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August 26, 2010

Private Investment in Infrastructure


World Economic Forum


World Economic Forum


How can governments meet ballooning infrastructure investment needs while still cutting costs following the economic crisis? A major part of the solution lies in increasing private sector investment to meet the funding gap, finds a World Economic Forum report released today in Geneva, Switzerland.


World Economic Forum

Photo: Eric Schmidt, Chairman of the Executive Committee and Chief Executive Officer, Google, USA; Co-Chair of the World Economic Forum Annual Meeting 2010 talks during the session 'Technology for Society' at the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 29, 2010 in the Congress Centre. (© World Economic Forum. Photo by Andy Mettler.)


World Economic Forum

Photo: Ellen Kullman, Chair of the Board and Chief Executive Officer, DuPont, USA, speaks during the session 'Rethinking How to Feed the World' in the Congress Centre at the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 29, 2010. (© World Economic Forum. Photo by Remy Steinegger.)


World Economic Forum

Photo: Mark Mactas, President and Chief Operating Officer, Towers Watson, USA is captured during the session 'Rethinking Compensation Models' at the congress centre of the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 27, 2010. (© World Economic Forum. Photo by Michael Wuertenberg.)


Of the estimated US$ 3 trillion needed per annum to meet global infrastructure investment needs, only US$ 1 trillion currently comes from private sources. A third of total funding needs is in developing countries, where private infrastructure finance is less developed.

The report, Paving the Way: Maximizing the Value of Private Finance in Infrastructure, provides a common reference point for what considerations are important to private capital providers and how the public sector can develop its capacity to address them.

Written through active consultation with representatives from both the public and private sectors, the report provides a framework for policy-makers as they seek to create environments favorable to investment, develop meaningful scale for private investment markets, and prepare for the future evolution of these markets. Case studies highlight what approaches have and have not worked across different countries.


World Economic Forum

Photo: Levin Zhu, President and Chief Executive Officer, China International Capital Corporation, People's Republic of China captured during the session 'Wanted: Capital' at the congress centre at the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 29, 2010. (© World Economic Forum. Photo by Michael Wuertenberg.)


World Economic Forum

Photo: Patricia A. Woertz, Chairman, President and Chief Executive Officer, Archer Daniels Midland (ADM), USA; Co-Chair of the Governors Meeting for Consumer Industries 2010; Co-Chair of the World Economic Forum Annual Meeting 2010, speaks during the session 'Rethinking How to Feed the World' in the Congress Centre at the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 29, 2010. (© World Economic Forum. Photo by Remy Steinegger.)


World Economic Forum

Photo: Anand G. Mahindra, Vice-Chairman and Managing Director, Mahindra & Mahindra, India, captured during the session 'Will India Meet Global Expectations?' at the Congress Centre at the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 28, 2010. (© World Economic Forum. Photo by Sebastian Derungs.)


Tony Poulter, Global Consulting Leader at PricewaterhouseCoopers, said: "Getting infrastructure investment in place quickly while also delivering value poses a challenge not only to government but to developers, investors and funders. In the current environment this challenge is bigger and more important than ever before. This report from the World Economic Forum shows that the way forward needs to involve new thinking by all parties - but that positive steps can be taken."

The market trends and key factors associated with successfully involving private finance highlighted in the report include:

• Countries that have been successful in tapping private finance markets have:
- created political, legal and economic environments conducive to investment,
- established ongoing programmes of opportunities,
- instituted contractual and regulatory frameworks to address any issues effectively and fairly,
- provided forums for stakeholders to share experiences, and
- involved the public at all stages.

• The costs and terms of commercial debt have changed significantly as a result of the economic crisis; reinvigorating the capital markets as a source of finance for infrastructure is difficult but of critical importance in the long term.

• There will be a move to more specialized infrastructure funds to provide investors with a better alignment of risk to reward. Investors will also place greater value on fund managers with experience in ongoing infrastructure asset management.

• Retail finance participation in infrastructure funds is likely to grow, but it requires a clear articulation of the value proposition and related challenges.

• Not all pension funds are the same and, while some are undoubtedly major investors in infrastructure, there are many that still regard infrastructure to be too specialized an alternative investment.

• While the heightened government financial support of infrastructure through the current financial crisis is expected to diminish, it appears likely that more countries will set up state infrastructure banks.

• Budgetary issues and increasingly constrained opportunities in the developed world may help steer more investment dollars to emerging economies (particularly BRIC countries) that have increasingly stable political, legal and economic regimes.

• Private investors care more about whether an investment is based on established practices than if it is green field. Getting private financing remains a challenge when the project is novel, untested or in a new market, but there have been successful examples of investment in more challenging projects in different markets.


World Economic Forum

Photo: Orit Gadiesh, Chairman, Bain & Company, USA; Member of the Foundation Board of the World Economic Forum captured during the session 'The Gender Agenda: Putting Parity into Practice' at the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 30, 2010 in the Congress Centre. (© World Economic Forum. Photo by Sebastian Derungs.)


World Economic Forum

Photo: Melinda French Gates, Co-Chair, Bill & Melinda Gates Foundation, USA; Co-Chair of the World Economic Forum Annual Meeting 2010, speaks during the 'Bill & Melinda Gates Foundation Pledge' in the Congress Centre of the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 29, 2010 . (© World Economic Forum. Photo by Sebastian Derungs.)


World Economic Forum

Photo: Doris Leuthard, (L) President of the Swiss Confederation and Federal Councillor of Economic Affairs shakes hands with the President of France Nicolas Sarkozy (R), at the congress centre prior to the 'Opening Plenary of the World Economic Forum Annual Meeting 2010' of the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 27, 2010. (© World Economic Forum. Photo by Michael Wuertenberg.)


The report is the result of a year-long collaboration between the World Economic Forum, PricewaterhouseCoopers and Industry Partners of the World Economic Forum. Guidance was provided by an Expert Committee of 24 leading practitioners from the private and public sectors and academics.

The Report Expert Committee:

Cressida Hogg, Managing Partner, Infrastructure, 3i Group.
Robbert Coomans, Advisor to the Board, APG Investments.
Mustafa Abdel-Wadood, Managing Director and Chief Executive Officer, Abraaj Investment Management.
Michael Till, Partner and Co-Head, Infrastructure, Actis.
Hela Cheikhrouhou, Division Manager, Infrastructure Finance, African Development Bank.
Rajat M. Nag, Managing Director General, Asian Development Bank.
Graeme Bevans, Vice-President and Head of Infrastructure, CPP Investment Board.
Stephen Vineburg, Chief Executive Officer, Infrastructure, CVC Capital Partners.
Hazem Shawki, Managing Partner, EFG-Hermes Private Equity.
Lennart Blecher, Senior Partner, EQT Partners.
Pierre Coindreau, Principal Advisor, European PPP Expertise Centre.
Bayo Ogunlesi, Chairman and Managing Partner, Global Infrastructure Partners.
Chris Lee, Founder and Managing Partner, Highstar Capital.
Luis Miranda, President and Chief Executive Officer, IDFC Private Equity.
Rashad Kaldany, Vice-President, Asia, Eastern Europe, Middle East and North Africa, International Finance Corporation.
Marc Lipschultz, Global Head Energy and Infrastructure, Kohlberg Kravis Roberts & Co.
Sadek Wahba, Global Head, Morgan Stanley Infrastructure.
Samara Barend, Former Executive Director, New York State Commission on State Asset Maximization.
Stephen Dowd, Senior Vice-President, Infrastructure, Ontario Teachers Plan Pension Board.
Richard Abadie, Partner, PricewaterhouseCoopers.
Tony Poulter, Global Consulting Leader, PricewaterhouseCoopers.
Nick Pitts-Tucker, Former General Manager, Co-Head of Corporate Banking Group and Structured Finance Department, Sumitomo Mitsui Banking Corporation Europe Ltd.
Ryan Orr, Executive Director, Collaboratory for Research on Global Projects, Stanford University.
Robert Dove, Managing Director, Infrastructure, The Carlyle Group.
Polly Trottenberg, Assistant Secretary for Transportation Policy, US Department of Transportation.

The Report - Paving the Way: Maximizing the Value of Private Finance. GET IT HERE.

|GlobalGiants.Com|


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