Fifty-four percent of global finance executives expect between 10-15% growth in P3 funding via a combination of announced priority projects and the sustained use of municipal debt funds, according to a recent survey conducted at the Natixis Infra Day Conference on May 18 in New York City.
“The conversation around infrastructure is strengthening in light of the current political environment,” said Jonathan Kim, Head of Global Infrastructure & Projects at Natixis CIB Americas. “Opportunities for project finance will be unlocked for banks that are active in various sectors and regions in the Americas such as Natixis.”
Also, a majority (54%) of respondents believe that infra debt funds will play a larger role in project finance compared to banks, citing strong debt fund capital volumes and banks becoming less competitive on longer-dated maturities.
“We are optimistic about the evolving role of infra debt funds in project finance, particularly given the requirements for long term capital,” said Joy Chatterjee, Head of Global Finance Syndicate at Natixis CIB Americas. “We view these funds as instrumental in the broader economy in light of the increased focus on infrastructure reform and supportive of a wider range of risks than banks.”
Following are additional findings from this survey, which provide insights into sector-based projections, expectations for Latin American infrastructure finance, the impact from the current interest rate environment, and the remaining data from the questions mentioned above.
Investors are most optimistic on the Oil & Gas sector
Under the backdrop of a recovering energy sector, 38% of respondents believe the oil and gas sector will originate the highest number of deals over the next 12 months. In addition, 28% of respondents believe the real estate sector will be competitive in originating infrastructure deals, followed by aviation with 21% and telecom with 13%.
Investors see the most potential infrastructure investment in Mexico amongst Latam countries
49% of respondents believe Mexico will be the most active Latin American country in terms of infrastructure finance, followed by Chile with 31%, Peru with 13% and Brazil with 7%.
Investors anticipate moderate impact of interest rate cycle on industry
Almost three-fourths (74%) of respondents believe the current interest rate cycle will have only a moderate impact on infrastructure finance over the next 12 months – deals may price higher but other factors are likely to play a role. 21% of respondents believe the current interest rate environment will have no impact, compared to 5% that reported a strong impact will be felt as deals become more expensive in anticipation of rising rates.
Investors’ anticipate some growth for P3 funding
54% of respondents expect 10-15% growth in the P3 funding market through a combination of announced priority projects and sustained use of municipal debt instruments. However, 21% of respondents expect no change in the requirement for bank debt even as tax exempt muni debt becomes less attractive. In addition, 15% of those surveyed do not anticipate the legislative regime will be accommodative toward P3, compared to 10% of respondents that believe high growth (above 15%) will spur meaningful growth across a range of sectors, utilizing bank debt and municipal debt.
Investors anticipate infra debt funds will play a larger role
54% of respondents believe infra debt funds will play a larger role in funding projects, but 38% believe that while capital from debt funds would be available it would continue to be comparatively inflexible on construction financing. Meanwhile, 8% of respondents believe the volume of available debt capital is still low relative to bank debt.
Methodology: The Natixis survey of 40 respondents was administered in person at their Infra Day Conference in New York City on May 18, 2017. The conference was attended by over 100 investors and industry participants in the infrastructure sector and featured speakers on telecoms, green infrastructure and debt capital markets