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Europe risks losing out on a $1 trillion China-led bonanza in overseas investment in infrastructure because of a “weak pipeline of assets and regulatory uncertainty” according to a report by law firm Linklaters. And the same legislative wavering is jeopardising the UK’s possible $200 billion slice of the “mountain” of foreign money, the report warned.
Linklater’s infrastructure sector chief, Ian Andrews, said “Decisions about future pricing regulation could have a significant impact on the UK’s ability to secure private investment. Investors are wary of regulatory environments that are perceived to be hostile or unstable.” The report described UK energy and water firms as coming under “political assaults” with “fierce political and regulatory pressure to cut prices”.
The report included a forecast of utility infrastructure sell-offs like RWE’s disposal of gas network Net4Gas: “More deals like this are likely to follow as companies tap into financial investors’ appetite for infrastructure assets. Many energy companies are looking to sell,” the report said.
It predicted that northern Europe would remain the focus of investment with more companies selling minority stakes in assets to raise capital or pay down debt. Utilities, it said, were already doing this, driven by low share and energy prices. However inflated prices for small numbers of assets in northern Europe could drive investors to the south of the region despite the high risks encountered there, according to Linklaters.
Were the UK to bag its share of investment from global players it could add 1.9 per cent to its gross domestic product according to Linklaters with the rest of the European Union seeing a 1.4 per cent improvement between now and 2023.
Linklaters calculated that global investors from Canada, China and Hong Kong, the Gulf Co-operation Council countries, Japan and South Korea, had increased their investment in European infrastructure by 465 per cent between 2010 and 2013 years compared to the preceding four years – a trend that would continue according to the report.
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