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Chatham House Rule applies
Infrastructure 2.0 – Funding and Financing
Strategies for Smart Cities
Tweet us! @IPFA_
Agata
Skrzypczak
Regional
Operations
Manager
IPFA
Chatham House Rule applies
▪ Sector Trends: Infrastructure 2.0 Series
▪ O-D Data Centres
▪ O-D Digital Infrastructure
▪ 4 Jun E-Mobility
▪ Regional Insights
▪ 28 May Investment Climate & Infrastructure Sector Outlook in Turkey
▪ Learning & Development
▪ 13 Jun Fibre
▪ Register for upcoming webinars and view on-demand webinars
www.ipfa.org/events/webinars/
▪ Contact us at [email protected] or [email protected]
IPFA Webinars
Tweet us! @IPFA_
Chatham House Rule applies
Speakers:
Michael Flynn, Deloitte Ireland LLP
Steven Hamilton, Deloitte Transactions and Business
Analytics LLP
Rana Sen, Deloitte Consulting LLP
Tweet us! @IPFA_
Funding and financing strategies for smart cities:Webinar on financing tomorrow's smart city ecosystems
IPFA 8 May 2019
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 5
Setting the contextChallenges and opportunities
Copyright © 2016 Deloitte Development LLC. All rights reserved.
The Alliance ApproachLeveraging the power of collaboration in a complex ecosystem
Funding & finance modelsFunding, finance, and revenue management options and approaches
Today’s webinar
Funding & Financing
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 6
Setting the context
Technology disruptors, changing constituent expectations, and key infrastructure needs are significantly impacting the realities of urban environments
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 7
Governments are under increasing pressure to address socioeconomic, resiliency, and citizen engagement issues
Convergence of trends
Unprecedented urbanization
Trending green
Safety and security
Exponential innovation
Transparent government
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 8
• Focus on purpose
Infrastructure + constituent-centricity + meaningful use of technology/data
What makes a city smart?
• Holistic view
• Inclusion
9
Copyright © 2018 Deloitte Development LLC. All rights reserved.
Smart City | Multiple StakeholdersA Smart City is composed of many stakeholders working together. The constituent is at the
center, indicating that successful Smart Cities are always constituent-centric
Public
Housing
Associations
Investors
Universities/
Schools
Research
Institutions
Startup
Incubators
Healthcare
ProvidersEnergy
Providers
Digital
Agencies
State/
National
Government
City
Government
RetailersManufacturers
and Construction
Companies
Banks/
Insurance
companiesHotels,
Museums,
Restaurants,
Theaters,
and
Stadiums
Telecom
ProvidersLogistics
ProvidersTechnology
Vendors
Public
Transportation
Providers
Constituent
10
Copyright © 2018 Deloitte Development LLC. All rights reserved.
Smart City | The Six Roles of City GovernmentSmart Cities require a government that is able to combine six roles and make deliberate choices
on the mix of roles through which it engages challenges
RegulatorThe government as regulator creates or changes laws
and regulations to allow new business models and
disruptive entries, simultaneously protecting the
interests of constituents and users of the city.
Connector and ProtectorThe government as connector and protector secures
modern transportation infrastructures, energy grids,
and digital networks. It sets standards and takes
measures to make these vital infrastructures resilient
and safe.
Strategist and AdvocateThe government as strategist and advocate sets out a clear direction for the city.
What is our vision as a Smart City and how do we want to realize it? It is an active
advocate of the city as an innovative hub for new business
Solution EnablerThe government as solution enabler builds
ecosystems by gathering parties that normally do not
work together to deliver creative new solutions that
neither of the parties could have realized on its own.
Innovator and InvestorThe government as innovator and investor applies the principles of innovation in
the internal organization and processes. It stimulates innovative solutions by
acting as a customer.
StewardThe government as steward creates an environment in
which new businesses and smart solutions can emerge
and grow, for example, by providing open data and by
facilitating startups.
11
Copyright © 2018 Deloitte Development LLC. All rights reserved.
Smart City | ConstituentsSmart-City initiatives should be focused on the constituents, as their active engagement and
collaboration throughout the Smart City journey leads to effective, constituent-centric solutions
Encourage constituents to actively
engage and contribute in their
communities and local government.
Empower constituents with right
data and tools so that constituents
can become more collaborative and
participative
Improve operations and
transparency for constituents,
supporting new ways for them to
connect with and understand their
government and the decisions that it
makes
Benefit all constituents from every
neighborhood and include those who
might not traditionally be heard in the
decision making processEngagement
Transparency Collaboration
Inclusion
Streamline back-office operations and constituent services,
avoiding duplication and promoting integration, while ensuring
data security and compliance
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 12
Funding & finance models
Options & opportunities
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 13
Global drivers of urbanization
Smart city | Macro drivers—city development
Increasingurbanization
Sustainabilityfocus
Public privatemix
Technology-ledcitizen
services
1.5 million
people per week moving
to cities
65%+ of
world population living in cities
by 2050
Paris Agreement—
global emissions reductions
UN SDGs—clear,
implementable plan
Public funding gap
UN SDG 17—Private sector participation
Citizens increasing use of technology
Mix of technology and
traditional infrastructure
Sources:Global Population – 7,6 bn., « Population Reference Bureau (2018) »; Level of urbanization – 54%., Based on “WHO 2014 analysis”; Urbanization growth – 1,84%, Based on “WHO analysis for period 2015 to 2020”; United Nations
14Deloitte Consulting confidential information | Not intended for reproduction or distribution
Financing challenge
Smart city financing challenge
• Increased technology component—shorter-term infrastructure
• Future of Mobility – certain public revenues reduced
• Varying attractiveness to lenders and investors
• New revenue models not clear
• Evolution from pilot to full roll out—different players required
• Determine value of data/IP asset created
• Blending private finance types together
Public infrastructure financing challenge
• Revenue models—beyond exchequer funding
• Value capture—joined-up thinking
• Financing structures
• Procurement structures
• Value for money
15Deloitte Consulting confidential information | Not intended for reproduction or distribution
Understanding project and valueConsider funding & finance
options
Determine relevant procurement
& delivery method
Understand
business model
Understand value
generated
Does funding
gap existDirect value capture
Risk transfer potential Indirect value capture
Return availableAsset recycling to fund
investment
Public funding
Private financing
Monetize value
Public provision
Operating contracts
Joint venture
Long-term lease
Public-private partnership
Franchising
Privatization
321
Model for delivering a successful sustainable infrastructure project
16Deloitte Consulting confidential information | Not intended for reproduction or distribution
Who pays……
A clear revenue stream is critical if private financing is pursued.
Determining the revenue model is key
Government/public
• Often the first choice historically✓ Payment for service ✓ Share of savings from efficiencies
achieved
End users
• Will users pay for the service?✓ Direct payment ✓ Indirect payment (e.g., utility model)
Third parties
• Revenue earned through another source✓ Ancillary income, new innovation
rollout to new markets✓ Revenues not linked to service
(e.g., advertising space)
Partial/indirect government support
• Revenue guarantees (minimum levels)• Pricing support• Gain sharing, e.g., financing savings,
efficiency gains, carbon reduction
17Deloitte Consulting confidential information | Not intended for reproduction or distribution
Change in approach to mobility can affect public funding models
Future of Mobility
18Deloitte Consulting confidential information | Not intended for reproduction or distribution
Capturing the value of gains from an infrastructure investment, and directing those funds to infrastructure investment.
Value capture
Direct value capture
Indirect value capture
Asset recycling
19Deloitte Consulting confidential information | Not intended for reproduction or distribution
Multiple sources and types of finance available
Supply of infrastructure finance
Appropriate match to financing
source
Debt
Hybrid
Funding
Equity
Government funding
Grant funding
Seniordebt
Bonds
Exchequer financing
Sponsor equity
Infra-structure
funds
Multilateralfinance
Mezzaninefinance
Alternative lenders
Vendor financing
Export credit
Alliance Approach – Key finance considerations
20Deloitte Consulting confidential information | Not intended for reproduction or distribution
Different levels of private sector participation
Varied procurement solutions
Direct
delivery
Conventional
Procurement
Operate
Contract/
licensing
Long-term
lease
Joint
venturePPP Franchising
Privatizations
(sales)
Risk transfer
Innovation
Public Private
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 21
Program versus project perspective…..
Leveraging public capital
Scale up investment in project preparation and pipeline development
Project-preparation facilities and technical assistance to increase the “bankability” of projects
Partial revenue support
Finance incremental cost support
Increase of grants—emerging technologies, non-public retrofit
Use of guarantees—revenue, loans
Create secondary market for sustainable infrastructure projects—anchor syndicated loans
Public policy insurance
Public equity/subordinated equity fund
22Deloitte Consulting confidential information | Not intended for reproduction or distribution
City of the FutureTech enabled infrastructure delivered
New infrastructure
New financing and procurement structures
New smart solutions
Delivering works and services to citizens
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 23
The Alliance Approach
Leveraging the power of collaboration in complex urban ecosystems
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 24
A more collaborative approach for urban financing, partnerships, procurement, and governance
The Alliance Approach
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 25
How to get started
The Alliance Approach
Innovative Financing
• Although traditional models will remain central to Smart City programs new models include: Vendor Finance, Innovation Funds, Mini-Bonds, P3s, Land-Value Capture, Tax Increment Financing, Guarantees
Collaborative Partnership
• Participation from multiple vendors and government agencies is the new normal, including new business models, gain-sharing agreements, and performance-based contracting.
Dedicated Governance
• A person or entity should be designated as Smart City program lead, with designated authority. This person or entity will work directly with leadership across the organization, breaking down siloes.
Nimble Procurement
• RFIs should include an outline for partnership memoranda of understanding (MOUs) and commitments. They should require the technology and solutions inter-operability, and promote business models that focus on shared value creation.
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 26
Revenue and contracting flows
City Managed Services/Data Hubs
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 27
Rana Sen
US State Sector Smart City and Transportation initiative leaderDeloitte Consulting [email protected]
Contact information
Connect with me on LinkedIn
Michael Flynn
Global Financial Advisory Public Sector LeaderInfrastructure & Capital Projects – EMEA LeaderPartner, Deloitte Ireland [email protected]
Connect with me on LinkedIn
Steven Hamilton
Senior ManagerDeloitte Transactions and Business Analytics [email protected]
Connect with me on LinkedIn
Funding and financing strategies for smart cities: webinar on financing tomorrow's smart city ecosystemsCopyright © 2018 Deloitte Development LLC. All rights reserved. 28
This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and
their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not
provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the
“Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of
public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.
Copyright © 2018 Deloitte Development LLC. All rights reserved.
A recording of this webinar will be made available
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