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10/21/2013

NYSSA's First Annual Global Infrastructure Conference


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Infrastructure is very much on the mind of the American and global investment community at large.  The International Finance Corporation’s Asset Management Company recently completed $1.2 billion in financing (exceeding a $1 billion target) with commitments from 11 investors, including sovereign wealth funds from Singapore and sovereign and pension fund investors from across the globe.  In a recent editorial for Bloomberg law, Jay Tannon, a partner at Patton Boggs LLP, suggested a national infrastructure authority in the US to oversee much-needed improvements across the country.  A recent statement by Liberian President Ellen Johnson Sirleaf that the Dallas Cowboy’s new football stadium uses more electricity than the total capacity of her country prompted detailed responses from sources as diverse as The Wall Street Journal and the Brookings Institution. 

NYSSA has organized a conference, coordinating between the Global Thematic, Global Investing and Institutional Asset Management Committees, to address these and other issues, featuring five panels of seasoned experts and practitioners.  The panels will focus on Transportation, Power and Energy, Water, Public Policy, and Investment Strategies.  As such, the conference will cover a veritable gamut of issues facing any infrastructure investor.  “Infrastructure is a critical component of today’s economic landscape,” says the conference’s lead organizer Thomas Brigandi, “and the investment community represented by NYSSA would be well served by taking an even closer look at the opportunities and challenges the sector presents.”

The team assembled to do so has a wealth of expertise and experience to offer.  According to panelist Kurt Krummenacker, a Vice President and Senior Credit Officer at Moody’s, the rating agency’s global outlook for infrastructure is stable, while credit strength for projects has been resilient.  “While some areas continue to see softness due to weak economic growth, concerns about…the Eurozone crisis or overcapacity, by and large credit strength for Moody’s rated infrastructure entities is expected to perform well through these issues.”  In his reasoning, he cited infrastructure’s “essentiality to economic development” and well-structured investment vehicles that “protect investors from cyclical [trends].”  Certainly, the structural complexity of Special Purpose Vehicles and Public Private Partnerships often employed in infrastructure finance has long been at the forefront of investors’ minds.

To continue President Sirleaf’s aforementioned use of football stadiums as a bellwether, the issues with America’s electrical grid were amplified by a blackout during the 2013 Super Bowl.  Of course, it had long been acknowledged that major structural changes were needed, a need that conference panelist David Posner saw as an opportunity.  “There will be over 1.7 billion new energy consumers in the next 25 years and existing infrastructure cannot keep pace,” Posner noted, in addition to estimating a $37 trillion dollar financing requirement over the next 25 years.  And on the eve of the US eclipsing Russia as the world’s top oil and gas producer, Posner noted that the increase of necessary supporting infrastructure, “including providing power generation to shifting population centers.”  The magnitude of the need for financing, according to Posner is “expected to create attractive energy infrastructure investment opportunities for the foreseeable future.”

In addition to energy, water resources have been looming in the background of macro discussions and policy debates for quite some time.  Water Asset Management co-founder Matt Diserio highlighted an OECD estimate of $1.8 trillion in required financing for water infrastructure over the next 20 years, “double that of electricity, road and rail combined,” he added.  “It is local, typically misunderstood…yet has historical pricing power that has outpaced inflation,” Diserio explains, forecasting a “multi decade investment super cycle around resource scarcity.”  On a broader note, he quoted the mayor of San Antonio, experiencing one of the nation’s worst droughts in decades, “Without water – everything is worthless.”  Forecasts that Yemen would be the world’s first country to run out of water, have begun to make the rounds of alert global-minded investors and policymakers, but the understanding and pricing gaps cited by Diserio provide a potential avenue for excess returns.

Broad forecasts about the changing global landscape are not just fodder for vague investment policy statements or bold headlines.  There are highly specific and structured investment vehicles to capitalize on the upgrades and additions to the building blocks of the global economy and the upcoming conference will give attendees a high-level overview of how to digest and apply understanding of these trends. 

–Daniel Fridson

Register for NYSSA's First Annual Global Infrastructure Conference.

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