Moody’s: Euro infra outlook stable but vulnerable

The ratings agency predicts that transport infrastructure companies will likely produce low growth throughout 2010 and 2011 but warns ‘there remains potential for unexpected negative events to derail the expected recovery’.

In a recent report on European infrastructure, ratings agency Moody’s concludes the economy has recovered from the “trauma of 2008 and 2009”, which will translate in positive – if unspectacular – growth for transport infrastructure companies over this year and next.

Moody's: European infra
to grow modestly over
next two years

However, “while there is greater likelihood of positive growth than was the case last year, there remains potential for unexpected negative events to derail the expected recovery,” the ratings agency said.

Moody’s sees modest growth for seaports, airports and toll roads while expecting transport companies to have an easier time in accessing the debt markets to fund their needs. Regarding ports, Moody’s says trade volumes started to recover by late 2009 and expects freight volumes to grow in the low single digits over 2010, with the all-important container freight category to grow faster.

Air traffic took a hit of between five percent and 10 percent during the 12 months ending on December 2009. For this year, Moody’s predicts flat growth across Europe with a 2.5 percent variance towards both sides of the growth spectrum. In 2011, things look slightly better but still sluggish with passenger numbers predicted to increase between zero and five percent.

Toll road traffic has been improving since April 2009, although the recovery has been mainly led by increases in light vehicle traffic. Heavy vehicle traffic, more closely correlated with trade and the economy, has only started growing during the first quarter of 2010. But the latter has varied across geographies – Portugal’s Brisa, for example, still saw heavy vehicle traffic decline by 10 percent during the first quarter, while French concessionaires recorded growth in the same period.

Moody’s expects infrastructure companies to continue tapping the capital markets to meet their funding needs, pointing out that “market circumstances are substantially more favourable than they were last year”. But the agency admits there is some nervousness affecting the sovereign debt markets that can potentially cross over to infrastructure companies, independently of a strong credit rating.

“Given the above, the industry outlook is stable, reflecting better economic circumstances and expected modest growth in transport volumes,” Moody’s concludes.