The global infrastructure deals market saw 277 deals announced in Q2, worth a combined USD51 billion, according to figures released by Preqin. The company expects these figures to rise by around 5 per cent as further information becomes available, but nevertheless, this represents a significant slowdown in activity in 2017 so far.
Every quarter from Q3 2015 to Q4 2016 saw total deal values exceed USD100 billion, but neither quarter of 2017 has approached this level of activity, with Q1 recording 373 deals for USD90 billion, and Q2 failing to meet that level. In fact, the second quarter of 2017 has seen the fewest infrastructure deals since Q3 2009 – at this pace, 2017 may see only half the overall activity compared to 2016’s record-breaking level.
North America recorded 78 deals, worth an aggregate USD19 billion, the highest value of any region. Europe saw the most deals announced (146), but these were worth a combined USD11 billion. Renewable energy assets drove dealmaking activity, accounting for 59 per cent of deal volume in H1 2017. Other energy investments represent 13 per cent of H1 2017 deal volume, up from 7 per cent in 2016. Almost one in five deals (19 per cent) in H1 2017 were worth USD1 billion or more, up from 14 per cent of deals in 2016 which were of this size.
This has pushed the average size of infrastructure deals in 2017 YTD to USD519mn, a significant increase from the USD344 million average deal size seen in 2016.
Secondary stage assets account for 79 per cent of deals announced in Q2, while brownfield projects represent just 3 per cent. The largest deal recorded in the quarter was the CAD 9.7 billion acquisition of Canadian pipeline operator Veresen by the Pembina Pipeline Corporation.
“The infrastructure deals market has slowed markedly in the first half of 2017,” says Tom Carr (pictured), Head of Real Assets Products at Preqin. “2016 saw record levels of activity throughout the year, but this momentum does not seem to have been sustained, and deal volume is now around half what we saw in the same quarter last year. This will be of some concern to fund managers, and they will be looking to regain some momentum in the latter part of the year.
“However, there are indications that deal flow may bounce back in H2. The closure of several mega infrastructure funds has injected a large amount of capital into the dealmaking market, which fund managers will be looking to deploy quickly. In addition, concerted efforts by both the US and Chinese governments to generate new private infrastructure investment are likely to provide more opportunities for attractive projects.”
