... And Retrenchment Of Public
The drop in the public
investment ratio was steepest
where the crisis struck hardest
and where the need for fiscal
consolidation was most intense.
According to EC data, by 2014
compared to 2009, the public
investment ratio would fall by
72% in Spain; 70% in Ireland;
62% in Cyprus, 58% in Greece
and 54% in Portugal.
… That Is Expected To Persist
Over the past few decades,
public spending on
infrastructure as a share of GDP
has in most advanced
economies been stagnant or
The deep cuts in public
investment spending in
countries at the center of the
eurozone crisis offer an
example of how public sector
infrastructure spending may
fare in times of financial stress.
This leads us to believe that
further retrenchment in
spending may lie ahead.
So How Big Will The Gap Be?
increase to 3.5% of GDP
Projected Annual Funding Gap
of 3% of GDP
drop to 2% of GDP
Source: Company market values at 31 December 2013 from FT Global 500 December 2013.
Public-Private Partnerships Are Still
As markets and governments develop new approaches to completing highly
essential infrastructure projects, we believe that initiatives such as the Canadian
government's C$1.25 billion five-year contribution to the Canadian P3 Fund and the
U.K.'s Private Finance 2 will continue to draw financing using public-private
Advantages to this model are that it includes some level of private investment and
that there is, typically, a transfer of construction and operating risk to the private
In the U.S., interest is growing as several states build robust PPP programs.
California, Florida, Indiana, Texas, and Virginia are among those that have initiated
In Europe, we expect the trend of increased issuance in the social and economic
infrastructure sectors to continue.
Catching Institutional Investors’ Eye
• Low default rates and
high recovery rates;
Global Cumulative Default Rates
By Rating (1992-2012*)
• Higher yields;
• Diversification; and
• Ability to match
9 10 11 12 13 14 15
Source: “Project Finance Default And Recovery: Shale Gas Fuels Rise In U.S. Defaults,” published on the Global Credit Portal 09-Aug-2013.
*Calculated by multiplying non-default marginal rates and then subtracting from 1 to get the cumulative default rate.
Unlocking Long-Term Infrastructure
4. Ongoing Strong Project
2. Increased Transparency
Of Project Data
7. Minimal Political And
8. Pricing And Yields That
Are Attractive For Lenders
1. A Visible Project Pipeline
And Standard Transaction
6. Support Packages That
Reduce Construction Risk
3. A Regulatory Regime That
Encourages Insurers To
10. Liquidity And Asset
9. Ongoing Strong Collateral
And Security, With High
Rates Of Recovery
5. Supportive Credit
For Project Bonds
Global Infrastructure: How to Fill A $500 Billion Hole, Jan. 16 2014
Cracks Appear In Advanced Economies' Government Infrastructure Spending As
Public Finances Weaken, Jan. 14 2014
Top 10 Global Investor Questions For 2014: Public-Private Partnerships, Jan. 9, 2014
S&P Investors' Appetite For Infrastructure Assets Boosts EMEA Project Finance, Nov.
Italy Looks To Institutional Investors To Support Its Infrastructure Finance, Nov. 11,
How To Unlock Long-Term Investment In EMEA Infrastructure, Oct. 4, 2013