IFC marks record year for infra investment

The International Finance Corporation committed $1.5bn to 54 core infrastructure projects in developing markets, a $100m increase over the prior year but an all-time high for the private investment arm of the World Bank. Commitments to low-income countries and renewable projects were prominent investment themes.

The International Finance Corporation has closed the books on its 2010 fiscal year with a record $1.5 billion of investment in 54 core infrastructure projects and commitments to low-income countries and renewable energy both taking leading shares in its portfolio.

The $1.5 billion is largest-ever single-year investment total for infrastructure in the organisation’s 44-year history. And though it bests the 2009 total by just $100 million, the growth in investment came during a turbulent year where the IFC was bracing for the worst.

“If we had turned the clock back 12 months, I guess we would have anticipated that the number of engagements wouldn’t have gone up so fast, but that maybe the average size of projects would have been a bit higher,” Bernard Sheahan, the International Finance Corporation’s (IFC) director for infrastructure, said in an interview.

Busy year for
IFC's infra team

“Once we look over projects over a billion dollars in size, not much of that is up and moving,” he added, referring to developing countries such as Russia, Mexico and India, where the IFC invests capital on behalf of the World Bank. “On very large investments, by and large, investors are continuing to keep some of their powder dry” in an effort to gauge how “the global economic picture is going to evolve”, Sheahan observed.

The economic uncertainty didn’t prevent the IFC from getting banks to open up their wallets to the €1.1 billion Pulkovo Airport improvement project in St. Petersburg, Russia – one of the first public-private partnerships (PPPs) in that country.

But unlike the Pulkovo PPP, much of the IFC’s lending and investing was concentrated on smaller deals in what it calls low-income countries, where the per-capita annual income is below $1,000. About 40 percent, or $600 million of the $1.5 billion the IFC invested in the 12 months ended 30 June went to low-income countries. These included investments such as a $16 million loan to a heavy fuel oil plant in Haiti and a 20 percent equity investment in a heavy fuel oil plant in Togo in West Africa.

Such fossil fuel-based power investments were “limited to low-income countries that have a limited renewable endowment”, Sheahan said. Elsewhere, the IFC made a big push into renewable energy, investing $515 million across 16 renewable projects, versus $355 million across 20 renewable projects a year earlier. These included first-time investments such as a private wind project in China, the first grid-tied solar projects in India and Thailand and the $600 million Eurus wind project in Mexico, the largest project of its kind to reach financial close in an emerging market.

“I think going forward, particularly in the renewable space, we’re seeing more larger deals moving forward,” Sheahan said.

Aside from direct equity and debt investments, IFC has continued to invest in infrastructure indirectly, by backing funds that focus on countries and regions that are a priority for the IFC. In 2009, for example, the IFC invested $150 million in the Indian infrastructure fund being raised by Macquarie and the State Bank of India. In 2010, the IFC extended $100 million to the Africa Infrastructure Investment Fund II, which is targeting between $600 million and $1 billion in total commitments and is co-managed by Macquarie.

Sheahan said investors are increasingly pitching IFC to make more fund investments. “Most of the proposals were getting are regional. We’re getting many more and we invest in a few here and there,” he said, adding that the IFC is likely to continue to do the bulk of its infrastructure investing directly.