Lack of equity restricting Caribbean infrastructure investments

The disclosure was made by managing director of CIBC’s corporate credit and structured finance, David Clee, during the first of a two-day CIBC First Caribbean Infrastructure Conference being held at the Hyatt Ziva hotel, Montego Bay under the theme: ‘Unlocking Economic Potential’.

“There is interest in energy generation and distribution, utility projects by investors, but a lot of countries get turned down because of their framework… The issue in the region is that the projects have to have good returns on investments because most professionals are looking for $15 to $20 million in equity,” he said.

Clee was part of a five-member panel discussion on Caribbean Infrastructure as an asset class from the international and regional investor’s perspective. His argument was supported by Managing Director of the Portland Private Equity Douglas Hewson, who stated that the main points around infrastructure development for the Caribbean is ensuring that there is a framework at the country level, and that the concessionary terms of the project will be influential to investors.

“Funding is available to the regio. The problem is that there needs to be proper structuring of the project. The threshold of the debt to equity ratio is not being met by the region, [while] investors look for a net 20 per cent return oninvestment and they also look for whatever sweeteners they can get,” Hewson stated.

As the Government continues to pursue tough economic reforms from an agreement with the International Monetary Fund, more emphasis is being placed on public/private partnerships for the development of local infrastructure.

Recently, the Government engaged in the privatisation the Norman Manley International Airport for which it is now seeking a bidder, the development of the North South Highway by the Chinese Harbour Engineering Company, and the planned logistics hub to meet the demands of the growing volumes of cargo as part of public/private infrastructure development.

“Australia, United Kingdom, Canada and Europe are very interested in infrastructure assets both at the apparent and the asset level, particularly on the airports and seaport,” Hewson told the audience. “The first deal was probably more than a decade ago in Europe, additionally all the major Australian airports have accessed the United States Private Placement market.”

“The investment markets that I have described, most of them are concession deals… so you’ve got that as a key consideration, but then there is the level of confidence in the regulatory infrastructure and how these assets will be overseen by the Government. Sometimes that latter part is the one that requires a little bit more work…” Hewson said.

The CIBC conference is aimed at focusing on the key principles of the successful development of airport, tourism, water utilities, energy and social infrastructure and will feature international and regional investors, major infrastructure operators, rating agency infrastructure, project finance specialists, and infrastructure project advisors from the private and public sector and multilaterals.




 

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