Additional Green Deal funds

About 100 billion Polish zlotys over five years – this is the value of the investment support program, which was created in the Ministry of State Assets. DGP knew the details.

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The ministry’s program allows companies to issue a new instrument – development bonds. Funds from the entrepreneurs’ cause will be allocated to investments, including those in green transformation.

Bonds can be purchased by individual and institutional investors. MAP suggests that the face value of one of them should be PLN 100. This is how much you have to spend today to buy retail government bonds.

Another incentive would be Belka’s tax credit. The development bonds themselves will become a substitute for bank deposits and Treasury issuance – the interest rate will be fixed, and the minimum period for issuance is 5 years. The securities will be generally traded and listed on the stock exchange, so that those who buy them from the issuers can sell them at any time.

The safety of buyers must be guaranteed by additional conditions that bond issuers must fulfill. First of all, the minimum issue value is 100 million PLN, which excludes small companies from the program. Second, the issuer must have an investment grade rating (having two independent opinions of creditworthiness).

An important component of the program is the creation of an investment vehicle that acts as a kind of market maker for development bonds, including by attracting foreign capital. The car will be a company that invests in bonds for development (FIOR). It will be an entity with a minimum capital of 100 million Polish zlotys, supervised by the Polish Financial Supervision Authority, that issues refinancing bonds to purchase development bonds. FIOR must spend at least 80 percent. Proceeds from the sale of refinancing bonds for the purchase of development bonds within two years of issuance.

Buyers of refinancing bonds can be large domestic and foreign investors (the minimum issue value is 500 million PLN), including institutions such as the European Investment Bank and the European Bank for Reconstruction and Development. Ultimately, FIOR, which operates in the form of a joint stock company, will be listed on the stock exchange. MAP assumes that the first bond refinancing issues could take place in the second quarter of 2022.

The concept of development bonds per se is not new – the tool first appeared in the announcement of the Capital Building Plan in 2016, and was then included in the government’s strategy for developing the capital market in 2019.

Polish entrepreneurs today do not have easy access to financing for long-term investments, according to research from the European Investment Bank. Loans over 5 years are not granted with eagerness as they require tight security. Meanwhile, banks are resigning from making deposits to natural persons. Entrepreneurs cannot get financing and savers have no way to allocate funds to protect them from inflation – explains one of our interlocutors who knows the background of the whole concept. He adds that the issue of developing or refinancing bonds will not increase the state’s deficit or debt, because it will be money from private sector investors.

The absence of Belka tax will increase the desire to use these tools. In addition, this largely applies to energy conversion projects, which are in line with the programming priorities of the European Investment Bank, the European Bank for Reconstruction and Development and the International Monetary Fund, as our interlocutor indicates.

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Our findings show that the concept of creating a FIOR emerged about a year ago, when it was not yet certain how devastating the COVID-19 pandemic would be. – The head of the exchange, Marek Dittl, worked on the idea with MAP, the tax part was developed by the former Deputy Finance Minister, Bowie Groza, and the issues of market regulation and supervision were developed by Artur Kluchny, former deputy – chair of the KNF – says one of our interlocutors.

In October, according to our sources, the head of MAP, Jacek Sasin, contacted President Andrzej Duda with his concept ready. And he considered that such a large project could constitute a new economic opening that is important for the head of state. The plan assumed it would be Andrzej Duda’s legislative initiative. However, the matter has calmed down due to the pandemic. Now it’s back because of the signal that appeared in announcements of the draft version of the New Deal – the law and justice reform plan that is being prepared. Indicates the BGK launching of a fund using development bonds, as it is intended to support investments.

However, three variables may play. The first is the concept of labeled MAP. The problem is that it did not provide a larger share of BGK (a bond operator for example), which raises questions about who would be the host of the project in practice.

The second option also assumes the use of the Development Bonds tool. In this context, our interlocutors from the power camp refer to “IGNC” (tentatively: “Ignac”) – short for “Investment, Economics, Modernity and Digitization”. He also mentions the injection of 100 billion PLN into the Polish economy over 5 years, of which 10 billion PLN this year. The BGK staff will be responsible for developing this concept.

Finally, the third variable may be a hybrid that combines the assumptions of both structures. One of our interlocutors points out that the Ministry of Finance is working on this concept, but in this case the offer will not be aimed at individual savers, since the minimum bond price will be calculated in the hundreds of thousands of zlotys. In this case, there is also no question of such an idea as FIOR.

Tomasz ółciak, Marek Chądzyński, Grzegorz Osiecki


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