The role of government: spend, spend, spend
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Infrastructure boom hits capital desert April 2009 |
The contrast between debt appetite and equity appetite in the infrastructure market could hardly be starker. Infrastructure funds were a feature of the boom years but appetite for them seems only to have grown since the markets turned: of the 10 largest unlisted infrastructure funds of all time, eight have been raised since May 2007. There are two main approaches for infrastructure funds: those that focus on deals where the government is paying an availability charge (lower-risk deals as there is no demand risk); and those that also look at user-charge assets such as airports and water companies. Funds also divide into those prepared to undertake greenfield projects and those that focus solely on secondary-market deals. Clearly, availability-based secondary-market deals represent the lower end of the risk spectrum for infrastructure and greenfield deals, while construction and demand risk are at the upper end. But perhaps the most significant difference is in terms of a long-term or short-term approach to the market.
