Just eight percent of the global pipeline of project finance deals are actionable in the short term, according to law firm Freshfields.
In a new study published this week, Freshfields said the worldwide call for an infrastructure-led economic stimulus is largely dependent on progress of almost 1,400 pending project finance deals, worth a combined $1 trillion.
However, of this pipeline, just 8.3 percent, or $83 billion worth, are at the financing stage, while the majority (71.9 percent) are going through a tendering process and 19.8 percent are at the pre-approval stage. Freshfields said that with the majority of projects currently years away from implementation, there will be a considerable time lag before the desired economic bounce is triggered.
The report also suggests that Europe appears better placed to benefit from the infrastructure “bounce” over the medium term than the US, with its $241 billion of projects in tender compared to the US’s $45 billion. Freshfields attributes this difference to the fact that the majority of US projects (62 percent) are stuck at the pre-approval stage.
Edward Braham, co-head of Freshfields’ global infrastructure and transport group, commented that the trillion dollar stimulus that project finance could provide is still some time away from entering the real economy: “Less than 10 percent appears ‘shovel ready’ and in most cases the diggers will remain idle for some time yet.”
According to Freshfields, projects are being held up by a combination of project-specific, financial and political logjams, with transport and energy infrastructure projects forming the bulk of schemes in the pipeline.