The waiting game

Infrastructure Investor Issue 4, July/August 2009

Editor's Letter

So Freshfields thinks less than one in 10 pending project finance deals are currently ‘shovel ready’ and can get to completion in the short term. Globally, says the law firm, there are 1,400 proposed transactions worth a combined $1 trillion. Of those just over 8 percent are at the financing stage. The rest are either at pre-approval or going through a tender process. 

No prizes for guessing what’s holding things up: Freshfields cites a mix of project-specific, financial and political logjams as to why “the diggers will remain idle for some time yet”.
In light of this, governments hoping that a quick, stimulus-funded increase in infrastructure-related construction activity will boost their flagging economies should double-check their expectations – and manage their voters’ carefully as well.

Meanwhile managers of infrastructure funds can tell their own tales of actionable vs. unactionable projects.  Unlike the diggers, these practitioners are typically not idle: their hunt for deals continues unabated. When Infrastructure Investor visited the London offices of Global Infrastructure Partners in June, we found a room full of people hard at work. But it’s closing things that’s the hard part.

GIP has featured in a number of high-profile bidding processes recently, though each time their pricing didn’t satisfy the vendors. Adebayo Ogunlesi, the man with the vision that created GIP, says price expectations of buyers and sellers are still grossly out of sync, and until the gap narrows, and capital markets recover, the market will be slow. How long until momentum returns? Ogunlesi wouldn’t say.

When discussing his business, Ogunlesi exudes supreme confidence.  With a large pile of uninvested capital at his disposal, he knows his time will come. Still, deep down the man is a dealmaker, and his fund has a limited investment period. At some point the pace will have to pick up, and GIP is clearly looking forward to that moment. When it comes, expect the firm to be making headlines. There will be less time for press interviews with Ogunlesi then. Ours starts on page 14.

Elsewhere financiers are playing the waiting game as well. India’s millions have just been to the polls and given the ruling Congress party an historic mandate to govern. The country’s infrastructure professionals are delighted: they believe the government will now do what it takes to finally enable the investment activity the country so evidently needs (see page 22). But big obstacles remain, and although large pools of private capital are ready to be put to work, it will take patience and determination to get projects started and then finished.   

This theme is global. Not a week goes by without a government somewhere in the world discussing yet another ambitious infrastructure programme. In the short-term, however, only a fraction will be deliverable. Eight percent of $1 trillion is a lot of money.  But for those who want a piece of it, now is the time to position themselves.

Enjoy the issue,

Philip Borel