Catalysing Institutional Investment in Climate-Resilient Infrastructure
GIB Summit
May 2014
PwC
Our PwC Capital Projects and Infrastructure team
800 infrastructure projects being worked on
c.USD 175bn project finance deals
closed in 10 years
c.1000 professionals across the global network
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
PwC
What services do we provide to clients?CP&I serves the full project value chain for ownersand 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
assessmentand 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
PwC
Our record over the last decadeProject Finance International – Global closed deals
Global by number of closed deals for 10 years to 2013Rank Adviser No. of
dealsValue
$’m
1 PwC 325 99,9862 Ernst & Young 251 68,9433 KPMG 156 57,4744 Macquarie 152 82,0495 HSBC 110 100,6826 Grant Thornton 99 10,4177 BNP Paribas 63 49,5888 SBI Capital 59 38,1609 Royal Bank of Canada 58 26,56610 Citigroup 45 46,287
Rank Adviser Value$’m
No. of deals
1 HSBC 100,682 1102 PwC 99,986 3253 Macquarie 82,049 1524 Royal Bank of Scotland 78,593 325 Ernst & Young 68,943 2516 Credit Agricole 58,336 97 KPMG 57,474 1568 SG 53,112 379 BNP Paribas 49,588 6310 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
2n
d
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
PwC
Market leading thought leadership
July 20136
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
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-scaleinfrastructure projects around the world.
Capital markets’ and institutional investors’ involvement in financing infrastructureprojects will steadily increase.
There remains a great deal of confusion among both governments and project sponsors abouthow best to access financing for infrastructure projects.
Demand for large-scale investment hasbeen complicated by the fiscal constraintsin 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 directto pension plans and life insurancecompanies.Increasingly investors are showing willingness to take on construction / greenfield projects. Financing is still relatively
new and tied to the specific conditionswithin individual markets.
The key issue is structuring and fundingprojects to a level where they becomeFinanceable / bankable
+ -
PwC
Reasons that many infrastructure projects are currently delayed, especially in emerging markets
Required actions by governments and project sponsors
Major roadblocks
for infrastructu
re developmen
t
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
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
PwC
Market conditions for infrastructure bonds
Relative feasibility and attractiveness of financing infrastructure projects through the capital markets.