1) There is a large and growing global need for infrastructure investment estimated at $3.4 trillion annually, with over $57 trillion needed through 2030 for projects like roads, rail, ports and power. 2) Government infrastructure spending has declined significantly since the financial crisis in many countries due to fiscal consolidation, and this retrenchment is expected to continue, leaving a major funding gap. 3) The projected annual funding gap could be as large as $500 billion or more depending on future government investment levels, but this gap could potentially be filled by increased investment from institutional investors, banks, and public-private partnerships.

1. Global Infrastructure:
How To Fill A $500 Billion Hole
Robin Burnett
Director
Infrastructure Finance Ratings
February 17, 2014
7th ANNUAL MEETING OF SENIOR PPP OFFICIALS
OECD Conference Centre, Paris
Permission to reprint or distribute any content from this presentation requires the prior written approval of
Standard & Poor’s. Copyright © 2013 by Standard & Poor’s Financial Services LLC. All rights reserved.

2. Rising Infrastructure Funding Needs…
We estimate annual
global infrastructure
needs of $3.4 trillion.
The bulk will be split
about evenly between
the U.S., the EU, and
China.
More Than $57 Trillion Needed For
Infrastructure Through 2030
9.5
Global investment, 2013-30
$ trillion, constant 2010 dollars.
57.3
11.7
12.2
4.5
0.7
2
16.6
Roads
Rail
Ports Airports Power
© Standard & Poor’s 2014. Source: McKinsey & Co.
2
Water Telecom Total

3. ... And Retrenchment Of Public
Spending …
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.

4. … 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
falling.
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
government infrastructure
spending may lie ahead.

5. So How Big Will The Gap Be?
Government investments
increase to 3.5% of GDP
Projected Annual Funding Gap
Bil. $
1500
Apple
Apple
Government investments
of 3% of GDP
Microsoft
1000
Google
Government investments
drop to 2% of GDP
Berkshire
Hathaway
500
General
Electric
Wal-Mart
0
Downside
Base Case
Base Case
Base Case
Upside
Source: Company market values at 31 December 2013 from FT Global 500 December 2013.
5

6. Where Could The Funds Come From?
A rise in institutional
investors' allocations to
4% could provide about
$200 billion per year in
additional funding.
If banks continue to
lend to projects at
current levels of about
$300 billion per year,
these inflows could fill
the gap left by the
governments.
Breakdown of Institutional Investor
Active in Infrastructure By AUM
Insurance Companies
Asset Managers
Private Sector Pension Funds
Foundations
16%
8%
0%
Endowment Plans
Family Offices
Public Pension Funds
Sovereign Wealth Funds
1%
11%
1%
19%
1%
AUM – Assets under management. Source: Preqin Infrastructure Online.
© Standard & Poor’s 2014.
42%

7. Infrastructure Has Become Attractive
Pension plans have
increased allocations
to alternative classes
with infrastructure up
from 8% to 24%.
Percentage Of Canadian Plans With
Allocation To Alternative Assets
Has Risen
Project bonds
represented 16% of the
project market in 2013,
doubling to $55 billion.
(%)
Nearly 60% of
investors say they will
increase allocation to
infrastructure in 2014.
2010 results
40
35
30
25
20
15
10
5
0
*Domestic and nondomestic. Source: Mercer 2013 Asset Allocation Survey
© Standard & Poor’s 2014.
2013 results

8. Public-Private Partnerships Are Still
Very Important
•
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
partnerships.
•
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
party:
o
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
PPPs
o
In Europe, we expect the trend of increased issuance in the social and economic
infrastructure sectors to continue.

9. Catching Institutional Investors’ Eye
Benefits
• Low default rates and
high recovery rates;
Global Cumulative Default Rates
By Rating (1992-2012*)
%
• Higher yields;
35
• Diversification; and
30
• Ability to match
long-term assets
and liabilities.
25
AAA
AA
A
BBB
BB
B
CCC/C
20
15
10
5
0
1
2
3
4
5
6
7
8
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.
9

10. Unlocking Long-Term Infrastructure
Investments
4. Ongoing Strong Project
Credit Characteristics
2. Increased Transparency
Of Project Data
7. Minimal Political And
Regulatory Risk
8. Pricing And Yields That
Are Attractive For Lenders
And Borrowers
1. A Visible Project Pipeline
And Standard Transaction
Structures
6. Support Packages That
Reduce Construction Risk
3. A Regulatory Regime That
Encourages Insurers To
Invest
10
10. Liquidity And Asset
Diversification
9. Ongoing Strong Collateral
And Security, With High
Rates Of Recovery
5. Supportive Credit
Enhancement Structures
For Project Bonds

11. Related Articles
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.
13, 2013
Italy Looks To Institutional Investors To Support Its Infrastructure Finance, Nov. 11,
2013
How To Unlock Long-Term Investment In EMEA Infrastructure, Oct. 4, 2013

12. Thank You
Robin Burnett
Director
T: +44 20 7176 7019 | F: +44 20 7176 3691
robin.burnett@standardandpoors.com
Permission to reprint or distribute any content from this presentation requires the prior written approval of
Standard & Poor’s. Copyright © 2013 by Standard & Poor’s Financial Services LLC. All rights reserved.

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