Asset Recycling – Projects and Programs

Infrastructure development is crucial for the continued economic growth and prosperity of emerging markets and developed economies (EMDEs). The demand for infrastructure, propelled by population growth and ever-increasing rate of urbanization, has resulted in the need to build, and improve infrastructure in EMDEs.

EMDEs are increasingly facing strong headwinds with rising inflation, volatile economic settings, and other recent macro-economic shocks. These factors have adversely impacted their fiscal capacity to fund infrastructure. Furthermore, the climate crisis has propelled countries to invest in mitigating measures to counter the adverse effects of climate change, such as clean energy transition, electric mobility, and climate resilience measures. The substantial capital investment required means that traditional sources of funding are increasingly stretched and need to be augmented by other funding solutions.

Given so, countries are exploring Asset Recycling as a mechanism to unlock capital invested in existing infrastructure assets and to apply the proceeds to develop new infrastructure assets.

The Asset Recycling section in PPPRC provides a comprehensive overview of how governments can leverage public assets to generate funding and drive infrastructure renewal.

• The first section centers on Asset Recycling Projects, delivering actionable insights to help governments expertly navigate the complex process of selecting, preparing, and executing asset recycling transactions. It serves as a hands-on guide, offering a systematic and consistent approach to facilitate asset recycling transactions. 

• The second section shifts attention to Asset Recycling Programs, a long-term structured approach to Asset Recycling.

Together, these sections form a dynamic and practical blueprint for harnessing public assets to unlock future investment opportunities. 

Asset recycling is a relatively new approach, and countries need guidance to implement it effectively. This section of PPPRC will be continuously developed with new resources and key publications.

What is Asset Recycling

Asset recycling is a mechanism that has been adopted by various governments to monetize existing operational infrastructure assets (brownfield assets) to unlock capital and to reinvest the proceeds raised towards the development of new infrastructure assets, including assets that have higher economic benefits and are more risky or less commercially viable. In addition, through asset recycling programs, governments have been able to access private sector efficiencies for better service delivery. 

Governments and public sector organizations that own and operate infrastructure assets have adopted asset recycling as a financing and funding mechanism to meet growing infrastructure needs as an alternative to raising taxes or increasing debt. 

Through the recycling of capital and application of proceeds towards new infrastructure, the public benefits from improved services provided by the private sector operating existing assets, and from additional services delivered by investment in new infrastructure.

Objectives of asset recycling 

• Monetizing government assets to reinvest proceeds in assets that community needs. This can be implemented through various means, including granting concessions or securitizing cash flows generated by the asset.
• Developing and investing in new infrastructure without increasing the government’s debt levels and/or taxes, or reallocating budget from other crucial public services programs.
• Realizing opportunities for efficiency gains and operational excellence in existing infrastructure with the support of private sector expertise and innovation.
• Promoting infrastructure as an asset class by broadening the potential investor base to include institutional investors, such as sovereign wealth funds, pension funds, insurance funds and asset managers.
• Providing diversified investment opportunities for investors in infrastructure as an asset class, either through direct investment or through specialized infrastructure funds or pension funds.

In developing an asset recycling program, governments should strategically assess the following:

• The capital value invested in existing infrastructure assets on the public balance sheet.
• The potential benefits that can be realized by monetizing these assets and directly reinvesting capital proceeds to
  • (a) create additional or improve existing infrastructure
  • (b) repay existing debt obligations used to finance infrastructure and/or (c) cover the operational expenses of existing infrastructure assets; and
• The pipeline of future assets that can be developed and subsequently “recycled,” thereby ensuring a long-term focus in the country’s infrastructure development program.

The Asset Recycling section of PPPRC has been developed by the World Bank’s Infrastructure Finance Department (IFD), with support from KPMG.

Appendix A: How is asset recycling different from privatization?

Appendix B: Asset monetization and PPPs through direct contractual agreements

It is important to note that direct contractual agreements for asset monetization may also fall under the domain of public-private partnerships (PPPs) in some jurisdictions. However, there are some differences between direct contractual agreements for asset monetization and PPPs.

Key Takeaways

• The link between monetization and re-investment can generate greater investment opportunities as it gives comfort to the public that proceeds are effectively channeled into value creating projects and not misused, mitigating the risks of public distrust of asset monetization schemes. Setting a clear and defined re-investment strategy for the proceeds help realize the government’s priorities and commitment towards developing new infrastructure.
• Re-investment mechanisms can be classified into two categories – (1) a retention-based mechanism, in which the proceeds are retained by the respective public sector entity undertaking asset monetization and (2) a consolidated fund-based mechanism in which the proceeds from asset monetization by all public sector entities are paid into a consolidated fund.
• There are two critical factors for successfully developing a reinvestment strategy for asset recycling – (1) establishing a clear regulatory and governance framework for re-investment of proceeds into new, high priority infrastructure projects and (2) ensuring clear and transparent use of proceeds - this includes developing a list of new, high-priority infrastructure projects where the proceeds of monetization will be utilized.

Under a holistic asset recycling program, the proceeds realized from monetization of infrastructure assets should be re-invested in developing new infrastructure assets; thereby creating a virtuous cycle of monetization and re-investment.

Asset recycling of public infrastructure assets can take various forms, but generally, it involves private investment in existing State Owned Enterprise (SOE) assets. It may involve, for example, government funding new assets or redeveloping existing assets or repaying existing debt by using the proceeds realised from the grant of concessions, a sale or lease or structured financing of existing infrastructure assets. 

For example, in an asset recycling transaction using a concession model, the private sector counterparty pays to government an up-front payment to secure the operating rights of the infrastructure asset.  Over the term of the concession, the ownership of the asset generally remains vested in the government.  The private sector party bears the responsibilities for the maintenance and operations of the asset in exchange for the revenues generated from users of the asset.  

Assets that are most viable for recycling are brownfield assets that have an established stream of revenue, such as toll roads, airports, and utilities assets and which design, development and construction risks have been substantially removed. The upfront payment realised under an asset recycling transaction is applied to fund new infrastructure projects or redeveloping existing assets or repaying existing debt.

Models of Asset Recycling

The range of models that have been observed in asset recycling transactions include the following:

To learn more visit the following SECTIONS:

The following section defines the roadmap for developing and successfully implementing an asset recycling program. 

The roadmap consists of six steps:

1. Define the asset recycling program (goals and objectives, and scope and scale); 

2. Create the necessary setting (e.g., a public governance mechanism); 

3. Create momentum (through engaging public and private sector); 

4. Monetize assets / transaction process; (v) Re-invest proceeds; and 

5. Monitor the program.

Figure 5: Trend of Government debt as percentage of GDP for 153 EMDEs

The Asset Recycling Programs section focuses on the fundamental elements that form the foundation of asset recycling: 

• what asset recycling is, 

• why it is needed, and 

• the roadmap for its implementation.

Enhance your expertise in implementing infrastructure projects through public-private partnerships (PPPs) and explore international certification opportunities in this field.

APMG International Certified PPP Professional (CP3P) programme

The PPP Certification Program Guide (PPP Guide) compiles best practices in the PPP industry and is structured into eight modules, reflecting the stages of a PPP project's lifecycle.Developed by a team of experts selected for their extensive experience in PPP projects and programs in key markets, the PPP Guide offers a free, comprehensive resource on all aspects of successfully delivering PPPs. It also serves as the core study material for the PPP Certification Program.

The Certified Public-Private Partnerships Professional (CP3P) credential is awarded to individuals who pass all three certification exams in the program.

• Foundation exam: Available in multiple languages, including English, Albanian, Brazilian Portuguese, Chinese, French, Japanese, Latin American Spanish, Romanian, Russian, Ukrainian, Serbian, and Vietnamese.
• Preparation exam: Available in English, Brazilian Portuguese, Chinese, Latin American Spanish, and Russian.
• Execution exam: Available in English, Chinese, and Russian.  

Developed by APMG on behalf of leading development institutions—Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB), Islamic Development Bank (IsDB), Multilateral Investment Fund (MIF), Public-Private Infrastructure Advisory Facility (PPIAF), and the World Bank Group (WBG)—the APMG PPP Certification Program sets a global standard for PPP knowledge.

The PPP Guide covers the following key modules, forming an essential pathway to earning the CP3P credential.

Foundation

The Foundation level is designed for individuals with little or no prior experience in PPP implementation. Its primary goal is to provide a standardized understanding of the PPP process and terminology, as outlined in the PPP Guide. The Foundation exam assesses whether candidates possess sufficient knowledge and comprehension of the PPP Guide to contribute effectively as informed team members in a PPP project. This certification prepares individuals to work collaboratively in a team environment and take steps toward implementing the PPP process. The Foundation certification is a prerequisite for the two advanced Practitioner certifications.

Certificate: Foundation exam

Preparation Stage

The Preparation exam is targeted at individuals involved in developing or implementing PPP frameworks, or in the initiation and preparation of PPP projects. This group includes public sector officials, practitioners, and their advisors or consultants.  Private sector professionals can also benefit by gaining a deeper understanding of PPP as a business opportunity. The exam evaluates candidates' ability to apply and adapt PPP frameworks, as well as their competence in project identification, screening, appraisal, and preparation within a governmental context.

Certificate: Preparation exam

Execution Stage

The Execution exam is intended for professionals involved in structuring and tendering PPP projects, as well as managing PPP contracts. This group is primarily made up of public sector officials, practitioners, and their advisors or consultants. Private sector professionals can also gain insights into PPP as an asset and business opportunity. The exam tests candidates' understanding of how to structure and draft PPP tender documents and contracts, and how to manage PPP contracts during both the construction and operations phases.

Certificate: Execution exam

Candidates who successfully complete all three exams are eligible to receive the CP3P credential. Download the free PPP Guide and take the exams here.

Resources

Explore the sections below or search our Library for resources on Infrastructure Finance and PPPs.

The WBG Infrastructure Finance Learning program is actively collaborating with universities, development partners and governments to share lessons learned and real-world examples in the field of Public-Private Partnerships (PPPs). This section offers a rich and supportive learning environment through an interactive learning journey, available both an in-person and virtually.

PPP Hot Topics

In partnership with the Multilateral Cooperation Center for Development Finance (MCDF), Egyptian Ministry of Finance, African Development Bank (AfDB), Asian Development Bank (ADB), Public-Private Infrastructure Advisory Facility (PPIAF), World Bank and the World Association of PPP Units and Professionals (WAPPP), the WBG Infrastructure Finance Learning program organizes a series of events aimed at providing valuable insights into PPPs.

These workshops are designed to offer specialized knowledge and practical skills tailored for PPP units and professionals in Africa and Asia. The series goes beyond standard training, focussing on niche and emerging topics, and emphasizes knowledge-sharing from experienced PPP units in developing countries, enriched with expertise from International Financial Institutions (IFIs). 

Workshop Topics Include:

• Workshop 1: How to Deal with Inflation, Exchange Rate and Interest Rate Risks in PPPs
• Workshop 2: PPP Project Preparation Funds
• Workshop 3: PPPs for New Technologies
• Workshop 4: New Sources of Public Financing for PPPs

WBG Learning Platforms

• The Open Learning Campus (OLC) is the World Bank’s primary platform for learning about the Bank and international development. While much of the content is publicly accessible, participation in specific learning programs requires an OLC account.

Additional Learning Opportunities Include:

• Benchmarking Infrastructure Development – Launch events: an in-person and virtual lesson

Other Learning Platforms

• PPP MOOC: The massive open online course on PPPs, designed to help learners understand the role of PPPs and equip professionals with essential skills. The course includes video lectures, readings, quizzes and other leaning material and is also available in French.
• ALSF Academy is an innovative web-based platform that provides e-learning courses and related materials, including comprehensive course handbooks, model agreements, practice guides and sector-specific publications.
• BIDAcademy by the Inter-American Development Bank: This platform promotes capacity building and training across Latin America and the Caribbean (LAC) to foster sustainable development in the region.
• UNICEF Agora: A global hub for learning, providing access to all of UNICEF's learning opportunities, including the Public-Private Partnerships (PPPLab-UNICEF project), which offers an online course based on the content of the PPPLab Food & Water Insights series.
• ESCAP Training materials: Developed by the ESCAP Secretariat, this online course covers major issues related to PPPs and is available in multiple languages, including Khmer and Burmese. Participants can also earn a PPP certificate upon completion.
• Capacity Building Program: The PPP Center in Philippines conducts a series of capacity building activities (CBAs), offering targeted and customized training to help stakeholders successfully implement viable PPP projects.

Resources

Ezplore the sections below or search our Library for resources on Infrastructure Finance and PPPs.

This section share resources on various industry sectors where Public-Private Partnerships (PPPs) play a crucial role. Each sector offers unique challenges and opportunities for PPPs due to differing legal, regulatory and investment considerations: 

Power Sector

• Role of PPPs: PPPs are instrumental in power sector reforms, legislation, regulation, and the development of Independent Power Projects (IPPs).
• Challenges: Legal and regulatory frameworks vary significantly across jurisdictions, affecting the role of PPPs.
• Opportunities: PPPs can drive development in economies at different stages, from emerging markets to developed countries.

Sub-National and Municipal

• Role of PPPs: Local governments use PPPs to deliver essential infrastructure services such as waste management, water supply, electricity, healthcare, education, urban transport and street lighting.
• Challenges: PPPs at the sub-national level face unique legal and regulatory issues, as the traditional sources of financing are often inadequate to fund local and regional investment needs and local agencies often lack capacity and resources to deliver quality services.
• Opportunities: The Municipal Public-Private Partnership Framework tool is designed to help local governments implement PPPs, considering their specific needs and challenges.

ICT and Telecommunications

• Role of PPPs: Governments focus on creating a regulatory environment that supports digital economy growth and ensures robust telecommunication infrastructure.
• Challenges: Key issues include data protection, privacy, and adapting to rapidly evolving digital technologies.
• Opportunities: PPPs can be leveraged to build and maintain essential digital infrastructure, supporting a thriving ICT sector.

Transportation Infrastructure

• Role of PPPs: PPPs are used to build, renovate, operate, and maintain transportation infrastructure like airports, ports, railways, roads, and urban transport.
• Challenges: Projects in this sector require substantial investment and have long-term implications, entailing both the construction of new infrastructure, as well as the refurbishment and expansion of existing infrastructure.
• Opportunities: PPPs can enhance the efficiency and effectiveness of transportation services, crucial for trade and economic growth.

Water and Sanitation

• Role of PPPs: Governments are increasingly using PPPs to meet the Sustainable Development Goal 6, focusing on clean water and sanitation by 2030.
• Challenges: Improving access and service quality to meet the SDGs cannot be done without massive investment.
• Opportunities: PPPs can provide the necessary financing and operational expertise to achieve these critical environmental and public health goals.

Resources

Explore the sections below or search our Library for resources on Infrastructure Finance and PPPs.

This stage follows the structuring, appraisal, and detailed preparation of the PPP project. In this section, you will find materials and resources focused on managing PPP contracts, including guidance on monitoring and enforcing contract requirements, as well as managing the relationship between public and private partners. It also provides training resources on key topics such as dispute resolution, refinancing, contract termination, and dealing with disruptions.

Additionally, this section offers examples and resources that outline the PPP process, define institutional responsibilities, and cover project implementation. Some governments have established dedicated PPP Units, which bring together staff with specialized expertise to ensure effective project management.

Understanding the legal avenues for redress is crucial for all parties involved in an infrastructure project. It's important to assess whether the host country’s court system is suitable for resolving disputes between contracting parties and addressing concerns of wider stakeholders, such as customers. If legal redress through the courts is unavailable, limited, or unsuitable—particularly for foreign investors—alternative mechanisms may be available through law or contract.

The Disruption and PPPs section explores the growing impact of global disruptions, including climate change, natural disasters, economic crises, disruptive technologies, and pandemics like COVID-19. These unprecedented challenges are reshaping how PPP contracts are managed, as discussed further in PPP Contracts in An Age of Disruption.

Resources

Explore the sections below or search our Library for resources on Infrastructure Finance and PPPs.