Italy experienced a strong economic recovery and high infrastructure investment volumes in 2017. Infrastructure deal volume was the second highest in the EU after the UK. A major new toll road project reached financial close, demonstrating Italy's expertise in restructuring public-private partnership projects. However, upcoming general elections in 2018 increase political risk and uncertainty over Italy's infrastructure policy going forward.

1. ANALYSIS
Italy’s infrastructure at a
crossroads after boom year
Daniel Atzori 1:28 PM 05 December 2017
For the Eurozone's third economy, 2017 has been
characterised by a strong economic recovery and
robust volumes of investment. inspiratia assesses
the infrastructure opportunities to come to market
in 2018, ahead of hotly anticipated general elections
So far, Italy's infrastructure deal volume in 2017 has
been the second largest in the EU after the UK,
thanks to the closing of a few major M&A
transactions involving sponsors such as Allianz
Capital Partners, InfraVia Capital Partners and
Deutsche Asset Management.
Closed infrastructure deals, 2017
Source: inspiratia | datalive
But remarkably, good news is also coming from
green eld road projects, a sector that suffered in the
years after the nancial crisis.
The Superstrada Pedemontana Veneta – a toll road
to improve the connectivity of the Veneto region,
one of Italy's industrial engines – reached nancial
close on 29 November. JP Morgan arranged a
€1.571 billion (£1.38bn US$1.86bn) bond issuance
for the project, one of Europe's largest project bond
nancings, with Sacyr and Fininc providing €430
million (£379m US$511m) in equity.
"The ability of both the Regione Veneto and the
operator to renegotiate the project and make it
bankable, without the need of an anchor investor,
demonstrates that there is strong expertise in Italy
in (re)structuring PPP projects, both legal as well as
economic and nancial," says Veronica Vecchi,
professor of public management and policy at
Milan's SDA Bocconi School of Management.
"The solution we found for the Pedemontana Veneta
could also help the Pedemontana Lombarda and, in
general, all economic infrastructure with demand
Daily
project
updates
Transactions
Value
(USD
m)
Location Latest Stage
Ferrovie dello
Stato Italiane
new trains
green bond
nancing
714 (
est.)
Italy
In
Procurement
Greater
Manchester's
waste project
5,006
(
est.)
UK
In
Procurement
A11 16%
Stake
Acquisition
24 Belgium FC
Greater
Manchester
Waste
Disposal
UK >
England
Delayed /
Cancelled
A150
Ecalles-Alix
to Barentin
re nancing
286 (
est.)
France
In
Procurement
UK Italy France Netherlands P
0
3600
7200
10800
14400
18000
Transactionvolume(USDm)
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2. risk that cannot be transferred to the operator,"
Bocconi's professor Vecchi adds.
A successful conclusion for these two projects
could inject new life into Italy's green eld road
market, which has been negatively impacted by the
economic slowdown as well as di culties with
certain projects. In particular, the low tra c volumes
of the A35 Brebemi – a toll road which was nanced
in 2013 to better connect the provinces of Brescia,
Bergamo and Milan– arguably deterred investors
from venturing into green eld PPPs for a time.
However, tra c volumes have now increased by
163% compared to H1 2014 and, with the A35
Brebemi being connected with the A4 Torino-
Venezia in November [2017], they are likely to
increase further.
New opportunities
In July [2017], Italy's Ministry of Transport released
a report entitled "Connettere l'Italia" (Connecting
Italy). The document lays a grand strategy for
upgrading the country's national infrastructure,
including highways, railways, airports and seaports.
The most attractive opportunities could come from
the latter, as ports are set to bene t from the
expansion of trade with China under the aegis of
Beijing's "Belt & Road" initiative, with Mediterranean
tra c ows expected to increase in the years to
come thanks to the 2015 enlargement of the Suez
Canal.
In 2016, the Italian government approved reforms,
which reduced the number of port authorities from
24 to 15; the new entities will manage all 57 ports
considered of national relevance. The new setup
aims to improve the port authorities' e ciency and
to cut red tape.
Italy's new port authorities
"For investors, the most appealing ports for
expansion and upgrade projects are not only
strategic commercial ports such as Trieste, Venice
and Genoa, but also all those that have cruise
potential," says Carlo Montella, partner, co-head of
the European Energy & Infrastructure Department at
Orrick.
Opportunities could also soon come to market in
urban transport, after Italy's state railway company
Ferrovie dello Stato (FS) and investment bank Cassa
Depositi e Prestiti (CDP) agreed in November [2017]

3. 12/5/2017 inspiratia
to develop new urban subway networks in the
country, encouraging the use of private capital.
For what concerns hospitals, in 2017 dataLive –
inspiratia's proprietary database – tracked the
nancial closing of one green eld hospital in
Treviso and the acquisitions of the Novara and Alto
Vicentino hospitals.
"We are currently working on the application of PPP
and project nancing models to the technological
upgrades of hospitals. A technological PPP has
been signed for Novara hospital and many projects
are under assessment. In general, in the healthcare
sector there is a promising pipeline, with some
important projects, such as Turin's Molinette," says
Bocconi's professor Vecchi.
"At the moment, because of the complex legal and
political framework, most of the operators are
domestic. However, we are creating the conditions
for international investors to enter the
market, thanks also to the upcoming standard
contract that will be soon released by the Treasury,"
she adds.
Also, the waste sector – where some regions of Italy
are lagging behind EU targets – is set to expand
next year.
"In 2018, we expect more investments in the energy-
from-waste sector, in particular in the regions of
Friuli-Venezia Giulia, Apulia and Liguria, where local
authorities have a strong political will to develop
incinerators," says Cristina Martorana, Milan-based
partner at Orrick.
Acquisitions
In 2017, a number of large acquisitions shook up
Italy's infrastructure market, as the country saw its
best deal activity since 2013. After a plunge in 2014,
deal ow has steadily increased since then.
Italy's closed infrastructure deals, 2012 - 2017
Source: inspiratia | datalive
The largest M&A deal of the year was the combined
acquisition of a 15% interest in Autostrade per
l'Italia (ASPI), which operates more than 3,000km of
Italian highways, by Allianz Capital Partners, EDF
Invest and China's Silk Road Fund.
The second biggest deal was the takeover of Italian
airports group Save by Deutsche AM and Infravia,
which reached nancial close in September [2017]
on a €1 billion (£914m US$1.1bn) debt package
supporting their acquisition.
Transaction
name
Financing
purpose
Sector
Closing
date
(quarter)
Transaction
value
Autostrade
per l'Italia
Acquisition
Acquisition Transport Q3 2017 2223
Pedemontana
Veneta
Primary
Financing
Transport Q4 2017 1820
Save Group
Acquisition
Acquisition Transport Q3 2017 1193
Autovia
Padania
Acquisition Transport Q3 2017 349
2012 2013 2014 2015 2016
0
1400
2800
4200
5600
7000
Transactionvolume(USDm)
Acquisition Primary Financing Refinancing

4. 12/5/2017 inspiratia
pedemontana political risk project bond
Stake
Acquisition
Treviso
Hospital -
Health City
Primary
Financing
Health Q3 2017 313
2i Aeroporti
and GESAC
re nancing
Re nancing Transport Q3 2017 235
Italian bre
business
acquisitions
Acquisition Broadband Q3 2017 76
Stake
Acquisition in
Milan Metro
Line 5
Acquisition Transport Q2 2017 72
Aeroporto di
Roma
Acquisition
Acquisition Transport Q3 2017 58
Linate Airport
Car park
Primary
Financing
Transport Q1 2017 28
Political risk
While Italy's age-old problems – such as corruption,
public debt and red tape – are yet to be addressed,
there are encouraging signs that the Italian
economy has turned a corner. ISTAT, Italy's o ce of
national statistics, forecasts a 1.5% GDP growth in
2017, while rating agency Standard & Poor's raised
the country's sovereign rating from BBB- to BBB in
October – the rst increase in 30 years.
The improvement of Italy's macroeconomic
fundamentals is improving the appeal of the Italian
market to international investors, who are often
burdened with an abundance of cheap capital but
face a scarcity of deal opportunities. The same
investors are left wondering whether upcoming
political elections will dramatically change the
landscape.
At the moment, despite the high uncertainty of the
spring 2018 Italian elections, a populist shift in Italy
currently seems rather unlikely. Even the two
political movements that could be de ned as
"populist" – the anti-establishment Five Star
Movement and the right-wing Lega Nord – recently
toned down their anti-EU rhetoric.
According to the latest polls, the centre-right
coalition – formed by Silvio Berlusconi's Forza Italia,
Matteo Salvini's Lega Nord and other smaller parties
– has some chance to secure the majority of the
votes. The ruling Democratic Party, led by former
prime minister Matteo Renzi, is currently suffering in
polls, weakened by the defection of a group of left-
wing lawmakers who formed their own party.
While it has yet to be seen whether centre-right
parties will have enough votes to form a
government, it is highly likely that, whatever the
outcome of the general elections, the revived Silvio
Berlusconi will be the kingmaker of any future
government.
For what concerns infrastructure, it could be argued
that a victory of either the centre-right or the centre-
left will not cause substantial changes to Italy's
infrastructure policy. On the other hand, the Five Star
Movement has often reiterated its opposition to
several large-scale infrastructure projects,
particularly when involving private capital.
Further reading
Italy’s infrastructure at a crossroads after
boom year
05/12/2017
Grand vision for industrial strategy but detail
lacking
04/12/2017
Political risk the dominant narrative in
infrastructure