Alvarez and Marsal
A&M Global Transaction Advisory Group

Infrastructure Pulse Americas Q3 2020

Jay Moody
Managing Director

Co-Authored by: Jason Clatworthy, Wayne Jephson and Andrew Johnson of A&M Taxand; Lawrence Slade & Jon Phillips of GIIA

Key Findings from Q3 2020 Report

The Quarterly Infrastructure Pulse, compiled by Alvarez & Marsal in collaboration with the GIIA is a survey designed to provide a regular temperature check of sentiment in the sector and emerging trends. Against a backdrop of COVID-19, a number of interesting themes are noted in the Q3 2020 survey:

  1. While investor sentiment remains mixed, respondents raising capital expressed a more positive view of the fund raising environment in Q3 compared to Q2. For those investing new capital, almost 85% of Americas respondents indicated positive infra debt markets with a significant improvement noted relative to Q2.
  2. Respondents indicated that the most positive geographic outlook continues to be for the United States. Although generally in line with the prior quarter, the outlook for all other Americas regions were lower in Q3 as compared to Q2.
  3. In terms of sector outlook, respondents were increasingly bullish about the outlook for transactions in communications infrastructure (reflecting increased appetite for, and number of, opportunities in fiber, telco towers and datacenters) as connectivity remains critical as people work from home. Sentiment remained strong in the renewable generation, regulated utilities, other power generation assets. Predictably the most negative, and indeed increasingly negative, outlook was reserved for airport transactions. All transportation sector sentiment was lower in Q3 as compared to Q2. Interestingly, the outlook for utility transactions in the Americas diverged from Europe. Americas sentiment was positive while European sentiment was negative, perhaps indicative of pressure on allowed returns in recent and pending European settlements, particularly in the UK.
  4. Most respondents expressed a more positive view in Q3, as compared to Q2, of the anticipated timeline for portfolio yields to return to pre-COVID-19 levels. In general, most asset classes are expected to return to pre-COVID-19 yields within approximately two years. Notable exceptions with longer timelines include transportation (airports, seaports, and toll roads) and midstream oil & gas assets. The only sector noted as being positively impacted by COVID-19, with a more favorable impact noted compared to Q2, was the communications space.
  5. ESG continues to be an important factor for infrastructure investors, although the importance declined slightly compared to Q2 in the Americas while it increased in Europe. We are seeing an increasing number of funds requesting ESG due diligence as an option in transaction processes…

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