The last Christmas season has been a relatively easy ride for most holiday-goers. Mild temperatures and fewer strikes have meant that transport schedules have suffered limited disruptions, in contrast to the havoc wreaked by snow episodes in preceding years. This time round, it was department stores, rather than airport lounges, that witnessed the longest queues as winter sales kicked off in the UK.
Presumably, that left plenty of time for infrastructure investors to reflect on the past 12 months and make astute resolutions for the coming ones. Unfortunately, we couldn’t attend any industry New Year’s bash last week, so we couldn’t smuggle in a recorder to take note of everyone’s pledges. Still, we eased back into work this week by trying to guess the most popular ones.
Here’s what we think some of you might be saying.
1. I will relax about regulation
It’s been a scary few years, hasn’t it? It was not enough that the Spanish government retroactively slashed renewable tariffs in 2012, burning everyone flying too close to the sun. Last September, investors that sued the Norwegian government over a 90 percent pipeline tariff cut got told their case wasn’t grounded. Still, there are signs of a more constructive dialogue out there. And of better forewarning when the rules of the game are changed, as with UK water prices last year.
2. I won’t pay too much for assets
I’ll just leave it to others. But how much is too much? Nobody’s really clear about where red lines stand and how they should be defined. In 2015, we saw a few transactions – Indiana Toll Road, Chicago Skyway – cross the 30x EBITDA mark, a ceiling some thought wouldn’t be hit so soon. There will again be a nice array of trophy assets on sale this year. Could 40x become the new 30x?
3. I will be a mid-market player. No, really
I’ve long said that I’m all about mid-sized proprietary deals. Big ticket auctions are just not good value. But this time I really will do it. And there are reasons to believe me: from Europe to Australia, mid-market players are witnessing competition trickle down from above, with a humbling effect on average returns. Buying smart and adding value will be key to maintaining performance. No, really.
4. I won’t be deterred from raising a fund
I know I’m not the only one to have that idea. Record fundraising by GIP and Brookfield alone, which could garner a combined $27 billion in 2016, would bring the year to more than half what was collected in 2015. And they’re not the only ones, with the likes of Macquarie, EQT or First State also expected to be calling for contributions. But there could still be space for me, provided I have a track record and/or a strong point of difference.
5. I will warm up to green policies
The Paris conference came up with an imperfect agreement, but one that’s provided a pretty good road map to tackle climate change, giving renewed impetus to renewables. Yes, subsidies are being cut in Europe on the most mature technologies. But others, like offshore wind, look promising. And emerging markets seem ready to roll out ambitious programmes too.
6. I will vote in Infrastructure Investor’s 2015 Awards
I’d like my voice to count when it comes to choosing last year’s industry champions. A shame I can’t vote for myself, of course. But look, I know a great deal about what makes a good [insert preferred sector here] investment in [insert relevant geography]. And since I have until 8 January to take part in the poll, I’ll simply do it now by clicking here. This [insert name of asset targeted in Q1] deal can wait – after all, it won’t make 2015’s awards anyway.
We hope many of you will meet your resolutions for 2016, whether infrastructure-related or not (rest assured that we will keep track of the former). In the meantime, Happy New Year from the Infrastructure Investor team!