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Outlook 2017: Soul searching for European greenfield

Traditional hubs of greenfield infrastructure activity are hitting a sticky patch across the continent. In 2017, investors would be wise to explore new frontiers.

Some sections of Europe's greenfield infrastructure market face a difficult 2017 and beyond. Investment in PPPs is suffering somewhat due to a thinning of opportunities, a lack of sufficiently visible long-term pipelines and worries over the amount of bankable deals. Meanwhile, regulatory shifts have seen projects in the most established energy sectors, particularly with regard to renewables, slow down across a number of major markets. Underpinning everything, political turbulence caused by the outcome of the US and Italian referenda in 2016 could be compounded by further electoral surprises in 2017.

However, dwindling opportunities in certain sectors and geographies need not sound the death knell for the entire continent. Bruno Candès, a partner at InfraVia, told an Infrastructure Investor roundtable last month that the digital infrastructure space is where he and his colleagues “are the most bullish right now” after wrapping up a £100 million ($130 million; €117 million) deal for Europe's largest data centre in July. Major broadband projects are also planned in France, Britain and Italy while the EIB's recently launched broadband fund is targeting a €500 million first close with no hard-cap planned.

Elsewhere, Germany and Britain, two of Europe's most active greenfield renewables markets historically, have used the past two years to manage capacity and control costs through cutting subsidies for solar and onshore wind farms, the latest major markets to act following Italy and Spain earlier in the decade. The emergence of the Law and Justice party in Poland has also seen one of Europe's more promising wind markets grind to a halt after new legislation made it virtually impossible for new-build projects to gain permits.

Opportunities within the renewables sector still remain: enticing big-ticket investments in offshore wind abound in both Britain and Germany, while a promising pipeline is shaping up in Belgium and the Netherlands. A busy December saw Belgium's 370MW Norther offshore wind farm reach financial close, shortly followed by the award of a 700MW project in the Netherlands to a consortium led by oil giant Shell.

Investors remain confident about onshore wind and solar progress in France and the Nordics. Spain, the scene of a number of legal battles against the government after it retroactively cut renewable subsidies three years ago, has said it will host a 3GW renewable energy auction in the first half of next year, potentially sparking the first wave of greenfield renewable projects since 2013.

More traditional infrastructure sectors could also see a renaissance, particularly in Central and Eastern Europe. The region, singled out in a UN report at the start of 2016 because of the near-50 percent drop in infrastructure investments it had experienced since 2009, could be one to watch in 2017. Funding has been boosted by the EU, which provided €217 million in January for new energy projects in central and south-eastern Europe and a further €263 million for gas and electricity infrastructure in the Baltics, where the security of supply from Russia has become a concern.

Making the biggest splash was China's announcement of a €10 billion vehicle focused on infrastructure and logistics projects in Eastern Europe. Beijing hopes to mobilise up to €50 billion in project financing from both Chinese and European investors, filling in an investment gap in the region as well as providing China with an entry point to the rest of continent. While further details have yet to emerge, the Chinese fund could provide significant competition to EU and private European funds present in the region.