Infrastructure West Finance Forum

Transcription

1 Equity and M&A: Excess supply for few projects Adam Nicolopoulos, President and CEO Infrastructure West Finance Forum July 9, 2013

2 How are we doing in the US? Needed investment: $454 billion/yr Estimated funding: $253 billion/yr 44% annual shortage Source: ASCE 2013 Report Global Project Finance in 2012 stood at $380 billion Need for alternative sources of capital 1

3 PPPs in the US In 2008 P3s in Europe P3s in the US 23 billion $2.7 billion < 15% Source: The Hamilton Project Recent P3s in CA: Project Value PPP Type Key Investors Presidio Pkwy $1 billion 30-year concession HOCHTIEF Meridiam Transbay Transit Center $4 billion Land Asset Sale Boston Properties, Hines TMG Partners Northwood Investors LLC, etc. Carlsbad Desalination $1 billion FDBOM Poseidon Resources StonePeak Rialto Water Facility $170 million 30-year concession Table Rock Capital Ullico Inc. 2

4 Project Sponsors/Stakeholders Contractors ACS Dragados Kiewit Bouygues Fluor Skanska Developers Cintra Abertis Hochtief PPP Macquarie Poseidon Public Agencies Key Players Time to step up? Asset Operators Port operators (PSA) Road operators (Autostrade) Airport operators (TBI) Rail Operators (Virgin) Public Agencies Financial Investors Government / Public Agencies Infrastructure Funds Private Equity Pension Funds Other Inst. Investors 3

5 Infrastructure Cost of Capital Equity Shareholders / financial investors Debt Lenders / debt capital markets IRR-driven Risk free rate (treasuries) Development risk Construction risk Revenue model / sector premium Operation risk Upside / ownership premium Exit DSCR-driven Risk free rate (treasuries) Project risk premium Swap rate [Other risk premium] Expected Returns IRR [12% 28%] Margins [ bps] 4

6 Rise of Infrastructure Debt Providers Traditional lenders such as banks and governments are under much economic pressure. Benefits for fixed-income investors ( Shadow Banking ): Regulated & stable assets Limited exposure to competitive forces and economic environment Stable cash flows, often inflation-hedged 5

7 Institutional Investors in the game? Institutional Investors AUM in OECD, Dec 2011: > $70 trillion Average Placements in Infrastructure: < 1% Australia and Canada: ~ 10-15% Source: OECD Report, 2013 What about appetite for US P3 assets? 6

8 Why do Institutional Investors stay averse? Greenfield projects = complex structures Limited direct-deal experience Illiquid assets Unrated asset class Risk in obtaining entitlements & permits Subsidized projects (i.e. energy) uncertain, regulation risks Specialists to assess these assets Highly contested (unions, citizens, etc.) 7

9 Private Participation Checklist Risk profile Sector Clear Scope Manageable Project Size Realistic Timeframe Geography Strategy Asset Class / Real Assets Concession Arrangement / Governance Low Regulatory Risks Land & Permits in Place / on Hand Purpose of Asset (solution-driven) Limited Competition 8

10 Why only invest in the end? Development Construction Ramp-up Operation Project s equity performance & costs IRR Capital Structure Equity 20% [Subsidy 30%] Debt 50% <BB Refinancing Equity 10-15% Debt / Bond 85-90% Capital Investment Equity value increased > BBB Secondary sale Risk to investor 20-30% 14-20% 10-12% <10% Financial Close Construction Completion Project life 9

11 West Coast Initiatives West Coast Infrastructure Exchange Limitations in available financing and the high cost of infrastructure mean new tools are necessary Source: WCX Charter The WCX as an enabling platform to facilitate project finance and delivery : Sharing best ideas and practices Strong management and resources Partnering with non-local innovators Connecting public entities with private capital $1 trillion in infra investments over the next 30 years 10

12 Looking forward Significant opportunities for investors Increasing awareness of P3 benefits Support from the State / Federal government New classes of investors Promoting regional and local growth... however what s needed is Well-structured assets Optimal alignment of objectives between public and private sectors 11

13 Our track record M&A Advisory Buy side Expert Witness Bina Istra - Croatia NJ-DOT suitability of P3s Europass E-Toll Collection Highway Jamaica Anguilla P3s La Quinta Container Port, TX and many others 12

14 Global relationships Road 1604, TX Northwest Parkway, CO Indiana Toll Road, IN Container Port Terminal, TX Trans-shipment Port Facility, LA Sangster Int l Airport, Jamaica Highway 2000, Jamaica Asser Monetization Program/PPP Development, USA Vienna Airport, Austria 770 MW and 775 MW Power Projects, UK N4/N6 Motorway, Ireland 500 MW Power Project, Tunisia Ferry Passenger Terminal, Caribbean Conf. Port Terminal, Mediterranean Luis Munoz Marin Airport, Puerto Rico Bina Istra Motorway, Croatia 685 MW Sidi Krir Power Station, Egypt Funding Alternatives, Transport Infrastructure Sofia Varna Road, Bulgaria 770 MW, 1540 MW and 1520 MW Power Projects, Turkey $200 million Power Gen. Fund, Turkey Greek Port System Privatization Maliakos Kleidi Motorway, Greece Ionia Odos Motorway, Greece Port Privatization, Bahrain Road Transportation Airports & Aviation Ports Power Projects Hato Int l Airport, Curacao Cheddi Jagan Airport, Guyana South African Airports Authority Ngqura Container Port, South Africa Our Team has closed numerous successful transactions at a global level. Our experience spans across all types of markets to offer our (public and private) Clients the best possible value proposition. 13

15 Thank you Adam Nicolopoulos anicolopoulos@adncv.com

16 This image cannot This image cannot currently be displayed. This image cannot currently be displayed. Typical Profile of an Infrastructure Asset Millions of US$ nominal (200) year of concession (400) (600) (800) Opex Senior debt interest & fees Dividends Equity subscribed Total Revenues Capex Senior debt repayment Tax Debt drawdown 15