PWC - Catalysing Institutional Investment in Climate-Resilient Infrastructure by Stefan Benkert at GIB Summit
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PwC is a global leader in project finance and infrastructure advisory, having closed 325 deals worth $99.9 billion over the last decade. They provide services across the entire asset lifecycle for major infrastructure sectors. While institutional investment in infrastructure is increasing, many projects remain delayed due to land acquisition issues, political/regulatory risks, and concerns over revenue and operating models. To attract more pension fund investment, governments must address illiquidity, lack of reliable business plans, and regulatory/geographic mismatches between projects and investors. Infrastructure bonds and specialized funds could help fill long-term financing gaps if the right market conditions are established.
PWC - Catalysing Institutional Investment in Climate-Resilient Infrastructure by Stefan Benkert at GIB Summit
- 1. Catalysing Institutional Investment in Climate-Resilient Infrastructure GIB Summit May 2014
- 2. PwC Our PwC Capital Projects and Infrastructure team 800infrastructure projects being worked on c.USD 175bn project finance deals closed in 10 years c.1000professionals across the global network
- 3. PwC Which CP&I sectors do we work in? Our clients are typically in the following sectors but can be in any sector where a large scale investment is being considered or undertaken. Energy Government Mining Utilities Mega-events Transportation Social infrastructure Healthcare Communications
- 4. PwC What services do we provide to clients? CP&I serves the full project value chain for owners and investors The asset lifecycle Strategic planning Project planning Project due diligence Procurement Project finance Asset operations and maintenance Project execution and commissioning • Market assessment • Economic analysis • Business case analysis • Political assessment • Organizational assessment • Stakeholder management • Dispute avoidance strategy • Feasibility analysis • Environmental assessment • Regulatory strategy and assessment • Schedule Analysis • Business case analysis including capital investment • Value analysis • Project risk assessment and analysis • Project controls and risk analysis • Financial assessment • Financial risk analysis • Procurement strategy • Procurement/ delivery modeling • Contract packaging • Strategy • Project qualifications • Finance raising and structuring • Financial modeling • Valuation • Acquisitions and divestitures • Deal structuring • Risk distribution and allocation modelling • Tax considerations • Asset optimization • Productivity improvement • Financial management • Compliance, reporting and tax • Divestitures • Dispute assistance • Refinancing • Project management • Project governance • Project evaluation and reporting • Start-up assessment • Project close-out • Post project audit
- 5. PwC Our record over the last decade Project Finance International – Global closed deals Global by number of closed deals for 10 years to 2013 Rank Adviser No. of deals Value $’m 1 PwC 325 99,986 2 Ernst & Young 251 68,943 3 KPMG 156 57,474 4 Macquarie 152 82,049 5 HSBC 110 100,682 6 Grant Thornton 99 10,417 7 BNP Paribas 63 49,588 8 SBI Capital 59 38,160 9 Royal Bank of Canada 58 26,566 10 Citigroup 45 46,287 Rank Adviser Value $’m No. of deals 1 HSBC 100,682 110 2 PwC 99,986 325 3 Macquarie 82,049 152 4 Royal Bank of Scotland 78,593 32 5 Ernst & Young 68,943 251 6 Credit Agricole 58,336 9 7 KPMG 57,474 156 8 SG 53,112 37 9 BNP Paribas 49,588 63 10 Mizuho 48,811 13 Global by value of closed deals for 10 years to 2013 globally with 325 closed deals for 10 yrs ending December 2013 1st globally with closed deals value of $99,986m for 10 yrs ending December 2013 2nd Source: PwC calculations based on Project Finance International, January 2014 Source: PwC calculations based on Project Finance International, January 2014 * excludes ineligible deals under the $20m threshold
- 6. PwC Market leading thought leadership July 2013 6 Issues pieces on disaster resilience and alternative financing trends Industry pieces on transport, energy & capital projects Future pieces on: global infrastructure market sizing with Oxford Economics, dispute resolution & national infrastructure plans Series on infra development in emerging markets
- 7. PwC Trend: We think the financing source for infrastructure will increasingly transition from bank debt to institutional investors. But governments and project sponsors need to gain a clearer understanding the prerequisites needed for such a market to take root There is a major need for large-scale infrastructure projects around the world. Capital markets’ and institutional investors’ involvement in financing infrastructure projects will steadily increase. There remains a great deal of confusion among both governments and project sponsors about how best to access financing for infrastructure projects. Demand for large-scale investment has been complicated by the fiscal constraints in many countries The challenge is finding innovative ways for value-adding infrastructure to be funded and financed in a manner that is sustainable for both governments and infrastructure users. Project bonds and non-bank lending could provide a flow of suitable highly rated assets direct to pension plans and life insurance companies. Increasingly investors are showing willingness to take on construction / greenfield projects. Financing is still relatively new and tied to the specific conditions within individual markets. The key issue is structuring and funding projects to a level where they become Financeable / bankable + -
- 8. PwC Reasons that many infrastructure projects are currently delayed, especially in emerging markets Required actions by governments and project sponsors Major roadblocks for infrastructure development Land acqui- sition Political & regulatory risks Value propo- sition Revenue and operating risks • improvement of the political, legal and financial environment • closing of the talent gap • infuse leading practices in every phase of the lifecycle of their investments • build transaction capacity • public sector, private sector and multilateral banks have to work closely together • long term planning and prioritisation of projects
- 9. PwC Main issues & lessons learned to attract institutional investors (e.g. pension funds) It is unlikely that pension funds will invest until key obstacles are overcome Infrastructure still regarded as a specialist investment Pension trustees & investment advisors are often not investment experts Failure to promote the infrastructure proposition Lack of reliable business models and business plans Miss-match between geographic location of funds and infrastructure opportunities Regulations & inflexible investment policies Illiquidity of infrastructure projects vs immediate need for yield Capital markets (e.g. infrastructure bonds or specialised infrastructure funds) can help fill the long-term financing GAP • Strong and transparent political and legal framework • Develop programs with prioritized investment opportunities • Develop transaction skills • Improve governance and transparency in financial reporting • Balanced tax and commercial policies • Understanding investor appetite, development of sectoral and geographic focus • Development of new sources and vehicles for private finance Developing a functioning market
- 10. PwC Market conditions for infrastructure bonds Relative feasibility and attractiveness of financing infrastructure projects through the capital markets.