Infrastructure is fast becoming a very popular investment choice.
However, some individuals believe that the market is not as secure as it could be, mostly due to the competition that occurs between infrastructure companies.
This competition causes perfectly sound infrastructure like toll roads or airports to end up sitting unused due to the old/existing infrastructure costing less to use for the average user.
If this happens, the companies lose money fast and will often be liquidated.
So far, this hasn’t occurred in water infrastructure investment, but with the drought and cheap solutions being sought to it on a daily basis, the same pattern could occur.
“Babcock & Brown, the Australian investment group, is a cautionary tale. It was one of the big casualties of the financial crisis, as some of its structured infrastructure deals were leveraged up to 10 times. When the markets went south and seized up, it was forced to renegotiate some of this debt and eventually ended up being placed into liquidation.
In short, infrastructure investments often offer steady, inflation-proofed cash flows — but they are not safe government bonds, particularly those outside the largely monopolistic utility and power sectors.”
From the point of view of Water Infrastructure Asset Management experts, infrastructure definitely needs investors, but like all investments, those investors need to have an understanding of the risks involved in the investment, and the risks that they can bear as an investor.
Inframanage.com predicts that infrastructure management planning and infrastructure asset management plans will increasingly be used by long-term infrastructure investors, and bond rating agencies to assist in assessing particular infrastructure investments and projects.
Ideally, infrastructure investments should be made with full disclosure as much as possible, and well-prepared infrastructure asset management plan, with associated expenditure and revenue projections, assist with this disclosure.