Project financing requires innovation

28 January 2015

Banks must develop innovative finance packages to allow project market to continue growth

At the end of every positive projection during the MEED Destination Dubai conference were echoing concerns of alternative investment streams to ensure projects are delivered on time and on budget.

Dubai’s recovery has been buoyed by preparations for the Expo 2020, it has also been complemented by the Dubai 2021 vision, which sets to develop the emirate beyond the trade event.

The emirate has, so far, proved to be undeterred by the recent oil price dip and, as such, project activity is set to press ahead into 2015. About $30bn-worth of projects are expected to be awarded in 2015 with construction spend trumping other sectors.

While Dubai’s plans are expected to be delivered with many targets seeming to be on track, the emirate is faced with several issues that must be addressed to ensure a sustainable future of continued growth that takes the city beyond 2020.

The most paramount is the question of project financing, and although there are $30bn worth of projects to be awarded in 2015, this doesn’t mean that the city requires this cash over the next 12 months.

The projects market can be encouraged by the fact banks are beginning to conceptualise finance packages that encompass equity market investment, public-private partnership (PPP) funding and contractor financing; a recipe that will ensure Dubai’s expansion plans are sufficiently financed to materialise.

The success of banks providing finance for 86 per cent of the cost of developing the 200MW second phase of Dubai’s Mohammed bin Rashid al-Maktoum solar park provides hope that perceptions have changed and new corporate finance stratagems are being developed.

Overall, the liquidity needed to finance projects in the city over the next five years is available, but can only be achieved if the banking sector continue to innovate finance packages for developers and government authorities alike.

Follow Hossam Abougabal on Twitter: @MEEDHossam 

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