Infrastructure bond is a type of bond issued both by private corporations and by

state-owned enterprise A state-owned enterprise (SOE) is a Government, government entity which is established or nationalised by the ''national government'' or ''provincial government'' by an executive order or an act of legislation in order to earn Profit (econom ...

s to finance the construction of an

infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...

facility (highways, ports, railways, airport terminals, bridges, tunnels, pipelines, etc.) These bonds may be nominated both in local and in more stable foreign currencies, such as U.S. dollars or euros. Infrastructure bonds are popular in developing economies where there is a strong demand for infrastructure.

Overview

As a rule, the issuer of such securities, after the construction of an infrastructure facility is completed, receives it on a

concession Concession may refer to: General * Concession (contract) (sometimes called a concession agreement), a contractual right to carry on a certain kind of business or activity in an area, such as to explore or develop its natural resources or to opera ...

for some time (most often several decades) and collects the payments from the facility users (for example, a

toll road A toll road, also known as a turnpike or tollway, is a public or private road (almost always a controlled-access highway in the present day) for which a fee (or ''toll'') is assessed for passage. It is a form of road pricing typically implemented ...

). Quite often, the state (or several states), on the territory of which this object is being built, provides guarantees for the issued bonds, which makes them attractive to a larger number of market participants, as doing so reduces the risk. Due to the long payback period of infrastructure facilities, the bond circulation period is also quite long (often several decades); therefore, such bonds will mostly target

institutional investors An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked co ...

including insurance companies and pension funds. To make such bond even more attractive, the state authorities may arrange certain interest and tax benefits.

References

{{Public infrastructure topics, state=collapsed International finance Infrastructure

Overview

See also

References