What key trends do infrastructure investors face in 2019? For one, nationalist and populist movements are on the rise – creating an environment of heightened political risk, which investors may find hard to navigate. The result could weigh heavily on regulatory stability, as well as country risk or sovereign credit quality.
In tandem, environmental, social, and governance (ESG) matters are beginning to rise in prominence. Increasingly, investors are stepping up their focus in their investment mandates on companies that are seen as acting more sustainably.
Against this backdrop, the latest edition of Outlook keeps investors abreast of the most-read research from the past quarter – offering insights into how the Infrastructure segment is changing and, importantly, how it may yet evolve.
Outlook is available in PDF here
Moorgate compiles, edits and designs Infrastructure Finance Outlook.
On October 29th the U.K. government announced that the Private Finance Initiative (PFI) model for future projects will no longer be used – potentially making a significant shift for the means through which public projects are funded.
However, a new report published by S&P Global Ratings suggests that any resultant financing routes are unlikely to be game changing. Instead, they believe PFIs could still be used, albeit under a different guise.
Following Moorgate’s outreach, FT advisor , TXF News, and Public Finance covered the news.
Market capacity for credit and political risk insurance (CPRI) has grown by 30% since 2015 according to the first ever Market Insight report released by BPL Global, marking its 35th year as the leading CPRI broker.
Based on market statistics and BPL Global’s own portfolio, the report provides an analysis of the CPRI market’s capabilities, current worldwide risk exposures and a claims update, focusing in particular on claims activity since the global financial crisis.
“Our report shines a spotlight on the fact that appetite for the CPRI class is on an upwards trajectory – both in terms of capacity and tenors” says Sian Aspinall, Managing Director, BPL Global. “Furthermore, analysis of market data clearly shows that it is adapting its capabilities to match natural return on investment for areas such as project finance structures, providing coverage for up to 25 years. Also notable is the jump in capacity for non-trade related credit insurance to over US$1.5bn per risk – an area previously constrained by Lloyd’s regulatory requirements.”
Following outreach from Moorgate, the report was covered by: TXF, Insurance Insider, Asia Insurance Post, Insurance Shark, Strategic Risk Europe, Business Insurance, Insurance Insider (2), Luther Pendragon, Commercial Risk Europe, Corporate Risk & Insurance, Global Trade, Credit Insurance News and The Treasurer.
To download a copy of the full report, please click here.
S&P Global Ratings has published its latest edition of Infrastructure Finance Outlook – reviewing the most pressing developments from the global infrastructure sectors from the past quarter.
Focusing on disruption, this quarter’s Infrastructure Finance Outlook provides global insights from S&P Global analysts on topics including: the outlook for U.S. utilities amid a sea of industry change; the opportunities and risks for both commercial airport and car park infrastructure; investment strategies for infrastructure projects in Australia and Brazil; and how signatories of the Paris Agreement can finance their green initiatives.
Read the latest edition here. The newsletter was also covered by the Global Listed Infrastructure Organisation (GLIO).
Moorgate compiles and edits Infrastructure Finance Outlook.
Prior to the financial crisis, Australia enjoyed a decade of promising infrastructure projects. Privatizations of the country’s four major airports, along with extensive highway construction, were infrastructure successes.
But – tempered by construction difficulties, overambitious project forecasting, and highly aggressive financial structures – Australia suffered multiple high-profile defaults. Coupled with the financial crisis, the country’s infrastructure project pipeline came to a standstill.
In an article for Brink Asia, Mar Beltran, S&P Global Ratings’ senior director and infrastructure sector lead, EMEA, describes Australia’s infrastructure turnaround. By employing alternative financing tools, the State of New South Wales (NSW), in particular, has overcome many of the legacy issues that were negatively affecting its infrastructure development.
Beltran says: “NSW’s infrastructure story can provide lessons to other markets: alternative financing models are available and can help to bring market confidence to institutional investors, who will be encouraged to see a strong project pipeline across the sector.”
Read the article here.
Europe’s car park infrastructure is undergoing significant growth: in the past year, four of the largest operators have been put up for sale, while M&A activities are commanding high prices. Although the recent flurry of deals appears promising, S&P Global Ratings argues that the future could look far less favourable for car park assets.
Notably, the automotive industry’s technological breakthroughs, the rise of ride-hailing apps and car sharing services pose material threats to car ownership. This may significantly alter companies’ ability to forecast future revenues and maintain successful relationships with municipalities and other stakeholders. To accommodate, S&P expects car park operators to adapt their business models in the future.
The report, written by S&P Global Ratings’ Stefania Belisario, was covered by City AM.
With quality of university facilities increasingly becoming a key consideration for prospective students and league tables alike, university accommodation holds promise as an asset class. Private investors are continuing to look to the traditionally resilient market for portfolio diversification but – as Rachel Goult, Director, Global Infrastructure Ratings, S&P Global Ratings, suggests – this could be about to change.
In a commentary article for IPE Real Assets, Goult explains how markets factors – including increasing tuition fees and distance learning – may cause uncertainty around the volume of future student applications and, consequently, the demand for accommodation. Although unlikely to affect universities at the top of the leagues, these factors could significantly impact accommodation development projects at lower-ranked universities and the ability of such universities to service debt.
To read the full article, please click here.
Image credit: CC Search user: Vita Student (License).
There’s no denying that underinvestment in infrastructure can have deleterious effects upon a country’s trade and economic competitiveness. But, equally, the challenges of financing capital-intensive infrastructure projects from public funds – and without compromising fiscal targets – are only heightening. The question, therefore, is: What tools are available that can ease financing for urgently-required infrastructure projects?
Writing for BRINK NEWS, Trevor D’Olier-Lees and Mar Beltran, both from S&P Global Ratings’ infrastructure ratings practice, bring to light the various means by which projects can raise capital. Traditionally, such projects may have either tapped into the capital markets or employed privatisation models. But, alluding to various worldwide projects including energy infrastructure, water systems and highways, D’Olier-Lees and Beltran highlight some of the emerging financing alternatives: such as “asset recycling”; the use of public-private partnerships (P3); and the “bundling” of assets.
While such methods are increasingly putting capital to work, D’Olier-Lees and Beltran stress that they are not without their challenges. Certainly, these alternatives are not immune to the perennial concerns around costs, technological and counterparty risks, and unfavourable regulatory landscapes.But by identifying, managing and appropriately mitigating these risks, the public and private sector players can create the optimal conditions to enhance infrastructure systems worldwide.
The BRINK NEWS article can be found here.
A recently-published paper by S&P Global Ratings has raised concerns that accommodation demand at the UK’s lower-ranked universities could fall – amid growing competition among the country’s higher education institutions.
While long-term investors remain interested in university accommodation, S&P believes the sector faces mounting pressure – as a consequence of the decline in number of applications and rising inflation, which could make rental prices in privately-financed accommodation less appealing. But the report also notes that the country’s best-in-class universities will be less affected as they continue to attract students and maintain strong occupancy levels.
The report comes as the Universities and Colleges Admissions Service (UCAS) announced a 3.7% year-on-year drop in demand for university places caused, in part, by falling demand for nursing places, an improving employment market and uncertainties that may arise following Brexit.
The report was covered by the Financial Times and Partnerships Bulletin.
Image credit: CC search user: University of Salford Press Office (License).
Infrastructure in the US needs trillions of dollars of investment for repairs and renewal. Pressure will only mount as disruptive technology increases in scope and the need to be environmentally sustainable rises up the agenda. In a feature for Infrastructure Intelligence, Trevor D’Olier-Lees, senior director at S&P Global Ratings, outlines the state of a selection of American infrastructure sectors, as well as the financing tools that might help the country find the funds for their development.