The Securities and Exchange Organization is to introduce a new mechanism for financing enterprises by establishing project investment funds -- financial institutions that raise capital through public deposits and then allocate the capital to ongoing projects, as specified in the charter of the fund.
Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors.
Behnam Chavosi, director of institutional affairs for the SEO said that the funds are established to avoid deficiencies in the current frameworks of corporate structures.
He estimates the mechanism of these funds to be successful, as the concepts and methods of project financing is different for each project.
Financing projects via such funds is not unheard-of in Iran. It isn’t common either. Numerous technical projects in different fields of oil, gas, petrochemical, mining, and power generation industries are domestically financed by such mechanisms. This is also strengthened by the presence of holding companies that run internal corporate projects in the capital market.
Similar investment funds have already been listed in the stock market and Fara bourse, representing other successful examples in this regard, said Chavoshi. The organizational chart of the funds, as outlined by the official, will include the assembly, board of executive directors, director, technical supervisors, trustees, underwriters, market makers, and audit commissioners.
As for their responsibilities, Chavoshi said that the technical supervisor of the fund -a legal person- supervises the project implementation to check if it is consistent with the project plan and related standards and regulation are observed. The supervisor will deliver his report to the fund director and trustee.
The market makers are responsible for providing investment funds with liquidity through market transactions.
The distinct characteristic of the funds will be transparency of information disclosure -- transparency of information flow from the company to investors, also known as “full disclosure”.
In fulfilling the transparency objective, the project investment funds will establish websites to publish news and information about their projects. They will also prepare monthly reports on project progress, performance reports, and periodical financial statements on three-month, six-month, and annual basis. All the reports will be uploaded onto their websites.
Project owners who want to apply for the fund’s investment finance services can study the related regulations and submit their request to the office of financial institution affairs of the SEO, together with related documents.
