Infrastructure as an Asset Class: Investment Strategies, Project Finance and PPP

by Barbara Weber (Bibs Capital); Hans Wilhelm Alfen (Bauhaus-Universitat Weimar)

• ISBN13: 9780470661758
• ISBN10: 0470661755
• Format: eBook
• Copyright: 2010-03-01
• Publisher: Wiley

Summary

The market for infrastructure is vast and, contrary to popular belief, the range of potential infrastructure investments is extremely broad. An investor who does not have a sufficient overview and insight into the infrastructure market or an awareness of the suitable investment opportunities and the risks they entail, will find it difficult to select the right investments.This book is a comprehensive guide to the subject, bringing together the topics of infrastructure investments, project finance and public private partnerships (PPPs), equipping investors with the necessary theoretical knowledge and background information as well as practical examples in order to further their understanding of the key aspects of infrastructure investments.It answers questions such as: How is infrastructure defined? Which sectors are classified as infrastructure, how are they categorised, and what are the differences between them? Is infrastructure an asset class in its own right? If so, what are its characteristics? What are the fundamental options for investing in infrastructure? What is a good starting point for institutional investors? How should infrastructure funds be evaluated? What risks do they entail and how can these risks be identified and assessed? How should they be structured in order to best allocate these risks?The book discusses the differing objectives and expectations of the parties involved and the conditions required by public principals and investors in order to enable these groups to overcome the "language problems" they largely encounter. In addition to background knowledge and information on the latest developments in the individual subject areas, the book also explains the methodology of project finance in detail, both for traditional project finance and in the PPP context, establishing the key differences to other forms of financing, guiding readers through the various phases of project analysis on a step-by-step basis using practical examples.Well structured infrastructure investments can serve to improve the risk-return profile of an investor's overall portfolio on account of their long term and their low level of correlation with traditional asset classes. This book will assist investors in their understanding of infrastructure investments, leading to a better informed portfolio.Table of ContentsFigures Tables Preface Acknowledgements Introduction Background and Objectives Structure 1 Infrastructure - An Overview 1.1 Demand for Infrastructure 1.2 Definition and Characteristics of Infrastructure 2 Infrastructure Investments 2.1 Infrastructure as An Asset Class 2.2 Infrastructure Investment Opportunities 3 Organisational Models of Project Infrastructure Implementation 3.1 Privatisation Models 3.2 Partnership Models 3.3 Business Models 3.4 (PPP) Contractual Models 3.5 Financing Models 4 Characteristics of Selected Infrastructure Sectors and Sub-Sectors 4.1 Transport 4.2 Water Supply and Sewage Disposal 4.3 Waste Disposal 5 Project Finance 5.1 Project Finance - History and Basic Information 5.2 Project Finance as a Financing Instrument for PPPS 5.3 Basic Structure of Project Finance 5.4 Project Finance - Traditional and in Projects 6 Financing Instruments 6.1 Equity 6.2 Mezzanine 6.3 Debt 6.4 Government Support Schemes 6.5 Asset-backed Securities 6.6 Sale and Leaseback 6.7 Derivatives 7 Cash Flow Calculations and Sensitivity Analyses 7.1 Items Requiring Inclusion in Cash Flow Analyses 7.2 Present Value and Discount Rates 7.3 Analysis of Financial Covenants 7.4 Sensitivity Analysis References Further Reading Index

Table of Contents

Figures

Tables

Preface

Acknowledgements

Introduction

Background and Objectives

Structure

Infrastructure - An Overview

Demand for Infrastructure

Definition and Characteristics of Infrastructure

Infrastructure sectors

Types of infrastructure companies

Role of the private sector and PPPs

Value added and value chains

Greenfield versus brownfield investments

Sources of revenue and financing

Competition and regulation

Infrastructure Investments

Infrastructure as an Asset Class

Investors in infrastructure

Risk-return profile of infrastructure investments

Portfolio diversification through infrastructure

Infrastructure Investment Opportunities

Listed infrastructure investments

Unlisted infrastructure investments

Direct investments/co-investments

Organisational Models of Infrastructure Implementation

Privatisation Models

Formal privatisation

Functional privatisation

Material privatisation

Partnership Models

Public Private Partnerships (PPPs) as vertical or vertical/horizontal partnerships

Partial material privatisation as a horizontal partnership

Business Models

Budget-financed remuneration

User-financed remuneration

(PPP) Contractual Models

PPP contract models in social infrastructure

PPP contract models for roads and highways

Interim summary: various 'privatisation paths'

Financing Models

Characteristics of Selected Infrastructure Sectors and Sub-Sectors

Transport

Cross-sector characteristics

Road transport

Rail transport

Air transport

Water transport

Water Supply and Sewage Disposal

Characteristics and organisation

Sources of revenue and value added

Competition and regulation

Privatisation, private sector involvement and PPP

Waste Disposal

Characteristics and organisation

Sources of revenue and value added

Competition and regulation

Privatisation, private sector involvement and PPP

Project Finance

Project Finance - History and Basics

PPP and Project Finance

Basic Structure of Project Finance

Characteristics

Project participants and other stakeholders

Objectives and contributions of project participants

Typical contractual framework for project finance

Structuring Project Finance - Traditional and in PPPs

Phase I - Advisory

Phase II - Project analysis

Phase III - Risk analysis and allocation

Phase IV - Financing

Phase V - Implementation and monitoring

Financing Instruments

Equity

Mezzanine Capital

Debt

Bank loans

Bonds

Short-term finance

Government Support Schemes

National development banks

European Investment Bank

European PPP Expertise Centre (EPEC)

European Commission

Governmental export credit and direct investment insurance - ECAs

Asset-Backed Securities

Sale and Leaseback

Derivatives

Futures

Options

Cash Flow Calculations and Sensitivity Analyses

Items Requiring Inclusion in Cash Flow Analysis

Cash flow modelling

Present Value and Discount Rates

Analysis of Financial Covenants

Sensitivity Analysis

References

Further reading

Index

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