Challenges – and how to confront them

It’s a strange anomaly that the US, the world’s largest economy, is, in the context of infrastructure, effectively an emerging market. As cited in this month’s keynote interview with legendary investment banker Felix Rohatyn, current estimates suggest the country needs to spend more than $2 trillion just to bring its infrastructure up to an acceptable standard.

Rohatyn, credited with having led the rescue of New York City in the mid-70s when it seemed in a hopeless financial position, has a few ideas on how to similarly apply a remedy to the thorny issue of infrastructure spending in an era of huge fiscal deficits. Indeed, he produced a book on the subject last year and is now an active proponent of a national infrastructure bank. He is also a witty and engaging interviewee. Turn to p.28 for his fascinating exchange with Cezary Podkul.

In Europe, from where Rohatyn draws much of his inspiration, post-Crisis challenges are also mounting. In Spain, times are particularly tough in the construction sector as a result of the bursting of the country’s housing bubble.  Hence, the government’s recent announcement of an infrastructure stimulus worth some €17 billion was bound to be applauded. However, as Bruno Alves reports on p.14, the applause will ring even louder if the plan includes a solution to the massive financial hit taken by Madrid’s ring road concessionaires. As yet, the problem remains unresolved. 

Among other challenges outlined in this issue is that of fundraising in an environment where access to capital remains scarce. The global first-quarter fundraising figures indicate that there is room for optimism (on p.12 you will discover that around half of last year’s total was raised in just the first three months of 2010). But in order to lure still-cautious investors, funds have to be savvy. On p.20, we explore interesting ways in which they are drawing in core support before then casting the net more widely.

Also in this issue you’ll find coverage of our recent Infrastructure Investor: Europe 2010 forum in Berlin. Starting on p.16, you’ll find the views of the editorial team on the top ten ‘takeaways’ from this event, which is now an established fixture in the diary for infrastructure investment professionals from around the world. It was clear from the many lively discussions – both on stage and off – that this is a defining period for infrastructure as an asset class. It was also evident that, while challenges abound, they will not be shirked.

Warm regards,

Andy Thomson
Senior Editor
andy.t@peimedia.com