infrastructure markets [email protected] +61 2
TRANSCRIPT
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Infrastructure MarketsHow Attractive Are They?
How S&P Looks At Credit Risks
Copyright © 2016 by S&P Global.
All rights reserved.
Thomas [email protected]
+61 2 9255 9872
Bertrand [email protected]
+65 6239 6303
Abhishek [email protected]
+65 6216 1121
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Definition Of The Infrastructure Asset Class
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25.0
18.0
5.0 4.0 3.0
20.0
13.0
5.0 4.0 3.0
Essential service to society Asset-backedInflation-Linked MonopolisticNo/Limited GDP risk High barriers to entryYield generation No/Limited commodity riskRegulation Others
• Investors associate clear
characteristics to infrastructure
assets
• In particular, they favour natural
monopolies…
• … and the long-term orientation of
such investments.
• The number of boxes they can tick
has a clear bearing on their appetite
The Way Investors See It
Source: Deloitte Infrastructure Investors Survey 2016, Deloitte Analysis
Characteristics Of Infrastructure Assets
Which factors do you see as most critical in defining what constitutes an
infrastructure asset now? (% of respondents)
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Setting The Scene
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Key Statistics For 2015
US$858m
Average size of unlisted infrastructure fund closed in 2015
US$349b
Estimated aggregate value of 661 infrastructure deals completed globally in 2015
US$108bEstimated amount of “dry powder” held by infrastructure firms
US$5.3b
Aggregate capital raised in Asia, nearly double the amount of 2014
Source: 2016 Preqin Global Infrastructure Report
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Funding Markets Remain Supportive…
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-
3.0
6.0
9.0
12.0
15.0
18.0
21.0
24.0
27.0
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16
Bank Loans Development Finance Institution Loans Bonds Equity Equity/Debt ratio (%)
Debt And Equity Are Waiting To Be Put To Work
Source: IJ Global
Global Project Finance Value By Funding
(US$ billion)
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… But Not All Goes To Greenfield…
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-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16
Primary Financing Refinancing Asset acquisition
As Acquisitions & Refinancing Take Their Share
Source: IJ Global
Global Project Finance Value By Purpose
(US$ billion)
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… Constraining Net Growth In Infrastructures
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• It seems to be a consensus among market participants that there is an
“infrastructure gap”
• “There is absolutely zero correlation between the scale of need for infrastructure
and addressable opportunities for the private sector” (Jim Barry, head of
Infrastructure at BlackRock)
• So why does demand fail to meet needs?
- Infrastructure users have to change their mindset
- Capital may be available, but not necessarily the right form of money
- Many investors restrict themselves
- Government do not monetise assets
- The infrastructure-finance market lacks transparent information
Why An Investment Shortfall?
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An Investor’s Perspective
Overview Of Investors’ Focus and Infrastructure Needs
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Global - A Safe Asset Class… Really?
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38.0
35.0
5.0
15.0
7.0
Political risk Regulatory risk Refinancing risk
Operational risk Tax risk
• The key risks that concern
infrastructure investors are external
risks…
• … including macroeconomic
circumstances, and…
• … the political and regulatory
environment
• Technological risk does not currently
seem a high concern for
infrastructure investors
The Way Investors See It
Source: Deloitte Infrastructure Investors Survey 2016, Deloitte Analysis
Risks Of Infrastructure Assets
When considering whether to invest, which risks most concern you? (% of
respondents)
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Investments In Emerging Countries
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The Way Investors See It
Source: GI Hub and EDHEC Infrastructure Institute, G20 survey – 184
• Important factors of investments
(5 is the highest importance rating)
- Stable regulation and contracts (4.2)
- Earnings stability (3.9)
- Counter party risk (3.6)
- Greenfield vs. brownfield (3.1)
- Earnings growth potential (3.0)
- Investment size (2.8)
• Key risks
- Public Policy Reversals
- Enforceability of Contracts
• Key opportunities
- Higher Returns
- Limited opportunities in developed
markets
44.0
3.0 20.0
33.0
No and do not want to Not sure
Yes, already invested No, but would like to
Investment behaviour
Do you already invest in infrastructure assets in emerging countries? (%
of respondents)
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Investment Needs In Emerging Asia
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Source: ADB
Actual Infrastructure Investments Lower-Deficit Likely To Increase Further
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Infrastructure Investment – Why It Matters
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-
20.0
40.0
60.0
80.0
100.0
120.0
Quality of overallinfrastructure
Transport infrastructure Electricity and telephonyinfrastructure
Global Competitiveness Index
China India Indonesia Malaysia Philippines Singapore Thailand
Developing Asia - Infrastructure a relative Weakness
Source: WEF (World Economic Forum) 2016-2017 Global Competitiveness Index. The lower the score, the higher the quality of infrastructure
Infrastructure Quality Comparisons Across 7 Asian Nations
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Philippines - Past Investments In Infra
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3.0
6.0
9.0
12.0
15.0
18.0
21.0
-
5.0
10.0
15.0
20.0
25.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
PPP Investments (US$ billion) [Left axis] Other Investments (US$ billion) [Left axis]
# Other Projects [Right axis] # PPP Projects [Right axis]
A Fluctuating Record
Source: World Bank, PPI Visualisation Dashboard
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Philippines: Infrastructure
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40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Transportation Electricity & Telecommunications Global Competitiveness Index
Infrastructure Quality Has Been Deteriorating
Infrastructure Weakness Hurts Competitiveness
Source: WEF (World Economic Forum) 2016-2017 Global Competitiveness Index. The lower the score, the higher the quality of infrastructure
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Putting The Infrastructure Puzzle Pieces Together
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• Demand:
• Need to bridge the gap between existing assets and needs for new assets
• Support growth in population and economy
• Funding:
• Governments will support increase in infrastructure spending but have fiscal constraints
• Private sector is keen to participate, but will evaluate projects based on commercial returns
• PPP:
• Public-Private-Partnership success is key to meeting funding needs
• Stable regulations/ policy, economically feasible projects are pre-requisites
PPPs Must Be Successful To Meet The Needs For Infrastructure
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