.

The World Bank, promoting the French model, describes options for financing infrastructure services in the context of the growing private sector participation in these activities.

BOT, BOOT, concessions, leasing, public-private partnerships, management and maintenance contracts – the implementation of these projects today takes a variety of forms.

An individual or company can participate in infrastructure financing, infrastructure management, and both. Such cooperation can be carried out in the form of leasing, concession, sale of assets or the creation of joint ventures.

Investment loans for infrastructure construction

An investment loan is a type of loan provided to companies to finance new investment projects.

This type of financing is characterized by a significant amount of available funds.

To obtain an investment loan for the construction of infrastructure, a company usually needs to make a contribution of up to 20-30% of the total planned investment costs.

CP Finance UK Finance is ready to provide an investment loan on the most favorable terms with an initial contribution of the project initiator of 10%.

Investment loans for businesses can be provided for up to 15-20 years.

This option has a number of significant advantages. First, the company can repay the loan before the agreed period expires. Secondly, banks can provide grace periods.

The role of project finance in infrastructure development

The above features of infrastructure projects require careful planning of projects, given their high capital intensity and long payback period.

Among the features of project finance for infrastructure projects, it is worth noting the use of high financial leverage, lending to companies without an operating history, and a complex structure of project participants.

History of project finance: global experience

The project finance method is applicable to many investment projects.

PF as a concept based on the use of private capital to finance investment in public services has a long history. As early as the 18th and 19th centuries, the road network was renewed in England, where the source of return on private investment was the toll for the use of the road.

The development of railroads, water, electricity, and telephony in the 19th century also required private equity. In the first half of the 20th century, the state assumed these responsibilities in many countries, but over the past 25 years, the process has reversed again.

Project finance in natural resources (coal, oil, gas) began in the 1930s in the United States.

This was followed by the development of oil fields in the North Sea (1970s) and other projects related to the development of mineral deposits in Australia and other parts of the world.

The use of project finance in the energy sector also began in the United States, where the Private Utlity Regulatory Policy Act was adopted in 1978 to support the development of private energy production (IPPs, or Independent Energy Projects).

A consequence of the processes of privatization and deregulation in the United States were similar processes in the energy sector in the UK in the early 1990s and then around the world.

The growth of PF over the past 20-25 years is mainly associated with global deregulation processes.

Co-financing of large infrastructure projects as roads was intensive in the UK in the 1990s thanks to the Private Finance Initiative (PFI).

Currently, these projects are called public-private partnerships.

One of the areas of use of project finance for infrastructure projects is also telecommunications, in particular the financing of mobile networks, which developed intensively in the late 1990s.

Today, project finance is also supported by the internationalization of investment processes.

Leading investors, consultants and lenders have projects from all over the world in their portfolios and use the experience gained in numerous projects.

Project finance is perceived as a method of financing large infrastructure projects and complex investments with increased risk. However, there are no restrictions on the amount of debt, so the use of the PF is possible for relatively small projects, including those implemented in small settlements for the local community.

CP Finance UK Finance investment services in Europe and beyond

CP Finance UK Finance provides a full range of financial services related to the construction, modernization or expansion of infrastructure around the world.

We offer financing for large infrastructure projects of all types.

Our interests cover the following projects:

• Highways and bridges.
• Sea ports and cargo terminals.
• Power plants, substations and transmission lines.
• Wastewater treatment facilities.
• Oil and gas pipelines.
• Social infrastructure, etc.

Interested in raising funds for the implementation of large infrastructure projects?

CP Finance UK Finance will answer any of your questions regarding investment lending and project finance.

CP Finance UK FINANCE LIMITED
Website:https://c-pfinanceuk.com/
E-mail:finance@cpuk-financeltd.com
Alt-Email:admin@cpukfinanceltd.com

Global investment in the energy sector in 2020 decreased by about $ 400 billion compared to 2019, while Financing of electrical substations amounting to just over $ 1,500 billion.

An electrical substation is a key node in a power system where energy is converted to adequate voltage levels for transport, distribution or consumption.

The development of any sector of the economy that consumes electrical energy, be it heavy industry or mining, requires additional investment in the construction of electrical substations and other elements of the power system.

Growing competition requires businesses to implement more efficient solutions in various areas, including generation, transformation and transmission of energy.

In recent years, companies in the power sector around the world have been challenged to implement new technological developments at their facilities to improve customer power services while striving for better quality and price conditions. The cost of electrical substations is also rising, given the stringent requirements for energy quality, safety and facility automation.

CP Finance UK FINANCE, a financial specialists perform a full range of works on the design and calculation of technical and economic parameters of electrical systems and networks, including the development of individual energy projects for power plants, industrial facilities, transport hubs, and so on.

We offer financing for electrical substations and construction of the facilities in Europe, the USA, Latin America, North Africa, the Middle East, as well as in the countries of South and East Asia.

The offerings of our finance company include the organization of project finance (PF), long-term investment loans and much more.

Determination of the cost of financing an electrical substations

Engineering design and financial calculations of electrical systems are based on a detailed analysis and feasibility study of the initial parameters and data collected at the pre-investment research stage.

The chosen option for the implementation of the electrical substation project should ensure the supply of energy to consumers with the lowest investment costs while maintaining optimal quality, reliability and flexibility of the facility.

Multi-stage work to determine the cost of financing an electrical substations includes the search for structures, equipment, materials and methods for their connection, which ensure the achievement of the planned economic indicators of the project with the obligatory compliance with the technical standards of the host country. These works should be an important part of all projects for the construction, modernization, expansion or reconstruction of electrical systems of any scale.

After the approval of a specific list of equipment, materials and technical solutions, our technicians begin stage-by-stage work on the development of technical documentation.

At the same time, the CP Finance UK Finance legal team is working to obtain the necessary approvals from local authorities, licensing authorities, representatives of electricity supplier companies, etc.

The electrical substations planning stage usually includes, but is not limited to:

• Analysis of the existing power system of the region including determination of its load, regulation conditions, as well as the potential for further development.

• Assessment of the requirements of key consumers to ensure optimal operating conditions for the equipment and substantiation of the parameters of the future power substation.

• Analysis of the parameters of the connected power plants and the selection of suitable operating modes for each facility to ensure their balance and dynamic stability.

• Performing professional calculations of power grid operating modes in order to develop an optimal scheme of electrical equipment including transformers, automation, protection systems, compensating devices and other units.

• Estimation of the required costs, including the purchase of materials and equipment, site preparation and the cost of professional services, including the services of construction contractors, independent consultants, etc.

• Preparation of a detailed report with technical and economic indicators of the future system, stages of construction, funding requirements.

The engineering design and financing of electrical substations in general covers an extremely wide range of practical issues.

Along with a systematic approach, which should be aimed at solving strategic business problems, the engineering team is faced with numerous narrow technical problems, such as the most rational choice of protection and automation devices.

There are many techniques used to estimate project costs in the early stages of development. These methods, widely used in areas such as electrical engineering, include Phased Estimating, Multi-Element Estimating, Factoring Estimating, and Parametric Estimating, among others.

In general, the cost of electrical substations today can reach several tens of millions of euros, which depends on the type of facility, capacity, location, the degree of technical complexity of the project and a number of other factors.

The schedule of financing  for the electrical substations and the amount of funds received at each stage of construction should be drawn up individually, taking into account the conditions of a specific project and the requirements of stakeholders.

Factors affecting the cost of an electrical substation

When starting the engineering design of an electrical substations, it is necessary to clearly define its place in the power system, to determine the function that it should perform today and tomorrow.

When determining the parameters of a substation under construction, it is important to clarify the investment efficiency indicators. Investment decisions are made on the basis of analytical information obtained from various sources.

The cost-benefit principle states that value is created when the benefit of a solution exceeds its cost.

The financial cost of the construction of an electrical substation is formed under the influence of the following three variables:

• Cash flow of the investment project.
• Time of project implementation from idea to commissioning.
• Risks and uncertainties associated with the project.

Any financial decisions made by project initiators and investors are closely related to the value of money over time.

The money received the next year is worth more than the same amount when it was received in the fifth or tenth year of construction. Most financial decisions made at the large business level must take into account the change in the value of money over time.

The most important factors affecting the cost of financing an electrical substations are the type of facility and its location in the system.

Finding the optimal solution is often difficult and requires deep economic and technical analysis.

When choosing a specific technical solution for a substation, several factors are taken into account, such as the location of the substation and the length of the associated low voltage circuits, the type and layout of the site, the characteristics of medium and low voltage networks for connection.

Both investment and operating costs are taken into account when preparing an engineering project. The costs of construction of a substation, power lines and installations constitute the main costs incurred from the moment of making a decision on construction until the moment of putting this substation into operation. Operating costs mainly include the cost of purchasing electricity, maintenance, repairs and energy losses. The exact proportions of these costs differ for each project.

It is worth analyzing these costs not only at the construction stage, but also in the context of the long-term operation of the facility.

The substation should be designed in such a way as to ensure the appropriate quality of electricity supplied to consumers at the lowest possible cost. The power quality is determined, among other things, by the level of voltage harmonics, frequency, symmetry of the supply voltages. The substation must be flexible, that is, it must easily adapt to connecting new loads or increasing existing loads. It should also be simple and safe to use.

Factors affecting the cost of an electrical substation are listed below:

• The location of the substation and the length of the MV and LV circuits connected to it, which should be as short as possible.

• The type and design features of the facility that directly affect the use of space and the requirements for the site and premises.

• The power of the step-down transformer in relation to the existing or anticipated future electrical load.

• Investor requirements and operating conditions governing the selection of electrical equipment and ancillary installations.

The investment costs of a substation and transmission line spent during the construction and installation period represent any costs incurred from the moment the decision was made to build a given facility until its normal operation.

Investment costs include the following:

• Material costs (transformer equipment, protection systems, line conductors, supports, cables, fittings and other elements and materials).

• Costs related to construction (operation of equipment used in the construction of the substation, planning of works and hiring of personnel).

• Design and administrative costs (eg development of project documentation, obtaining official building permits).

Operating costs include the following:

• Costs for the purchase of electricity, as well as associated costs to cover energy losses (the latter depend on the resistivity of cables, expected power and consumer demand for electricity).

• Costs associated with the maintenance, repair and maintenance of an existing electrical substation and its equipment.

• The cost of a system failure (in other words, the cost of undelivered energy). The cost of energy not delivered as a result of equipment failures is determined based on the failure rate, taking into account the average number of failures per year and the average duration of failures.

Based on the experience of numerous implemented industrial and energy projects, our professional team can compare alternative options for the construction of electrical substations, choosing the optimal solution for the customer.

The financing of electrical substations requires in-depth knowledge and experience due to the numerous technical and economic factors affecting a project.

For example, the location of the substation close to energy consumers allows to reduce the cross-section of wires due to less voltage drop at a distance. This, on the one hand, reduces investment costs, however, reducing the cross-section of the wires in this case increases the operating energy losses.

When placing transformer equipment inside the premises where energy consumers are located, there is no need for the construction of an overhead power transmission line.

The disadvantage of this option is the need to allocate the appropriate equipped space, which may be associated with additional investment.

When choosing the design of the future electrical substation, our engineering team must find a balanced approach to parameters such as efficiency, loss rate, safety, access and ease of use, compact design, equipment size and weight, initial investment and maintenance costs. The final decision always rests with the investor.

When making calculations for large capital-intensive projects carried out over several years, financiers take into account discounting formulas that translate future flows into current values.

Need more information?
Are you looking for professional assistance in the implementation of your investment project?

Contact CP Finance UK FINANCE LIMITED for details.

Contact us for more information.

CP Finance UK FINANCE LIMITED
Website:https://c-pfinanceuk.com/
E-mail:finance@cpuk-financeltd.com
Alt-Email:admin@cpukfinanceltd.com

The Industrial engineering services of CPUK and List of our service under EPC contract:

• hydroelectric power plants of any type;
• alternative fuel thermal power plants;
• waste processing plants and waste incinerators;
• innovative fuel pellet plants;
• electrical substations for business;
• loading and unloading equipment;
• automated production management systems;
• security and enterprise monitoring systems;
• industrial, residential and commercial buildings;
• steel plants equipment;
• equipment for oil refineries;
• water treatment facilities;
• fertilizer plants;
• sugar factories;
• mines, etc

Experts pay special attention to energy efficiency, the rational use of production resources, etc. Potentially negative impact on society and the environment is reduced. Top-class professionals are involved in the construction, modernization, repair, operation and maintenance of enterprises around the world including industrial engineering services and financing

CP Finance UK offers an optimal financing solution to capital intensive projects and industrial engineering services.

Rich experience guarantees the success of any project and the security of your investment.

Do not miss the unique opportunity to increase the efficiency of your business at minimal cost.

To learn more about the services, contact our experts at any time.

EPC contracts and industrial engineering services

Modern industrial engineering services of CPUK

The purpose of industrial engineering is to develop, create and modernize enterprises aimed at obtaining optimal and accurate results.

Industrial engineering services and financing under EPC contracts includes:

• search for optimal reconstruction and modernization opportunities;
• development and optimization of production technology;
• selection and purchase of the necessary equipment;
• design and manufacture of equipment;
• installation, testing and commissioning;
• introduction of innovative technologies;
• education and training of personnel.

Industrial engineering today requires a holistic strategic approach, taking into account the individual needs of the business and the specifics of the enterprise.

The cost of services is determined individually, depending on the complexity and scale of the project, special requirements of the customer and many other factors.

Energy systems and engineering Industrial service

Designing energy systems is a complex task that requires compliance with numerous requirements. Modern energy systems must comply with strict environmental standards, demonstrating high efficiency, adaptability and safe operation.

Specialists in the field of industrial engineering are involved in all stages of energy production and distribution, including mining and processing of mineral resources, generation and distribution of heat and electric energy. In particular.

Energy systems industrial engineering includes optimization of fuel logistics, energy storage and distribution, forecasting the needs of end users and much more.

Electricity transmission networks require priority attention, where minimization of distribution costs plays an important role.

Our services allow the investor to make the best decisions on new projects and effectively introduce innovations, increasing the technical and financial indicators of existing energy systems.

Engineering waste management plant

Technologies for sorting metal, plastic, paper, glass and organic substances can become part of a successful business project. Waste recycling plants operate in many countries, helping communities effectively solve environmental and energy problems.

Let’s create a clean and healthy future for us and our children!

Waste is an important product of human life. Solid waste processing is becoming more and more in demand amid growing environmental pollution and depletion of mineral resources.

Our partners offer highly efficient technical solutions that allow the investor to turn tons of municipal solid waste into big money.

Install and configure the following equipment:

• conveyor belts;
• waste bag openers;
• manual sorting platforms;
• ballistic separators;
• magnetic separators;
• bio-drums and much more.

Industrial engineering services of CPUK

Each area of economic activity has its own specifics. A feature of engineering company services is the need for comprehensive support at all stages of the organization of the production process.

A wide range of equipment for industrial production, mining, agriculture and infrastructure. One of the advantages is direct contacts with reputable manufacturers of equipment, machinery and components around the world. This approach ensures proper product quality and minimizes project costs.

To solve these problems, the companies have a staff of highly qualified engineers with extensive experience. Their knowledge and skills are being improved in accordance with the development of technologies; therefore, each company project is always innovative.

All solutions are implemented in accordance with applicable national and international standards. During each stage of the work, the customer receives a full package of the necessary technical and design documentation.

CP Finance UK offers investment consulting, financial modeling and bank lending.

Our partners carry out any work on the automation of production and technological systems in order to increase the efficiency of all processes. The cost of work is fixed in advance, so the client is insured against unforeseen expenses.

Our clients can receive expert advice on any aspect of the project at any time.

Investment consulting and engineering services are critical for organizing the operation of any production facilities. The effectiveness of your business depends on the quality of design, assembly and configuration of equipment.

Comprehensive project development guarantees the reliability of all technological processes and maximum profitability of your enterprise.

Email:finance@cpuk-financeltd.com
Website:https://c-pfinanceuk.com/