This presentation was held during the 5th GIB

Summit, May 27-28 2015. The presentation and

more information on the Global Infrastructure Basel Foundation are available

on www.gib-foundation.org

The next GIB Summit will take place in Basel, May 24-25, 2016.

 

The information and views set out in this presenation are those of the author(s) and do not necessarily reflect the opinion of the Global Infrastructure Basel Foundation. Neither the Global Infrastructure Basel Foundation nor any person acting on its behalf may be held responsible for the use of the information contained therein.  

大公国际资信评估有限公司

Innovative Sustainable Infrastructure Rating Model

— for the 5th Global Infrastructure Basel Summit

Guan, Jianzhong May 27, 2015

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Contents

I.  Research  Ques-ons  II.  Sustainability  reflects  the  rule  of  forma-on  of  

infrastructure  credit  risks  

III.  The  core  ideas  of  Sustainable  Ra-ng  Methodology  

IV.  The  logic  of  Sustainable  Infrastructure  Ra-ng  Methodology  

V.  The  significance  of  crea-ng  Sustainable  Infrastructure  Ra-ng  Methodology  

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I.  Research  Ques-ons  

•  Infrastructure   projects   are   characterized   by   their  novelty.   They   have   no   opera-ng   history   and   their  credit   risk   is   focused   on   two   phases,   the  construc-on  phase  and  the  opera-on  phase.

1. What are the conspicuous features that differentiate

infrastructure projects from other rated entities?

•  Current   ra<ng   methodologies,   mainly   western  ra-ng   methodologies,   focus   mainly   on   the  regulatory   environment,   scale   and   diversity,  financial   strength   (cash   flows).   They   obviously   do  not   reflect   the   par<cularity   of   the   forma<on   of  credit  risks  in  infrastructure  projects,  hence  can  not  sa<sfy   the   needs   of   investors.   This   is   the   external  factor   that   limits   capital   from   flowing   into  infrastructure  projects.  

2. Can current rating methodologies of

incumbent CRAs reflect the particularity of

credit risks of infrastructure projects?

•  The   interna-onal   community   need   a   ra<ng  methodology  which  can  reveal  the  rule  of  forma<on  of   credit   risks   in   infrastructure   projects   now   more  than  ever  .

3. What is the solution?

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II.  Sustainability  reflects  the  rule  of  forma-on  of  infrastructure  credit  risks  (2-­‐1)  

     1.  The  concept  of  sustainability  

Sustainability

Sustainability of the environment

Ecology

Market demand

Sustainability of construction

Sustainability of operation

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The sustainability of ecology and

market demand

sustainability of operation

Fundamentally decide

sustainability of construction

Directly decide

The lack of operation history

The development of rating methodology

challenges

II.  Sustainability  reflects  the  rule  of  forma-on  of  infrastructure  credit  risks  (2-­‐2)  

     2.  The  logic  of  the  elements  of  sustainability  

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novelty

Sustain-ability

fundamental requirements for

developing an infrastructure

rating methodology

III.  The  core  ideas  of  The  Sustainable  Ra-ng  Methodology  (4-­‐1)  

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The   evalua<on   of   ecological   impact  and  market  demand  as  the  basis  for  ra<ng   the   environmental   values   of  infrastructure  projects.

The   evalua<on   of   technology,   qua-­‐  lity  and  progress  in  the  construc<on  phase   as   the   basis   for   ra<ng  construc<on   risks   of   infrastructure    projects.

The   projec<on   of   opera<ng   cash  flows   and   profits   as     the   basis   for  ra<ng    opera<on  risks.

Ra-ng  factors  

III.  The  core  ideas  of  The  Sustainable  Ra-ng  Methodology  (4-­‐2)  

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To  improve    the  

sustainability  of  credit  risk  projec-ons  of  infrastructure  

projects

Innova<ng  credit  

engineering  ra<ng  

methodology

III.  The  core  ideas  of  The  Sustainable  Ra-ng  Methodology  (4-­‐3)  

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Credit rating

Environment

Degree  of  devia<on  for  sources  of  repayment Construc<on

III.  The  core  ideas  of  The  Sustainable  Ra-ng  Methodology  (4-­‐4)  

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Regulatory  regime  

The   degree   of   devia<on   between   the   project   and  ecology  &  market  demand

The   degree   of   devia<on   between   relevant   indicators  and  benchmarks  in  the  construc<on  phase

The   degree   of   devia<on   between   sources   of   repay-­‐  ment  and  profitability  in  the  opera<on  phase

U<lize   the  devia<on   to   predict   the  debt   requirement  and   repayment   risks   of   different   stages   in   the   con-­‐struc<on  phase  and  opera<on  phase

Employ   engineering   techniques   to   simulate   various  states  with  key  credit  indicators

IV.  The  logic  of  Sustainable  Infrastructure  Ra-ng  Methodology  (4-­‐1)  

Regulatory  regime

Construc-on        

Opera-on

Opera-ons    phase

Construc-o

n  ph

ase

indicators

benchmarks

Project  characteris<cs

Ecology  and  market  demand

Sources  of  repayment

profitability

Degrees  of  

devia-on

Credit  engineering

Repayment  risks

IV.  The  logic  of  Sustainable  Infrastructure  Ra-ng  Methodology  (4-­‐2)    

Debt  requirements

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 What  is  credit  engineering?    Credit  engineering  is  a  new  ra<ng  technique,  which  is  based  on  the   needs   of   determining,   evalua<ng,   early   warning   and  managing   credit   risk   factors,   employing   modern   engineering  and   high-­‐tech   methods,   to   accurately   reveal   credit   risks   with  foresight,  and  crea<vely  solve  the  problems  of  managing  credit  risks.

IV.  The  logic  of  Sustainable  Infrastructure  Ra-ng  Methodology  (4-­‐3)    

 Infrastr-­‐ucture  projects

Credit risks

Engineering    technique  

1.  Modeling

3.  Network  topology

2.  Compu-ng

4.  Stress  test

5.  Simula-on

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Structure  of  credit  risk    research  

1.  Determina-on  of  credit  risks

3.  Early  warning  of  credit  risks

2.  Evalua-on  of  credit  risks

4.  Management  of  credit  risks

Maximum  debt  burden

Realize  the  counter-­‐cyclical  func-on  of  credit  ra-ngs

IV.  The  logic  of  Sustainable  Infrastructure  Ra-ng  Methodology  (4-­‐4)    

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The   first   to   develop   ra<ng  methodologies   based   on  the  rule  of   forma<on  of  credit   risks   in   infrastructure  projects

The   first   to   objec<vely   present   the   debt   repayment  risks  of  infrastructure  projects  to  investors

Open  the  gate  for  project  finance  innova<on  to  meet  the  financing  need  of  infrastructure  projects

Innova<ng   infrastructure  ra<ng  methodology  as  the  breakthrough   to   lead   global   capital   to   invest   in  infrastructure   and   promote   global   economic  development

V.  The  significance  of  Sustainable  Ra-ng  Methodology    

Thank  You!

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