Smart Cities Funding Models

Bridging the Funding Gap of the Next Trillion-dollar Market

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Smart Cities are cities built on ‘Smart’ and ‘Intelligent’ solutions and technology which will lead to the adoption of at least 5 of the 8 following smart parameters: smart energy, smart building, smart mobility, smart healthcare, smart infrastructure, smart technology, smart governance and smart education, and smart citizen. The Smart Cities market is set to grow from just over $900 billion in 2016 to $1.57 trillion in 2020. Public and private stakeholders are preparing for the Smart Cities disruption with key strategies to build and transform cities into seamless ecosystems. Cities are always looking toward increasing capacity and efficiency of functioning in order to attract economic growth and activity. In order to build highly functional and intelligent cities, public authorities will need to integrate smart technology into existing infrastructure while building new infrastructure from ground up.

Infrastructure building has always been dependent on financing mechanisms used to support construction, operation, and maintenance. Several financing mechanisms have been made available to stakeholders depending on risk appetite, investment size, and duration of financing. It is imperative that stakeholders understand the nuances, advantages, and shortfalls of each mechanism before choosing a tool to finance projects under their purview.

The research service analyzes and profiles each mechanism to understand the key aspects and best use cases to ensure stakeholders are kept informed and have a holistic view of the infrastructure and Smart City financing market. Coverage also includes a comprehensive scoring and feature comparison which can be used to select the most appropriate funding mechanism. The base year considered for the study is 2016.

Key Target Audience

The key target audience includes:
•     Public sector organizations
•     Wealth funds
•     Banking and lending sector
•     Industrial credit sector
•     Smart product manufacturers
•     Smart city integrators
•     Foreign Investors

Research Scope
•     Definition of Smart Cities
•     Overview of all funding mechanisms
•     Government-based financing
•     Institutional funding
•     Revenue-based funding
•     Scoring of funding mechanisms
•     Suitability of funding mechanisms

Key Questions this Study will Answer
•     What are the mechanisms being used currently to fund infrastructure projects?
•     What are the ways public or private entities can monetize infrastructure?
•     What are the features of funding mechanisms available for Smart City projects today?
•     What are some examples of successful funding of infrastructure projects?
•     What are the risks associated with each funding mechanism?
•     What is the best fit for an infrastructure project based on risk appetite, funding duration, and stage of project?

Table of Contents

1. Executive Summary
Sources of Funding
Cash and Securities Flow during Project Finance
Financing Mechanism Suitability
Financing Schedule for Infrastructure
Risk to Reward Map of Funding Mechanisms
2. Research Scope, Objectives, and Methodology
Research Scope
Research Background
3. Introduction and Definition of Smart Cities
Definition of Smart Cities
Global Infrastructure Investment Trends
Revenue Attributed to Smart City Solutions
Types of Smart City Operating Models
Global Smart City Market
Global Smart City Market—Detailed Breakdown
4. Funding Mechanisms
Sources of Funding
Government Financing
Institutional Funding
Revenue-based Financing
5. Government Financing
Government Financing—Center Allocation
Government Financing—Debt Funding
Government Financing—SWF and Pension Funds
Government Financing—Land Monetization
6. Institutional Funding
Institutional Funding—Public-Private Partnership
Institutional Funding—Securitization or Structured Finance
Institutional Funding—International Grants
7. Revenue Based
Revenue Based—User Fees
Revenue Based—Tap Fees
Revenue Based—Linkage Fees or Impact Fees
Revenue Based—Pay for Performance
8. Case Studies
Case Study: India—Government Financing
Case Study—Securitization: Tamil Nadu Urban Development Fund
Case Study—China: Land Monetization
Case Study—Amsterdam: Public-Private Partnership
Case Study—Sovereign Wealth Fund Investment Diversification
Case Study—SWF Pension Fund: Global Strategic Investment Alliance
Case Study—Grants: European Investment Bank (EIB)
Case Studies: Revenue-based Financing
9. Funding Mechanisms Scoring
Smart City Funding Score Matrix—Identifying Top Funding Channels
Financing Mechanism Suitability
Financing Schedule for Infrastructure
Risk to Reward Map of Funding Mechanisms
Cash and Securities Flow during Project Finance
10. The Last Word
The Last Word
Global Smart Cities in 2025
Legal Disclaimer
11. The Frost & Sullivan Story

Infographic



List of Figures & Charts

1. Smart City Market: Business Model, Global, 2012–2025
2. Land Monetization Projects, China, 1992-2003
3. Smart City Market: Funding Mechanism Overview, Amsterdam, 2013
4. Smart Cities, Global, 2025


1. Population, Urban Population, and Temperature Growth; Global; 2006, 2013, & 2030
2. Smart City Market: Percent of Respondents Indicating Revenue Band for their Organization’s Smart City Solutions, Global, 2015 and 2016
3. Smart City Market: Percent of Respondents Indicating Revenue Band for their Organization’s Smart City Solutions, Global, 2016
4. Smart City Market: Percent of Respondents Indicating Projected Revenue Growth Rates for their Organization’s Smart City Solutions, Global, 2016
5. Smart City Market Revenue: Global, 2016-2020
6. Smart City Market: Detailed Breakdown by Segment, Global, 2020



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