G
lobal Opportunity brought together some of the leading figures in global project finance to discuss
the current challenges in project finance around the world, what can be learnt from the past and what needs to happen in the future if we are to meet the huge challenges that lay ahead. Inadequate or poorly performing infrastructure is a huge challenge for both developed and developing countries across the globe as they try to drive forward economic and social growth.
Whether we are talking about transport, power supply, energy generation, water, sanitation or housing, the economies and societies of the world cannot survive, develop or grow without decent modern infrastructure. Not least as the population
and urbanisation continues to increase. Figures from the United Nations suggest that as the world population climbs relentlessly toward the10bn mark, over the next two decades the number of people living in cities will also rise from the current 50% mark towards 70%. Hence we now see estimates of the scale of this investment needed across the world being put in the region of $57tr by 2030. Clearly extraordinary numbers and extraordinary challenges when it comes to financing and funding this ambition.
In the UK the scale of this challenge is clear. With current infrastructure investment levels sitting at around £20bn a year, big steps have to be taken to accelerate investment levels to some £45bn by 2016 to meet the targets set by the UK National Infrastructure Plan. It is the same around the world. While China currently leads the way with infrastructure investment of around $500bn year, Europe with $400bn and the US with around $375bn, all nations know they must raise their game to sustain growth and social need.
Finding the necessary financing has been difficult for much of the western world over the last few years as economic down turn put pressure on markets, governments and available finance. But as we enter the long awaited upturn, infrastructure is at last being seen around the world as a safe and vital
Clockwise (from left): Sarah Cartledge; Peter Chamley; Malcolm Bairstow; Gabriel Buck; Geoff Bee; Antony Oliver; Philippe Gautier; Manish Gupta; Andrew Ivison; Shyam Sankar
bet for investment ad a key driver for economies.
However, the question still remains how to accelerate the much needed and much wanted investment in transport, water, power and housing infrastructure.
To set the scene the round table kicked off with a general discussion around the impact of investment in infrastructure in light of the current economic conditions.
Q: As we now witness a long awaited economic upturn, what has been the biggest impact of the global economic downturn on the way in which investors approach globally important infrastructure projects and how has the appetite for investing in infrastructure changed in the last five years?
Malcolm Bairstow Spending money on infrastructure remains the best form of stimulus as it boosts economies and generates jobs. There is a burning platform around the world in both developed and developing economies. While there is less of an appetite for spending public money, there is an appetite for private sector funding. But as a general statement I would say that the private finance models around
34 GLOBAL OPPORTUNITY 2014 | ISSUE 01
the world feel quite unstable. With the exception perhaps of Australia and Canada there still doesn’t seem to be a lot of confidence.
Gabriel Buck In terms of credit risk on infrastructure projects it is
exactly the same today as it was pre- 2007 – pricing has changed but the fundamentals around infrastructure in the UK or anywhere around the world remain compelling. For me the big change since 2007 is that Basel III and the regulators have made long term bank financing something of a scarce resource. The amount of money available is much less and the cost at such high levels that it becomes uneconomic. The days of long term abundant liquidity from banks for PPP are gone.
Manish Gupta The quality of projects that come to market or that get
transacted have improved. When there is a lot of capital you often find that projects get funded that don’t have the right economic rationale behinds them. In the last five years investors have become a lot more discerning. Also governments, investors, banks and capital markets have become more innovative. Over the next five years we will see bank funding become
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FINANCE
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