Last year’s Outlook contained the results of a market survey eliciting views on the joint European Commission and European Investment Bank Europe 2020 Project Bond Initiative. The overwhelming response was positive: the need for an alternative source to bank finance for greenfield infrastructure financing was obvious in light of the demise of the monolines, regulatory constraints on banks, their deleveraging and the exit of many banks from the project finance market.
In the last 12 months, the need for the successful implementation of the initiative has, if anything, only increased: evidence of greenfield infrastructure activity points to a reduction in numbers of deals and volume of capital raised; the Eurozone sovereign debt crisis has worsened – governments need infrastructure and they need private capital to deliver that infrastructure; and political pressure has mounted. Since the start of the year, the focus in the EU has been on growth and a stimulus for growth is the construction and delivery of new infrastructure; project bonds have become the subject of declarations by Heads of State!
But we are still awaiting the first EU greenfield infrastructure project to be financed in the capital markets since the onset of the financial crisis. It was against this background that leading representatives from stakeholders from across the infrastructure market assembled in our London office last month. A leading sponsor developer, the Commission, the EIB, a rating agency, an investment manager, financial advisers, an investment bank/lead manager and the UK Government all came to brainstorm the Initiative but also the infrastructure finance market generally - its current state and the future outlook.
This year’s Outlook summarises that debate, its themes and conclusions. All are agreed that the market is at a point of transition and that project bonds – delivered under the Initiative and also using other structures – will very much feature in the infrastructure market of the future.