Infrastructure as an Asset Class

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