Infrastructure bond
Infrastructure bond is a type of bond issued either by private corporations or by state-owned enterprises to finance the construction of infrastructure facilities such as 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.
Operation
As a rule, the issuer of such securities, after the construction of an infrastructure facility is completed, receives it on a concession for some time and collects the payments from the facility users. Quite often, the state, 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 ; therefore, such bonds will mostly target institutional investors including insurance companies and pension funds. To make such bond even more attractive, the state authorities may arrange certain interest and tax benefits.