RARE Infrastructure Value Fund Market Commentary – February 2010
Divergence in the global markets this month as the spotlight focused on sovereign debt issues and the markets suffered a bout of risk aversion. Developed markets (MSCI World, local) finished up 1.7% and emerging markets (MSCI EM, local) down 0.3%.
Top news stories for the month continued the focus on Greece’s finances, including swap contracts with Wall Street banks that hadn’t previously been disclosed. Expect this issue to continue to create volatility in global markets as concerns remain as to whether other countries may be saved/swamped. In the meantime, US unemployment unexpectedly fell (to 9.7%), the Fed increased the discount rate (to encourage banks to borrow from money markets rather than the Fed) and Obama’s budget is seeking an extra USD1.7t in tax from the wealthy and businesses over the next decade.
Infra Regulation. Fraport (Germany, airport) announced it reached an agreement with airlines to increase fees by a better than expected 2.9% each year from 2012 to 2015. French tollroads increased prices by up to 0.5%. The UK energy regulator released a report considering ways to de-risk and achieve more timely investment in electricity and gas infrastructure over the next 10-15 years.
Infra M&A. Unlisted infra M&A activity declined 33% in 2009. 2010 appears busy with Ontario Teachers rumoured (and then denying) a bid for Northumbrian Water, Abu Dhabi acquiring 15% of Gatwick airport, ISA (Colombia, infra) agreeing a USD2.8b toll road deal with the government, Poland’s treasury selling down 16% of Enea (utility), Morgan Stanley’s infra fund buying 40% of Southern Star Central Gas and new toll road tenders launched in Ireland, Georgia (US), and Turkey.
Infra Funding. Busy month for financing with IPO’s being considered for German and Russian rail/cargo companies and Ecorodovias (Brazil, tollroad). The EIB has loaned EUR100m for Spanish roads, lenders are in place for the EUR860m French Réunion Tram project, and Queensland Airports has rolled AUD190m at ~250bps over swaps. Separately, rating agency S&P expects Brazil will have to spend as much as USD500b over the next five years as it gears up to host the World Cup (2014) and Rio de Janeiro Olympics (2016).
Other Infra News. Massive air travel disruptions in February with snow storms in the US and strikes in the EU. French public investment group CDC is launching an infrastructure subsidiary.
