Infrastructure as an Asset Class. Investment Strategy, Sustainability, Project Finance and PPP. 2nd Edition. The Wiley Finance Series

  • ID: 3610158
  • Book
  • 422 Pages
  • John Wiley and Sons Ltd
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Praise for Infrastructure as an Asset Class

′Infrastructure is a key prerequisite for economic development and the backbone of any society. Sustainable infrastructure protects our world′s vital natural environment and promotes a more effective and efficient use of financial resources. This second edition of Infrastructure as an Asset Class integrates important sustainability aspects in infrastructure investing, making it an indispensable resource for long–term infrastructure investors and policy makers alike.′
Klaus Schwab, Chairman, World Economic Forum

′This updated book has come at a crucial point for institutional investment in infrastructure. Pension funds are maturing in a low–return environment and need both the capital growth and cash flows which infrastructure investments can offer. The breadth and depth of practical experience shared by the authors will be invaluable to those assessing the risks and rewards of investing in this asset type.′
Sally Bridgeland, Chair, Local Pensions Partnership Investments Ltd

′A larger and even more elaborate piece of new and valuable information on Infrastructure and a well–written must–read for market participants of all kind.′
Ron Boots, Head of Infrastructure Europe, APG

′Dr. Weber and her co–authors have produced an excellent update to their important 2010 work on infrastructure investing. This edition succinctly captures the developments of this fast–growing market in light of the close–to–zero interest rates and strained government budgets. The book not only guides and inspires practitioners, but should also be mandatory reading for pension fund board members and trustees, so as to gain valuable information about the opportunities and risks in this asset class.′
Torben Möger Pedersen, CEO, Pension Danmark

′Infrastructure is key to robust and sustainable economic growth and also represents a significant opportunity for investors. Dr. Weber and her co–authors deliver an authoritative guide to this multi–faceted market, as the asset class not only represents an opportunity to diversify a portfolio, but also the chance to benefit from global trends fueled by renewed government interest. The second edition′s greater emphasis on sustainable infrastructure is particularly welcome and of course very topical.′
Chris Knowles, Head of Climate Finance, European Investment Bank

′The authors have a wonderful understanding of the infrastructure asset class and all its nuances. This new edition captures the essence of how both investors and the opportunities they are pursuing have evolved over the last six years as infrastructure has become an increasingly core long–term asset class.′
Mike Weston, Chief Executive, Pensions Infrastructure Platform

′The authors strike a very good balance between a high–level description of the asset class and a comprehensive in–depth coverage of the various (sub)–sectors in the infrastructure investment universe. This book is written by experienced industry practitioners, evidenced by many real–world examples and case studies and addresses increasingly important ESG topics. It is a must–read for investment professionals, risk managers and pension fund trustees.′
Christoph Manser, Head of Infrastructure Investments, Swiss Life Asset Managers

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List of Figures xi

List of Tables xiii

Preface xv

Acknowledgements xvii

About the Authors xix

Introduction xxi

CHAPTER 1 Infrastructure An Overview 1

1.1 Demand for Infrastructure 1

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 14

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 Sources of revenue and financing 22

1.3.9 Competition and regulation 24

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 profile 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? 61

2.2.3 How to invest in sustainable infrastructure 64

2.2.4 Challenges for 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

2.3.3 Direct investments/co–investments 85

CHAPTER 3 Organisational Model 87

3.1 Privatisation Models 88

3.1.1 Formal privatisation 93

3.1.2 Functional privatisation 95

3.1.3 Material privatisation 96

3.2 Partnership Models 100

3.3 Business Models 102

3.3.1 Availability payment models 102

3.3.2 User–driven payment models 105

3.3.3 Direct–user payment models 106

3.4 PPP 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 of the energy market 181

4.4.2 Renewable electricity generation cross–sector characteristics 186

4.4.3 Solar energy 192

4.4.4 Wind onshore 194

4.4.5 Wind energy offshore 196

4.4.6 Hydropower 197

4.4.7 Bioenergy/biopower 200

4.4.8 Transmission and distribution 202

4.4.9 Energy storage 214

4.4.10 Sustainability considerations 227

4.5 Natural gas networks 233

4.5.1 Characteristics and organisation 233

4.5.2 Transmission/transportation 234

4.5.3 Storage 235

4.5.4 Distribution 236

4.5.5 Sources of revenue and value chain elements 237

4.5.6 Competition and regulation 237

4.5.7 Private–sector involvement 238

4.5.8 Sustainability considerations 239

4.6 District Energy Systems (DES) 241

4.6.1 Characteristics and organisation 241

4.6.2 Sources of revenue and value chain elements 243

4.6.3 Competition and regulation 244

4.6.4 Private–sector involvement 245

4.6.5 Sustainability considerations 246

4.7 Social Infrastructure 248

4.7.1 Healthcare facilities 250

4.7.2 Education facilities 253

4.7.3 Administrative facilities 254

4.7.4 Sustainability considerations 255

CHAPTER 5 Risks 259

5.1 Risk management 259

5.1.1 Risk matrix 264

5.2 General Risks 265

5.2.1 Market risk 265

5.2.2 Interest rate risk 268

5.2.3 Exchange rate risk 269

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 282

5.3.1 Planning, construction and completion risk 283

5.3.2 Technical risk 285

5.3.3 Financing risk 286

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 PPP and Project Finance 297

6.3 Basic Structure of Project Finance 299

6.3.1 Key characteristics 299

6.3.2 Project 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 Finance Traditional and in PPPs 312

6.4.1 Phase I Advisory 316

6.4.2 Phase II Project assessment 317

6.4.3 Phase III Risk analysis and allocation 319

6.4.4 Phase IV Financing 319

6.4.5 Phase V Implementation and monitoring 325

CHAPTER 7 Financing Instruments 327

7.1 Equity 328

7.2 Mezzanine Capital 331

7.3 Debt 332

7.3.1 Senior loans 332

7.3.2 Bonds 335

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) 342

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

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 000

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Barbara Weber
Mirjam Staub–Bisang
Hans Wilhelm Alfen
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