ANNUAL REVIEW

Infrastructure & Project Finance 2016

October 2016  |  FINANCE & INVESTMENT

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Infrastructure projects play a vital role in a country’s economic development. Developing and delivering infrastructure schemes can improve a country’s productivity and bolster economic growth. This can be particularly useful in times such as these, where economic, financial and geopolitical conditions worldwide have created significant uncertainties and instability in the commodities

 

UNITED STATES

Michael E. Pikiel, Jr.

Norton Rose Fulbright US LLP

“There was a time when the US was the global leader in infrastructure. Since that time, despite having the world’s largest economy, the US has failed to invest in new infrastructure and failed to adequately maintain and rehabilitate existing infrastructure. This underinvestment has led to decaying public infrastructure and created a tremendous funding gap, all of which, according to a 2013 report by the American Society of Civil Engineers, could cause the US to lose approximately $3.1 trillion in gross domestic product through 2020. The good news is that the biggest trends to emerge over the last 12 months is a rapidly growing recognition of the need to invest in infrastructure and growing demand for infrastructure investment. Further good news for investors is that the opportunities for investment in the US are increasingly diversified.”

 

CANADA

Maxime Turcotte

Stikeman Elliott LLP

“Public-private partnerships (PPPs) continue to be attractive for federal and provincial governments. We have seen both levels of government use private markets to build, operate and finance transportation and social infrastructure. The Canadian market also has a number of developers that seek to monetise their projects post-construction, creating attractive opportunities for investors seeking moderate risks over the long term, such as pensions funds and insurance companies. Renewable energy activity has historically been strong in Ontario, Quebec and British Columbia. Investment opportunities in renewables have been supported by favourable governmental programmes whereby Canadian projects usually involve long term fixed price contracts with government backed public utilities.”

 

MEXICO

Marco A. Sotomayor Melo

RDA – Rodríguez Dávalos Abogados

“Adverse economic and financial conditions worldwide continue to cause uncertainties in commodities and oil prices as well as currency instability. There is a crisis in Mexico in terms of governmental leadership which is causing uneasiness throughout the business community. In spite of these factors, which have been affecting investment decisions, there is still some activity in infrastructure projects, specifically in the areas of transportation, energy, oil & gas and healthcare. In general, the Mexican government has reduced its budget for infrastructure projects but it is looking to compensate through a maJor participation of private capital in such projects, through public-private partnerships.”

 

BRAZIL

Daniel Engel

Felsberg Advogados

“Infrastructure investments in Brazil can be divided between greenfield, brownfield and distressed. Over the last few months, as a result of the prevalent Brazilian economic and political circumstances, greenfield investments have been on a downward trend. Brownfield investments have taken place under strategic and specific market opportunities, and not necessarily as a consequence of a well developed secondary market itself. Also, investments in distressed infrastructure assets have increased significantly. Investors have shown a particular interest in greenfield investments, most notably in power generation from renewable sources – mostly wind and solar power – as well as transmission lines and urban mobility projects.”

 

SPAIN

Joaquín Sales

King & Wood Mallesons

“The infrastructure sector in Spain has been stagnant over the last 12 months. Very little new money has been invested and a number of existing road and transport projects have been refinanced. The public sector has put most investment initiatives on hold, due both to budget constraints and the negative circumstances affecting the Spanish government, with repeat elections resulting in a much divided congress. At the time of writing, no government has been formally appointed. However, we are seeing renewed interest in the energy sector and investors trying to find reasonably priced portfolios, if not standalone projects. And, of course, going forward, Spanish infrastructure companies will continue to invest heavily abroad, in North America, Latin America, Europe and Australia in particular.”

 

ITALY

Andrea Scialpi

EY Italy

“The Italian economy is rebounding from a period of decline and has recently seen moderate growth. With the onset of recovery there has been renewed interest in infrastructure, with the government providing stimulus for the private sector, along with European funding, to invest into the sector. In particular, we are seeing a renewed focus by the government on the disposal of strategic infrastructure assets. Investors increasingly consider Italy a place to invest their money, and the transport sector appears to be particularly high on the list. The recent attempt to dispose of a stake in Aeroporti di Roma, the upcoming minority disposal of ASPI, the recently completed acquisition of the A4 motorway by Abertis and potential transactions involving other Italian airports are clear examples of this trend.”

 

LUXEMBOURG

Alexandrine Armstrong-Cerfontaine

King & Wood Mallesons

“Much is being done to attract investors in new and alternative technologies and the Luxembourg government has made economic diversification a priority. We see activity developing with a big push from the government into ‘new’ sectors. One such area is sustainable development, with close to 200 eco-enterprises, mainly active in the renewable energy sector, waste management, water treatment and eco-construction, supported by 28 public agencies and six research institutes. Furthermore, the University of Luxembourg and various public research centres have joined together with a number of world-renowned American research institutes for various projects. Data management and storage centres have also been active areas. The government is not only supporting such projects financially, but also promoting them intensively.

 

INDIA

Munish Sharma

Dua Associates

“Infrastructure investment in India has seen substantial activity over the last 12 months, particularly in roads and bridges, renewable energy such as solar power, ports and healthcare. There have been some improvements in terms of infrastructure creation and service delivery in water supply and sewage treatment, largely due to increased interest from the government. This has been the welcome signal that the infrastructure sector had been looking for, having been at a standstill for more than five years. Investors and developers have also shown considerable interest in the water supply, waste management and education sectors.”

 

JAPAN

Izumi Yamada

Deloitte Tohmatsu Financial Advisory LLC

“The government advocates the expansion of private participation in public services and assets through PPP and PFI schemes in its national master plan, the Japan Revitalisation Strategy 2016. The Cabinet Office (CAO), the supervisory agency of PPP/PFI, set numerical targets for 2013-2022, comprising ¥7 trillion for concessions, ¥5 trillion for public facilities with income-generating facilities, ¥4 trillion for public real estate utilisation projects, and ¥5 trillion for other projects. The government also targeted six airports, six water facilities, six sewerage facilities and one toll road between 2014 and 2016, and three educational facilities and six public housing projects between 2016 and 2018. The targets set by the CAO are more ambitious than the PPP/PFIs projects seen in recent years. A number of private entities have just begun operation of airport concessions including the Sendai Airport, the Kansai International Airport and the Osaka International Airport, as well as the toll road concession in Aichi prefecture.”

 

ANGOLA

Irina Neves Ferreira

Angola Legal Circle

“It is a widely accepted fact that recent notable economic growth in Angola was mostly, if not entirely, supported by oil profits. The sharp drop in oil prices thus had a major impact on the country. Budgetary adjustments were required and the state budget for 2015 was amended only three months after its publication. Public investment policies – including in infrastructure – were consequently heavily reduced. The Ministry of Finance publicly stated that certain infrastructure projects would be suspended in order to guarantee the implementation of infrastructure projects deemed a priority.”

 

MOZAMBIQUE

Paula Duarte Rocha

Henriques, Rocha & Associados

“Mozambique remains one of the most attractive markets in Sub-Saharan Africa with abundant natural resources being key for infrastructure development and rehabilitation. Low commodity prices, political instability and a debt crisis that has led to suspension of international aid, along with the metical depreciation – GDP growth slowed to 3.7 percent – have, however, been stalling the economy for the last 12 months or so, posing challenges to any investment opportunities. Investment opportunities in the energy, power and transport segments have not lost momentum, but the pace of negotiation slowed down and promising projects are yet to be implemented. The Catembe Bridge in Maputo, and the new port of Beira, both funded by China, have been the most significant infrastructure investments in the country since 2014.”


CONTRIBUTORS

Angola Legal Circle

Deloitte Tohmatsu Financial Advisory LLC

Dua Associates

EY Italy

Felsberg Advogados

Henriques, Rocha & Associados

King & Wood Mallesons

Norton Rose Fulbright US LLP

RDA – Rodríguez Dávalos Abogados

Stikeman Elliott LLP


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