The Growing Cost of Infrastructure Assets: Part I – September 2015

by Stephen Yates

  • 17 Sep 2015
  • INF

Infrastructure as an asset class has grown in prominence and significance in recent years as infrastructure deal flow has continued to grow steadily, both in terms of the number of transactions completed and aggregate deal value. Around 8,000 infrastructure transactions have been completed since 2006, with an estimated deal value of over $1.7tn, whereas as few as 660 transactions were completed globally in 2006, with an estimated aggregate deal value of $279bn.

Preqin’s Infrastructure Deals platform on Infrastructure Online includes extensive information on over 11,900 completed infrastructure transactions globally. These deals involve a variety of investors, ranging from infrastructure fund managers and direct institutional investors to industry players such as developers, contractors and other industry-specific trade investors. 2013 saw a record high in terms of deal numbers, with 1,056 transactions completed at an estimated aggregate deal value of $424bn. Although transaction numbers have decreased to 883 and 325 in 2014 and 2015 YTD respectively, these figures are expected to increase substantially as more deals come to light.

Coupled with this growth in demand for infrastructure assets and the increased availability of debt financing, competition for assets within the market has grown and the year-on-year increase in average deal size is a reflection of this. As the chart above demonstrates, average deal size has increased over time, with particularly large growth in recent years. Having stood at a record low of $323mn in 2010, this figure grew to $493mn in 2014, and has leaped to a record high of $626mn in 2015. In fact, more than 40% of the completed transactions in 2015 YTD have been valued at $500mn or more.

This increase in average deal size can also be seen regionally. Across North America, Europe, Asia and the rest of the world, average deal size has been growing consistently since 2010. In 2010, the mean cost of an infrastructure asset in North America stood at $346mn, $335mn in Europe, $156mn in Asia and $411mn in the Rest of World region. These figures rose to $580mn, $402mn, $307mn and $635mn in 2014 respectively. However, average deal size in North America and Europe has seen its most significant rise between 2014 and 2015, rising by 33% and 42% respectively. Conversely, average deal size in Asia and Rest of World rose more modestly to $307mn and $649mn, 1% and 2% increases respectively.

When looking at specific countries, the US, Canada and the UK have all experienced a substantial increase in average deal size during this period; the 2006 figure stood at $499mn in the US, $313mn in Canada and $361mn in the UK. 2015 figures have grown to $734mn in the US, $595mn in Canada and $546mn in the UK. However, it is Australian assets that have experienced the most dramatic growth in pricing in this period, growing from $295mn in 2006 to $761mn in 2015, a 158% increase.

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