ARTitle_Infrastructure_Sept18.jpg

ANNUAL REVIEW

Infrastructure & Project Finance 2018

September 2018  |  SECTOR ANALYSIS

financierworldwide.com


Click cover to download

(Subscriber-only password access)

 

Not a subscriber?

Click here to join the FREE mailing list and receive password access


There have been some interesting developments in the global infrastructure market in the first half of 2018, with further new opportunities anticipated for the second half of the year. The UK market remains disappointing, however. The private finance initiative (PFI) concept introduced in 1992 has dramatically fallen out of favour over the past year. Political support for the concept has collapsed among the previously enthusiastic Labour party, which has announced that it will move projects back under public sector control if or when it returns to office. At the same time, the collapse of Carillion, a major PFI construction player, has increased public opposition to private sector investment in infrastructure.

 

UNITED STATES

Kent Rowey

Allen & Overy LLP

“Infrastructure investment in the domestic US market has been active, both in terms of fundraising and dealmaking. With respect to the former, third and fourth generation infrastructure fund managers are raising new funds in the $5bn to $7bn range. A few funds are targeting even higher amounts. Deal activity is strong, especially in the airport, port and logistics sectors. The Port Authority of New York and New Jersey alone is considering terminal redevelopments with aggregate capital costs in excess of $10bn. Several container terminal businesses have traded in the past 12 months, as shipping companies look to divest terminal assets and terminal operators look to sell down exposure.”

 

CANADA

Anurag Gupta

KPMG Canada

“Infrastructure investment in Canada has historically been driven by strong government support, either by way of direct funding, such as design-bid-build, or via alternative delivery methods, such as PPP or alternative finance and procurement (AFP), as it is known in Ontario. Over the last few months, governments have been increasingly moving away from using long-term private finance in favour of short-term construction phase private financing, which achieve construction risk transfer benefits, or fully publicly financed structures. Sectors that continue to receive government funding, and thus infrastructure projects, include social accommodations, transit roads and bridges.”

 

BRAZIL

Bruno Gandolfo Damico

Stocche Forbes Advogados

“Despite the economic crisis and political uncertainties due to presidential elections, there has been significant investment in infrastructure in Brazil over the past year. Since the Investment Partnerships Program (PPI) was launched by the federal government in 2016, 175 projects have qualified for inclusion. By the end of 2018, a total of 101 projects worth BRL 144.2bn are expected to be completed. The PPI portfolio includes concessions in energy, mining, oil & gas and logistics such as railways, highways and ports. Renewable sources, such as wind, solar and biomass, are the target of several government programmes and have been treated as a priority.”

 

PERU

Carlos Arata

Rubio Leguia Normand – Perú

“Due to a variety of factors, infrastructure investment in Peru has been very slow. Previously, ongoing political turmoil helped focus the executive branch’s efforts on mitigating the pressing issues in the country, hoping to improve public opinion, rather than pursuing long-term projects. Equally, corruption scandals have created a terrible environment for public officers to act and decide controversial matters. However, president Vizcarra is promoting projects in different sectors, especially those with an important social impact, such as hospitals, water treatment plants, schools and so on, and some improvements have been made in the most important private and public initiatives.”

 

UNITED KINGDOM

Chris Lewis

EY

“There is a lot of interest in new areas of the power market, including batteries, metering, solar and capacity market solutions. The announcement from the government detailing the country’s active participation in nuclear power for the foreseeable future has also increased focus on the sector. Further, investor interest in the opening up of the rail market – through market-led proposals – and the road investment programme as they move into the new control period, has also increased. According to the Ministry for Transport, key roads below the motorway network and the largest ‘A’ roads currently operated by Highways England could receive investment of up to £100m each.”

 

FRANCE

Paule Biensan

White & Case LLP

“In France, we have mainly seen refinancings and secondary market transactions. Investors seem to be attracted by investing post-construction and in refinancing, when the infrastructure has been successfully operated over a certain number of years. Alongside traditional bank and industry players, new players, such as infrastructure funds and insurance assets managers with an appetite for this class of asset, have emerged in recent years. They come as debt providers as well as equity providers. In terms of greenfield projects, it is mainly in the broadband sectors, such as Grand Est and Gironde, and social infrastructure, such as Saclay school, that there is a fair amount of activity.”

 

SPAIN

Joaquín Sales

King & Wood Mallesons

“Public investment in the infrastructure sector in Spain is expected to increase in 2018 with respect to 2017, but will remain well below figures seen prior to the 2008 financial crisis. That said, investment in construction and improvement of infrastructure projects is expected to grow more than 10 percent in relation to the previous Spanish general state budget. Most of the investment will go to high-speed rail networks and the maintenance of existing roads, as well as the development of new ones. Renewable energy projects are also attracting new investors with fairly large projects being developed.”

 

GERMANY

Alexander M. Wojtek

Luther Rechtsanwaltsgesellschaft mbH

“Germany is still one of the world’s biggest exporters and is enjoying record low levels of unemployment, Europe’s largest economy has long suffered from a lack of investment in its infrastructure. Following reports of an insufficient and aging infrastructure, in August 2016, the German federal government adopted a plan to spend €270bn on construction and modernisation of the country’s infrastructure over the next 15 years. Our impression is that the mere announcement of the ‘Federal Transport Infrastructure Plan’ has already led to an enhanced investment climate.”

 

SWEDEN

Peter Högström

Lindahl

“The a need for investment in the infrastructure sector is great and the government has adopted a new very ambitious infrastructure budget and national plan, but nothing is clear as to which projects will have private sector involvement in terms of financing. The majority of these projects are in the transport sector and part of the national infrastructure plan. However, in the private sector, there has been considerable activity. In particular, there is still strong interest in investments in wind, biogas, gas and electricity grids, district heating and social infrastructure, such as real estate, relating to the care and schooling sector.”

 

POLAND

Adriana Mierzwa-Bronikowska

Hogan Lovells LLP

“Poland benefits greatly from EU funding with respect to the development of public infrastructure projects. The country has seen an enormous influx of infrastructure investment in the transport sector, specifically in roads and rail. Last year, the concentration of public infrastructure investment caused a significant increase in prices in the construction market. With respect to PPP projects, the majority of schemes that reach a commercial and financial close tend to be smaller in value, around €10m.”

 

JAPAN

Hiroshi Tomita

PwC Advisory LLC

“With a view to further promoting public-private partnerships (PPPs) in infrastructure development, the Japanese government has amended its private finance initiative (PFI) law and introduced the concession scheme since 2011, with a focus on sectors including airports, waterworks, roads, educational facilities and ports. Apart from PFI and PPPs, including concessions, in the wake of governmental climate change policy and power sector reform following the Fukushima incident, the introduction of the feed-in tariff (FIT) scheme in 2012 has helped fuel the substantial expansion of investment in the renewable energy sector.”

 

ANGOLA

Irina Neves Ferreira

Angola Legal Circle Advogados

“Angola elected a new president in 2017 and he has stated on various occasions, including through the Governmental Programme for 2017-2022, that the Angolan executive is committed to making public investments in infrastructure, in particular in key sectors such as energy, water, roads, railways, ports and airports, in order to boost private investment in the country’s provinces. For example, in the last 12 months, Laúca Dam in the province of Malanje and a 10 km railway in Luanda – the so-called ‘nova marginal’ – have been completed.”

 

MOZAMBIQUE

Paula Duarte Rocha

Henriques, Rocha & Associados

 “In the aftermath of the ‘hidden debts scandal’, which caused foreign investment in Mozambique to fall by 75 percent in the last three years and reduced external financing and donor support, investors seem to be regaining confidence in the country. The liquefied natural gas (LNG) sector is projected to be the primary recipient of foreign direct investment (FDI) inflows into Mozambique, as well as the major driver of the country’s economic expansion prospects. Infrastructure in Mozambique is still significantly underdeveloped and remains a challenge if the country is to boost its economy and seize opportunities emerging from international interest in its vast natural resources.”


CONTRIBUTORS

Allen & Overy LLP

Angola Legal Circle Advogados

EY

Henriques, Rocha & Associados

Hogan Lovells LLP

King & Wood Mallesons

KPMG Canada

Lindahl

Luther Rechtsanwaltsgesellschaft mbH

PwC Advisory LLC

Rubio Leguia Normand – Perú

Stocche Forbes Advogados

White & Case LLP


©2001-2018 Financier Worldwide Ltd. All rights reserved.