The Guidelines to Implementing Asset Recycling Transactions is intended to be a living document and will be reviewed at regular intervals. Visit the Asset Recycling: Decision maker’s notes for a practitioner's overview of Asset Recycling programs. To find more, check out the Content Outline.
Options for utilization proceeds
The government entities may consider the following for utilization of proceeds from asset recycling:
- Re-investment of proceeds in greenfield assets.
- Re-payment of existing debt relating to the asset that is the subject of the asset recycling transaction (this would usually be a pre-condition of the lenders, unless the current lenders agree to continue their exposure to the project even after the private party takes over operations and maintenance of the project).
- Meeting operational expenditure for existing assets; and
- Provide financial support for technical assistance for future projects.
Considerations in utilization of proceeds
There are several considerations for utilization of proceeds from asset recycling:
- A good practice for government could be to specify the application of the proceeds raised from implementing an asset recycling program. This should include providing clarity as to the intended investment program for new infrastructure asset to be developed as well as the amount that is to be re-invested. This will help in:
- Defining priority assets.
- Provide visibility in meeting the funding gap for new infrastructure assets.
- Ensure transparency and accountability in the application of sales proceeds; and
- Assess objectively and retrospectively the success of the program, and accordingly calibrate the implementation of the asset recycling program.
- Re-investment within the Relevant Authority’s purview: The Relevant Authority may intend to retain the proceeds from asset recycling for re-investment in new/greenfield assets which are within the purview of the Relevant Authority. This mechanism incentivizes Relevant Authority to recycle assets to unlock capital.
- Allocation of proceeds to a separate fund: The proceeds from asset recycling can be allocated to a fund that is separate and distinct from the Relevant Authority’s balance sheet. The application of the fund should be transparently specified so that the public can be assured of long-term value creation through the re-investment of the proceeds in infrastructure assets. In some jurisdictions, this approach is used to de-politicize the monetization and application of the proceeds through asset recycling programs by enhancing accountability and transparency.
- Add to the strategic criteria for determining the use of proceeds:
- Conforms to the Long-Term Strategy for Low Carbon and Climate Resilience 2050 and net zero pledges and the country’s Nationally Determined Contribution (NDC).
Box 10: Case Study on the Utilization of Proceeds from Asset Recycling
Utilization of proceeds of asset recycling by various jurisdictions: A range of options for utilization of proceeds from asset recycling, being practiced by various countries is presented below.
Countries | Sectors | Asset Recycling Model | Utilization of Proceeds |
|---|---|---|---|
| Australia | Ports, Energy, Roads, Land Registry | Sale and / or long-term lease of assets |
|
| India | Highways | Toll-operate-transfer (TOT), InvlT, Securitisation for brownfield highway assets |
|
| Brazil | Airports, rail and roads (predominantly airports) | Operations and Maintenance Concessions |
|
| Mexico | Highways and toll roads | Sale/ securitization through National Infrastructure Fund |
|
| Turkey | Predominantly Airports | Lease and/or transfer of operating rights (TOR) model |
|
Research and Publications
This section has not been prepared with any specific transaction in mind and are meant to serve only as general guidance. It is therefore critical that the content will be reviewed and adapted for specific transactions.
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