Clear, comprehensive guidance toward the global infrastructure investment market Infrastructure As An Asset Class is the leading infrastructure investment guide, with comprehensive coverage and in-depth expert insight. This new second edition has been fully updated to reflect the current state of the global infrastructure market, its sector and capital requirements, and provides a valuable overview of the knowledge base required to enter the market securely. Step-by-step guidance walks you through individual infrastructure assets, emphasizing project financing structures, risk analysis, instruments to help you understand the mechanics of this complex, but potentially rewarding, market. New chapters explore energy, renewable energy, transmission and sustainability, providing a close analysis of these increasingly lucrative areas.
The risk profile of an asset varies depending on stage, sector and country, but the individual structure is most important in determining the risk/return profile. This book provides clear, detailed explanations and invaluable insight from a leading practitioner to give you a solid understanding of the global infrastructure market.
Get up to date on the current global infrastructure market
Investigate individual infrastructure assets step-by-step
Examine illustrative real-world case studies
Understand the factors that determine risk/return profiles
Infrastructure continues to be an area of global investment growth, both in the developed world and in emerging markets. Conditions continually change, markets shift and new considerations arise; only the most current reference can supply the right information practitioners need to be successful. Infrastructure As An Asset Class provides clear reference based on the current global infrastructure markets, with in-depth analysis and expert guidance toward effective infrastructure investment.
List of Figures xiii
List of Tables xv
Preface xvii
A Note from the Publisher xix
Acknowledgements xxi
About the Authors xxiii
Introduction xxv
Chapter 1 Infrastructure - An Overview 1
1.1 Demand for Infrastructure 2
1.2 Sustainability and Infrastructure 7
1.2.1 Sustainability and sustainable development - a brief history 8
1.2.2 The need for sustainable infrastructure 9
1.3 Definition and Characteristics of Infrastructure 10
1.3.1 Differentiation of terms: project - asset - facility 13
1.3.2 Characteristics 15
1.3.3 Cross-sector characteristics 16
1.3.4 Types of infrastructure companies 16
1.3.5 Role of the private sector 18
1.3.6 Value chain elements 19
1.3.7 Greenfield versus brownfield investments 21
1.3.8 Yield-driven versus IRR-driven investors 22
1.3.9 Sources of revenue and financing 24
1.3.10 Competition and regulation 25
Chapter 2 Infrastructure Investments 27
2.1 Infrastructure as an Asset Class 28
2.1.1 Investors in infrastructure 29
2.1.2 Risk-return profiles of unlisted infrastructure investments 33
2.1.3 Benchmarking infrastructure investments 40
2.1.4 Portfolio diversification through infrastructure 46
2.2 Sustainable Infrastructure Investing 56
2.2.1 Concept of sustainable investing 56
2.2.2 Why invest in sustainable infrastructure? 62
2.2.3 How to invest in infrastructure sustainably 64
2.2.4 Challenges of sustainable infrastructure investing 68
2.3 Approaches to Infrastructure Investing 69
2.3.1 Listed infrastructure investments 69
2.3.2 Unlisted infrastructure investments 73
Chapter 3 Organisational Model 87
3.1 Privatisation Models 87
3.1.1 Privatisation versus PPP 88
3.1.2 Formal privatisation 94
3.1.3 Functional privatisation 95
3.1.4 Material privatisation 96
3.2 Partnership Models 100
3.3 Business Models 102
3.3.1 Availability payment models 103
3.3.2 User-driven payment models 105
3.3.3 Direct-user payment models 106
3.4 Contractual Models 107
3.5 Financing Models 110
3.6 Interim Summary - Various 'Privatisation Paths' 110
Chapter 4 Characteristics of Selected Infrastructure Sectors and Subsectors 113
4.1 Transport 114
4.1.1 Cross-sector characteristics 114
4.1.2 Road transport 118
4.1.3 Rail transport 125
4.1.4 Air transport 133
4.1.5 Water transport 141
4.1.6 Sustainability considerations 149
4.2 Water Supply and Sewage Disposal 152
4.2.1 Characteristics and organisation 152
4.2.2 Sources of revenue and value chain elements 158
4.2.3 Competition and regulation 160
4.2.4 Private-sector involvement 161
4.2.5 Sustainability considerations 164
4.3 Waste Disposal 166
4.3.1 Characteristics and organisation 166
4.3.2 Sources of revenue and value chain elements 172
4.3.3 Competition and regulation 175
4.3.4 Private-sector involvement 176
4.3.5 Sustainability considerations 178
4.4 Energy - Electricity 180
4.4.1 Overview 181
4.4.2 Generation - renewable electricity - cross-sector characteristics 186
4.4.3 Generation - solar energy 191
4.4.4 Generation - wind energy - onshore 193
4.4.5 Generation - wind energy - offshore 195
4.4.6 Generation - hyrdoelectric energy 197
4.4.7 Generation - bioenergy 199
4.4.8 Transmission and distribution 203
4.4.9 Electricity storage 215
4.4.10 Sustainability considerations 228
4.5 Energy - Natural Gas Networks 234
4.5.1 Characteristics and organisation 234
4.5.2 Transmission 235
4.5.3 Storage 236
4.5.4 Distribution 237
4.5.5 Sources of revenue and value chain elements 237
4.5.6 Competition and regulation 238
4.5.7 Private-sector involvement 239
4.5.8 Sustainability considerations 240
4.6 Energy - District Energy Systems (DES) 241
4.6.1 Characteristics and organisation 242
4.6.2 Sources of revenue and value chain elements 244
4.6.3 Competition and regulation 246
4.6.4 Private-sector involvement 247
4.6.5 Sustainability considerations 248
4.7 Social Infrastructure 249
4.7.1 Healthcare facilities 250
4.7.2 Education facilities 253
4.7.3 Administrative facilities 255
4.7.4 Sustainability considerations 256
Chapter 5 Risks 259
5.1 Risk Management 259
5.2 General Risks 265
5.2.1 Market risk 265
5.2.2 Interest rate risk 269
5.2.3 Exchange rate risk 270
5.2.4 Environmental, social and governance (ESG) risk 270
5.2.5 Political, legal and regulatory risk 277
5.2.6 Force majeure 282
5.3 Project/Asset-specific Risks 283
5.3.1 Planning, construction and completion risk 284
5.3.2 Technical risk 285
5.3.3 Financing risk 287
5.3.4 Syndication risk 288
5.3.5 Operational risk 289
5.3.6 Contractual and counterparty risk 290
5.3.7 Realisation risk 290
5.4 Sector-specific Risks 291
Chapter 6 Project Finance 295
6.1 Project Finance Basics 295
6.2 Project Finance and PPP 297
6.3 Basic Structure of Project Finance 299
6.3.1 Key characteristics 299
6.3.2 Participants and other stakeholders 302
6.3.3 Objectives and contributions of project participants 308
6.3.4 Typical contractual framework for project finance 310
6.4 Structuring Project Financings - Traditional and in PPPs 312
6.4.1 Phase I - Advisory 316
6.4.2 Phase II - Project assessment 316
6.4.3 Phase III - Risk analysis and allocation 318
6.4.4 Phase IV - Financing 319
6.4.5 Phase V - Implementation and monitoring 324
Chapter 7 Financing Instruments 327
7.1 Equity 328
7.2 Mezzanine Capital 330
7.3 Debt 331
7.3.1 Senior loans 331
7.3.2 Bonds 334
7.3.3 Short-term finance 339
7.4 Government Support Schemes 339
7.4.1 National development banks 340
7.4.2 European Investment Bank (EIB) 341
7.4.3 European PPP Expertise Centre (EPEC) 343
7.4.4 Governmental export credit and direct investment insurance - ECAs 343
7.5 Asset-backed Securities 344
7.6 Sale and Leaseback 346
7.7 Derivatives 346
7.7.1 Futures 347
7.7.2 Options 348
Concluding Remarks 349
Appendix A Sample Page from CDC Toolkit on ESG for Fund Managers 351
Appendix B Credit List for Envision's Sustainable Infrastructure Rating System 353
Appendix C Infrastructure Sustainability Rating System (Australia) - Themes and Categories 355
Appendix D National Appropriate Mitigation Actions (NAMAs) 357
References 361
Index 381
