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Infrastructure Funding

Infrastructure Funding

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Published by Gill Wallace Hope

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Published by: Gill Wallace Hope on Dec 19, 2010
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15Deloitte Research – The changing landscape or inrastructure unding and nance
 A Deloitte Research study
The changing landscapeor inrastructureunding and fnance
 
16Deloitte Research – The changing landscape or inrastructure unding and nance
 
Contents
Disclaimer
This publication contains general inormation only and Deloitte Services LP is not, bymeans o this publication, rendering accounting, business, nancial, investment, legal,tax, or other proessional advice or services. This publication is not a substitute or suchproessional advice or services, nor should it be used as a basis or any decision or actionthat may aect your business. Beore making any decision or taking any action that mayaect your business, you should consult a qualied proessional advisor. Deloitte ServicesLP, its aliates and related entities shall not be responsible or any loss sustained by anyperson who relies on this publication.
 About Deloitte Research
Deloitte Research, a part o Deloitte Services LP, identies, analyzes and explainsthe major issues driving today’s business dynamics and shaping tomorrow’s globalmarketplace. From provocative points o view about strategy and organizationalchange to straight talk about economics, regulation and technology, Deloitte Researchdelivers innovative, practical insights companies can use to improve their bottom-line perormance. Operating through a network o dedicated research proessionals,senior consulting practitioners o the various member rms o Deloitte ToucheTohmatsu, academics and technology specialists, Deloitte Research exhibits deepindustry knowledge, unctional understanding and commitment to thought leadership.In boardrooms and business journals, Deloitte Research is known or bringing newperspective to real-world concerns. For more inormation, please contact WilliamEggers, Deloitte Services LP, at +1 202 246 9684 or weggers@deloitte.com.
1 Introduction2 On the demand side5 On the supply side7 In summary 8 Endnotes9 About the authors11 Recent Deloitte Research public sector thought leadership12 Contacts
 
1Deloitte Research – The changing landscape or inrastructure unding and nance
Introduction
Two years on, policy makers are still sorting through thewreckage ollowing the nancial tsunami that roiled theworld in 2008 and the ensuing global recession, thedeepest in generations. The inrastructure sector was notimmune. In act, it could be argued that inrastructureis uniquely disadvantaged in the crisis and its atermath.At this point only one thing is certain: the landscape orinrastructure unding and nance has been dramaticallyaltered and could remain so or at least the near term.Two trends are now evident. First, governments are usingincreased inrastructure spending as an economic stimulustactic. Second, tightened credit markets are posing anobstacle to raising debt nance or inrastructure deliverymodels — public or private — that depend on high levelso up-ront capital repaid over the long term through userees or general taxation.This article discusses these trends and the impact o eachon inrastructure unding/nance, particularly with respectto the prospects or public-private partnerships (PPPs) inthe United States and around the world.Figure 1 portrays the emerging contours o the newinrastructure unding/nance landscape, outliningconditions on both sides o the market: the “demand”or inrastructure unding/nance and the “supply” ounding/nance on the part o the public and privatesectors.
Figure 1. How the inrastructure landscape has changed in the wake o the credit crisis
Pre-credit crisistrendsPost-credit crisistrendsDemand
•Limitedpublicmoneyforinfrastructure•Highconstructioncosts•Fiscaldynamicsencouraginggovernmentstoexplore
 alternative delivery models
Supply
•Well-functioningdebtcapitalmarketsandinternational
 project nance loan market
•Highlygearedcapitalstructuresandattractiveequityreturns•Dominanceofactiveequityinvestorsandemergenceof
 inrastructure unds
Demand
•Infusionofpublicmoneyforinfrastructure•Fallingconstructioncosts•Fiscaldistresssolidifyinginterestinalternativedeliverymodels
 
Supply
•Challengeddebtcapitalmarketsaidedbynewborrowing
 instruments
•Priceandtenorconstraintsininternationalprojectnanceloan
market
•Variabilityinequityreturns•Impairmentofsomeactiveequityplayersbalancedbycontinued
growth in inrastructure unds
Source: Deloitte

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