A rethink of the infrastructure market
Industrial operators and developers, infrastructure funds, strategic investors, advisers and pension funds were among the delegates at the fourth annual Infrastructure Investors Forum Europe in the Freshfields Bruckhaus Deringer London offices on 2 February. In a fascinating session they focused on and discussed new approaches and strategies for the next generation of infrastructure investing in Europe.
Even as the smog of the global financial crisis appears to be lifting, many themes discussed at last year's forum remain prevalent market concerns today. Constraints in securing adequate liquidity for investment and a focus on the management and operation of assets remained key focal points. It was widely recognised that the industry is still wrestling with the implications of the global shock of the last couple of years – as one panel chairman said, 'We are all still learning the language of the current economic environment'.
However, a 'cautious optimism' was the prevailing emotion and the panel discussions and expert presentations also focused on other developing issues including:
the role played by fund managers in securing funding in this still uncertain yet relatively positive economic environment and the increased skills required by the key market players experiencing an improving deal pipeline; the scope of the infrastructure market and the developing sophistication and diversity of infrastructure as an asset class; transparency required in fund structures (fees, information etc); regulatory risks; investment opportunities in renewable energy; and developments and trends in the financing of and investment in future infrastructure deals, including the diversification of funding sources, with the increasing importance of the bond markets and direct investment. The central theme to emerge from the forum was twofold:
that demand for infrastructure investment will continue to grow; and that managers must find ways to secure the necessary funding for infrastructure projects. The key lies in a more sophisticated understanding of the infrastructure market and improved communication with investors. The onus also falls on regulators and governments to ensure that there is a stable regulatory environment in which infrastructure projects can thrive.
The need for investment in infrastructure
With a rapidly growing and aging population, the demand for better infrastructure (particularly in transportation and health services) can only increase. Substantial investment in energy projects will also be necessary to meet EU and other governmental targets.
In an age of burgeoning deficits...