1. Actis, Tata launch Indian infrastructure joint venture
The private equity firm and Indian conglomerate have invested a combined $200 million in a joint venture vehicle which will target road and highway building project work worth an aggregate total of $2 billion.
2. NY gov scraps asset maximisation body
The New York State Asset Maximisation Board would have facilitated private investment in the state’s infrastructure. Governor Paterson will leave its creation up to the next administration ‘due to persistent budgetary concerns’ that rendered it a lesser priority.
3. IFC to inject $20m in clean water fund
The International Finance Corporation is committing to the AmKonzen Asia Water Fund, which will target water treatment and water management assets in China and Southeast Asia.
4. Rohatyn warns against leases of public assets
The investment banking veteran who helped New York City avoid bankruptcy in 1975 said leasing out a public asset in an effort to avoid bankruptcy is ‘at best, a zero-sum game’.
5. ICICI Venture to launch $500m infra fund
The Mumbai-based firm is also set to begin fundraising for a $100 million real estate fund targeting domestic opportunities.
6. L&T to launch $250m infrastructure fund
The infrastructure finance subsidiary of India’s Larsen & Toubro Group will begin fundraising for its maiden infrastructure fund in two months.
7. Paulson: Volcker rule is unnecessary
Former US Treasury Secretary Henry Paulson said at a conference that he does not support the Volcker rule, nor does he believe it would have saved any failed banks during the financial crisis.
8. Marguerite Adviser hires CFO, MD for energy
The advisory company running the day-to-day activities of the EU-focused €1.5 billion Marguerite infrastructure fund has hired David Harrison, formerly of Macquarie, to serve as chief financial officer and William Pierson, a former partner at Santander Infrastructure Capital, to be the firm’s managing director for energy investments.
9. Financial close for Russia’s first road PPP
The $2.1 billion Moscow-St. Petersburg highway has become the first Russian road PPP to reach financial close. Sberbank and Vnesheconombank have provided ruble funding for the project which includes a bond issue guaranteed by the Russian government.
10. Not in the clear yet
Though little attention has been paid to private equity fund managers in the debates over US financial regulatory reform, a planned amendment from Senator Jack Reed could make the Senate’s bill much less friendly to venture and private equity fund managers – including infrastructure.
PIIGS will still fly
Why investors in public-private partnerships say they will not be deterred by fears of sovereign defaults
In Europe the possibility of sovereign default is on everyone’s lips given the well-publicised problems in Greece. For private sector participants in public-private partnerships (PPPs), it’s a pertinent issue.
Here’s why. In a concession agreement, a government takes on a long-term obligation to make payments to the concessionaire. If it were to default on these payments, there would be two likely outcomes: 1) no private sector parties would be likely to enter into such an arrangement with that government in future; and 2) a default would result in the government having to repay the outstanding finance, thus exacerbating its credit difficulties.
Increasingly, investors in European PPPs have been moving out of the mature UK market and into other European markets with blossoming PPP programmes. These include countries such as Portugal and Spain, part of the grouping of five countries unflatteringly referred to as the PIIGS (Portugal, Ireland, Italy, Greece and Spain) – so-called because of the profligate scale of the debt they face. It invites the question as to whether this geographic realignment is being made at the wrong time.
However, anecdotal evidence from European PPP investors suggests there is no great sense of alarm. And the reason why is that they believe governments would be prepared to go to any lengths to avoid defaulting – note, they say, the austerity measures recently introduced in Spain, Portugal and elsewhere (and the massive Euro zone bailout of Greece).
The conclusion is that governments would rather slash public spending, hike taxes and reach for anything else in their toolkits rather than default. Angry rioters on the streets of European capitals might perversely offer some comfort to those wanting to enter long-term financial contracts with European governments – it shows that mollifying public sentiment is coming second to fiscal responsibility.
Two qualifications should perhaps be made, though. One, there are still those who view the prospect of a European sovereign default as a real threat. Just because it shouldn’t happen in theory doesn’t mean it won’t in reality. Two, investors in funds may not buy into their fund managers’ arguments that certain countries are a safe bet.
One fund manager said he personally would have no qualms about entering long-term PPP contracts in debt-afflicted Southern European countries. But would he actually enter such an arrangement right now? “No,” he replied. “I’ll wait until things calm down.”