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

by Stephen Yates

  • 22 Sep 2015
  • INF

The growth in average deal size for infrastructure assets can be seen on an industry-by-industry basis throughout the period 2006-2015 YTD. In fact, from to 2006 to present, the mean cost to invest in a transportation asset has increased from $708mn to $889mn, from $452mn to $616mn for a utilities asset, $338mn to $477mn for telecommunications and $195mn to $240mn for those assets within the healthcare/medical facilities industry. However, as expected, it is the energy industry that has witnessed the most substantial growth during this period; average deal size for energy-based assets stood at $313mn in 2006, but currently stands at $501mn in 2015 YTD, a 60% increase on the 2006 figure. Within this subsector, renewable energy is an area that has become increasingly prominent in recent years. The global transition from reliance on traditional to alternative energy sources is an important political and economic issue, and one that has resulted in a huge increase in the number of transactions completed within this industry, coupled with a dramatic increase in average deal size. In fact, average deal size has grown as much as 118% over the period in question, standing at $171mn in 2006 and $372mn for 2015 YTD.

Typically, institutional investors and fund managers prefer to focus on more mature and established infrastructure assets, and are less willing to take on the construction risk associated within greenfield projects. It is therefore perhaps unsurprising that the average deal sizes of those assets at the brownfield and secondary stage of development have increased more considerably than the average deal size of greenfield assets: the average deal size of brownfield assets has grown from $356mn to $643mn, secondary stage assets from $371mn to $541mn and greenfield projects from $470mn to $657mn. For more information on infrastructure deals, Preqin’s Infrastructure Deals platform on Infrastructure Online includes extensive information on over 11,900 completed infrastructure transactions globally.

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