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FFA to launch $1B infrastructure vehicle.

Summary: The first ever $1 billion structured investment vehicle to channel investments in Lebanon's energy and infrastructure projects is expected to be unveiled by FFA Private Bank.

BEIRUT: The first ever $1 billion structured investment vehicle to channel investments in Lebanon's energy and infrastructure projects is expected to be unveiled by FFA Private Bank. FFA, which is one of the leading investment companies, is upbeat about the prospects of success of the initiative, especially since Lebanon is in dire need of major infrastructure projects, most notably in the field of renewable energy.

"FFA is a specialized bank with activities in capital markets, asset management, real estate development and investment banking. We have been active in investment banking but the level of activity in Lebanon is slow. Today we have a new strategy to focus on infrastructure projects in the country through structured finance. This is an added value to FFA and we are bringing people on board for this special initiative," FFA chairman Jean Riachi told The Daily Star.

Riachi stressed that FFA realized Lebanon's needs for infrastructure and for this purpose the structured investment vehicle was launched.

"This where money can pour like rain for the country. It [money] will not come from tourism, real estate, industry and debt servicing. We cannot continue like this. We need to put the money where the need is and the need of the country is in infrastructure," he explained.

The vehicle will be called the Lebanon Infrastructure Fund.

"Our objective through this vehicle is to raise $1 billion to finance infrastructure projects in Lebanon," Riachi said.

The financing could take different shapes whether debt or equity financing. It could include bonds, bank loans and vendor financing.

The funding could also be in the form of multilateral financing obtained from international organizations such as the International Finance Corp., German state-owned development bank KfW and French development-financing institution Proparco.

According to FFA, "two aspects that would add tremendous value and would gain to be further emphasized are the substantial improvements of using structured finance to mutualize pools and channel the widest investor base possible, giving them equal transparent access to unique investment opportunities via a regulated, supervised and professionally organized investment vehicle as well as tapping into the diaspora investor base to fund infrastructure, oil and gas, and renewable energy projects."

Iyad Boustany, managing director and head of corporate and investment banking at FFA, said FFA's job is to provide the structure or the sponsor.

"If for example an investor wanted to build a renewable energy plant which will not use the state's power grid, then it may not need the approval of the Energy Ministry. But in each case the project needs to have the approval of the regulatory authority such as the CMA [Capital Markets Authority] and from the Central Bank if we wanted to get subsidized lending," Boustany said.

Riachi said investors look at risks before getting involved in any project.

"Investments are like a commodity. If you provide an investor with a good reward then he will be very happy to invest and this will mitigate the risk. Our problem is not raising money from the investors but the real problem is what we have to offer for them in terms of investments," he added.

Riachi emphasized that Lebanon needs to assure the investor that his investment is safeguarded.

"We are presenting the documentation to the CMA in order to get approval. What we need to do is to have projects. It is not the problem of raising money. It is the problem of having projects that are structured in the right way," he said.

FFA is eyeing various infrastructure projects with special attention to renewable energy. In one FFA document, the fund noticed that Lebanon has a reasonable wind potential, especially in the district of Akkar in north Lebanon. "The location is known for wind resources availability and has an estimate average wind speed of 9 meters per second."

It added that in 2013 the Energy Ministry launched a tender for the construction of 50 to 100 MW wind farms; the project is still ongoing.

The selected contractor will be able to build, own and operate the wind farm that can sell electricity for 20 years to Electricite du Liban (with an additional five-year option).

There are currently three projects under final review on the table of the Cabinet, each with an average capacity of 70 MW, which have all already secured their land lots. All three projects of $100-150 million each are all located in the same area and are likely to represent 100 percent of the wind-farm sector in Lebanon.

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Publication:The Daily Star (Beirut, Lebanon)
Geographic Code:7LEBA
Date:Jun 1, 2017
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