Infrastructure may be the subject of an unprecedented focus on the part of private investors but these aren’t yet ready to throw caution to the winds, according to Andrew Ivison, a partner at London-based CMS Cameron McKenna.
“There will be continued investor appetite to buy infrastructure assets, with more and more money looking at infrastructure across the different sectors.”
Ivison thinks sustained appetite could push prices up, but he remains unsure as to whether this will induce investors to pay over the odds or take a pause to reflect on the valuations at play. “Infrastructure funds have raised huge amounts of cash. The question now is how much of that is going into particular sectors.”
He notes an increasing interest for infrastructure debt and describes the emergence of funds dedicated to the asset class as “healthy”.
Importantly, he says, investors aren’t so desperate to part with their money that they will buy an infrastructure asset at any price. “Not every piece of infrastructure will fly off the shelf. The deal has to be well structured and sensibly priced.” He cites the example of a large-scale UK greenfield project currently under tender where the bidder universe seem to have reduced to two consortia from an original set of 12 interested parties.
Some geographies will retain more allure than others, with Africa continuing to establish itself as a promising land for infrastructure projects. “There is a massive amount of interest for private equity in Africa. Will there be enough deals, are they structured well enough, will they find enough financing? This we don’t know but the momentum is clearly there,” argues Ivison.
Some sectors, amid regulatory uncertainty and oil market upheavals, will face a more uncertain outlook. This may especially be the case for European and Australian renewables as well as the non-power energy sector, Ivison concludes.
“We are seeing governments and industry struggling with the question of how best to capitalise on the shifts in the gas industry in prices, geographical availability and the potential of hitherto untapped unconventional indigenous sources such as shale gas. As a short term consequence we expect to see more gas fired projects being procured across all continents in 2015, together with plans for ambitious associated gas pipelines and terminals.”