On Wednesday 18th January 2017, Berwin Leighton Paisner hosted the first INFIN breakfast event of the year, providing some valuable insights into the European infrastructure market in the coming year. Joined by a panel of infrastructure experts from across the industry representing debt, equity, public and private interests, INFIN discussed the likely shape of 2017 European infrastructure market.

Using live audience polling technology, the 150 industry attendees were asked for their views on the prospects for the 2017 European infrastructure market. The six key themes resulting from this polling are highlighted below:

1. Brown beats Green …… M&A Rules
Notwithstanding the likely PF2 greenfield pipeline and various large scale new infrastructure projects, 56% of the audience (and the panel) believed that 2017 will be dominated by brownfield M&A in both the regulated and unregulated sectors. Only 16% of the audience felt that greenfield projects would generate the most activity in 2017.

2. Sector Play
Surprisingly 40% of the audience thought that low carbon/renewable energy deals will dominate 2017, followed by transport at 32%. With the trend towards reductions in government support mechanics for renewables deals, it will be interesting to see the shape of the market and how many European renewable energy deals will close in 2017.

3. Less about the Banks
Over 70% of the audience believed 2017 was the year of institutional debt investors and that they, rather than traditional commercial project finance banks, will provide the most infrastructure debt in 2017. This contrasts with 26% of the audience who felt commercial banks will be the dominant debt providers. This suggests a massive shift in the infrastructure debt market. In addition, the overwhelming majority of our attendees (75%) also felt that Brexit will reduce the EIB’s lending activity in the UK.

4. Threats to the Infrastructure Investment Market
The audience was polled on what they perceived would be the biggest threat to a sustained flow of infrastructure deals in 2017, and they felt that ‘political risk/Brexit/Eurozone issues’ will have the biggest impact (44%), closely followed by a lack of deal pipeline (36%) and with asset over valuation (16%) trailing.

5. Allocations
The audience was very positive on the direction of allocations to infrastructure in 2017, with 59% suggesting allocations towards infrastructure will increase by between 1-5%, and a further 21% suggesting an increase of more than 5%.

6. Thinking Positive Thoughts
The audience was polled at the start of the INFIN breakfast on their general sentiment towards investment in the infrastructure market. At the start of the session, a healthy 66% were positive. The same question was asked at the end of the session with 76% citing they were positive, hopefully, persuaded by the views of the INFIN breakfast panel of experts on their thoughts on the 2017 market.

So notwithstanding perceived risks of the UK’s exit from the EU, potential instability in the Eurozone and the election of President Trump, there was an overwhelmingly positive outlook for European infrastructure investment, in particular, driven by a strong secondary market and the continuing wider reallocation of investment volumes towards the infrastructure sector (in search of stable and perceived ‘bond-like plus’ returns in an uncertain global macro-economic environment).

For UK Sterling and Euro-denominated assets, whilst political events may create a certain amount of investor uncertainty, other investors see these events as an opportunity to acquire these assets at competitive prices.

From this polling we still appear to be in a sellers’ market – so will 2017 play out as the INFIN audience predicted or will we see a shift back to the buyers?

Thanks to Berwin Leighton Paisner & INFIN for hosting this event and authorising us to publish this article on our website.

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