Three takeaways from the Infrastructure Investor Summit

The II Global Infrastructure Investor Summit happened. Here are Solvere’s takeaways from the No.1 gathering of private capital for infrastructure worldwide.

Hosted by Infrastructure Investor, the event took place in Berlin on March 19-21 and attracted the majority of the players in the global infrastructure investment industry, which is remarkable for a single event. Our congratulations to the organisers and the speakers and attendees that made it possible.

Solvere sponsored the Global Projects Forum this year, and our team had the privilege of 1) listening to some of the most qualified opinions in the sector; 2) meeting sponsors, investors, developers, lenders and service providers that we can partner with; and 3) providing our own views and thoughts about how to solve the remarkable challenges that the industry faces.

We took away many valuable insights from the forum. Below are the three we have chosen as our favourites.

1. Has infrastructure peaked? We think not. What has peaked is business-as-usual models.

Never mind the amount of people, firms and institutions that were represented in Berlin. No matter how sophisticated our business, corporate, financing and risk management models have become: Private participation in infrastructure is still only a VERY small portion of the total invested, and most of it goes to the familiar geographies.

Take the US$ 80 billion raised in infrastructure investment funds in 2018: That makes a tiny portion of the US$2.6 trillion estimated total infrastructure investment across the globe last year. Furthermore, it was said on several occasions during the event that eighty percent of the private investment still goes to core OECD countries.

There was a lot of talk about the “holy grail” of the double-digit returns in infrastructure. When listening to the most experienced people we reasserted ourselves in the conclusion that the double digit is the exception, not the norm for the future of the industry. Infrastructure assets are structurally designed for the long term, and they are very much needed for and linked to economic development. The real challenge is managing stability, be it regulatory, market, technological, or of other nature.

Even when the growth rate of private fundraising for infrastructure might be alarming for many, the industry should stop asking such simplistic questions in a context with so many dimensions. In our opinion, we have only seen a handful of working models in an ecosystem that keeps getting more heterogeneous and dynamic every day. It is business-as-usual that has peaked in infrastructure investment, and there are vast unchartered territories waiting to be developed, much in the same way that Australian and Canadian pension funds pioneered investment in unlisted infrastructure years ago.

2. Growing complexity demands new approaches to business and risk management

One of the things that we really liked about the forum was how openly the panellists and participants were willing to share experiences, concerns, observations and ideas (alright, perhaps not so openly when it came to the disclosure of precise, actual return rates, but that will gradually change). To us, this is proof that changes are happening in the industry as a reaction to the growing complexity of our socioeconomic systems and our limited ability to understand what is going on. We observe a natural, yet counter-intuitive tendency to collaborate, learn and trade-off in the advent of uncertainty.

ESG is a clear example. Environmental, social and governance issues took the centre stage of the discussions during the first day, but also reverberated throughout the rest of the week in Berlin. However, we observed that there is still much confusion about which direction to go, and how to measure orientation and progress. Let us stop for a moment and admit that many of the structures and ideas that have underpinned the infrastructure investment industry so far are unfit for the ESG challenge. As a matter of fact, they were designed to avoid these issues, not to deal with them.

Our opinion is that what is missing is a systematic approach to dealing with complexity. A system-of-systems approach is in order to avoid falling into the trap of control illusion: building more and more sophisticated tools and arrangements to control every single corner of the analytical framework, overlooking not-so-obvious behaviours that really drive infrastructure in the long run. Systems thinking calls for moving from looking out for risks to looking inward for capacities, skills, interdependencies, vulnerabilities, biases. Resilience requires moving the focus away from artificial legal and market architectures and onto built-in functions and flows of our systems.

3. Technology? Yes, but the real revolution is cultural.

Some voices at the forum were sceptical about the disruptive capacity of technology to transform the industry. We concede that technology can only go so far, especially when the people using it cannot comprehend its potential and limitations. The big point here is that the real revolution is the generational, cultural change that will transform the way that infrastructure is financed, delivered and operated. This is already seen in the business models at work in the software sector, and we should pay close attention to the talent, views and drivers of the young people entering our sector; they don’t see technology, ESG, sustainability, gender equality, or collaboration as aspirational goals. They are part of their culture already.

Now, this revolution may not necessarily happen in a spontaneous, revealing, flash-like fashion. It may well be a subtle one. Perhaps one key cultural aspect to change is the obsession in the sector with the next new best thing. If we are talking infrastructure, we are in the realm of long-term planning. How about stopping to look for the next thing that will bring double-digit returns in the short-to-medium term and focus on what has brought stable returns in the long term?

To face rapid change and unpredictability, and without getting too philosophical about it, we at Solvere like to rest on a fundamental principle: complex systems that endure evolved from simpler systems that work. For those of you fans of systems thinking, this is called Gall’s law. So, let us observe the simple infrastructure investment systems that have worked, study the characteristics of the people and organisations that made them work, and take them to the next level by combining with other systems that also worked, no matter how far outside our zone of comfort the latter are. In this analysis we will probably find many experienced professionals who were bold enough to listen to and rely on young talent.


We will keep sharing our views on the fascinating things happening in our sector. Stay posted.

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Sharing our PPP expertise with the Indonesian Government

Solvere Managing Partner Jose Cordovilla had the pleasure to deliver a knowledge-sharing session to the Indonesian Government. A broad representation from different institutions, including BAPPENAS, the Ministries of Finance, Public Works, Health, Transportation, Telecommunications and other, attended the event. The session took place at the IIGF offices in Jakarta, on 21 May 2018, and it was organised jointly with our local partner Muhammad Saifullah of Adhikari.

The Joint PPP Office of the Government of Indonesia kindly invited Solvere and Adhikari to deliver a knowledge-sharing workshop with the following objectives:

  • To review the basics of availability payment (AP) mechanisms in PPPs
  • To share experiences in the design and implementation of these mechanisms in other countries, mainly in Europe and Latin America.
  • To create a discussion forum to address questions and generate ideas

The session was very successful, with full attendance from a wide variety of Government officers and a very dynamic debate with the audience. The key takeaways from the workshop were:

  • APs are regular, guaranteed payments from the Public Partner to the Private Partner in exchange for the availability of an assets and/or a service.
  • APs are usually paid monthly or quarterly, and adjusted based on the functional availability of the service and the performance of the operator, measured by a number of Performance Indicators and the corresponding payment adjustment mechanisms.
  • AP in PPPs is a recent instrument. It only started in the late 1980’s with the UK’s PFI programme and there is limited real experience about its actual benefits and challenges.
  • AP is similar to obtaining a loan and paying the instalments regularly, but instead of receiving money upfront the Government receives an asset or a service that is ready to be used.
  • AP remunerates the Private Partner for retaining Operational Risk (excluding Demand Risk), typically combined with Construction Risk.
  • The Public Partner retains Demand Risk in part or in full. Lately there are examples of hybrid models, like the Peru Metro Lima Line 1 expansion, where the model is a combination of minimum demand guarantee + availability payment.
  • AP is a mitigation mechanism for commercial risk through contractual arrangements (different to credit enhancement mechanisms and also different to financial support like VGF).
  • AP is, in practice, very difficult to design and manage and requires management capacity and strong governance mechanisms to ensure the right outcomes.
  • AP is not adequate if the Government cannot guarantee the transfer of operational risk and monitor and evaluate the efficiency gains.

Solvere would like to thank the Joint Office of PPPs, especially Ibu Novie Andriani, for inviting us and treating us with such great hospitality.

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Technical issues, feasibility and bankability of Road PPPs in Spain

This is a Summary of the IPFA event hosted by Solvere Infraestructuras on May 10, 2018. Madrid

This IPFA event organised and hosted by Solvere Infraestructuras intended to create a space for debate and exchange of relevant ideas for public-private partnerships in Spanish roads, with special attention to the Radiales and the new Road Investment Plan (PIC) of the Ministry of Fomento (Public Works).

The venue was at full capacity and counted in approximately 70 professionals who represented broadly the road concessions sector, including the Government, construction companies, road operators, banks, insurers, rating agencies, investment funds and consulting firms.

The starting point was: Road PPPs must have technical and financial sustainability, but also – and no less important – generate long-term value and reinforce the legitimacy of such an infrastructure provision mechanism. This implies a significant change in the culture of the sector, towards greater collaboration and adaptability, innovating in how we work and how we take risks jointly, with greater transparency and boldness in the business approaches.

This spirit was reflected in the interventions of the speakers and attendees, who participated very actively in the debate.


Speakers and Structure of the Session

The session had the following speakers:

Jose Cordovilla, Managing Partner of Solvere Infraestructuras acted as moderator. In the first part, SEITT gave an overview of the new PIC and the future tenders for Radiales. SEITT and Société Générale shared their points of view and experiences on different aspects of road PPPs in Spain that were brought to the discussion. In the second part, Acciona and COPASA joined the panel and the debate was opened (as well as the possibility of asking questions) to the rest of the attendees.

Key Topics

Scope of the PIC and Radiales

The Radiales will be tendered as service concessions with total transfer of demand risk and a maximum duration of 25 years in 2 contracts:

  1. Radiales 2, 3, 4 and 5 together with the AP-36 Ocaña-La Roda, AP-41 Madrid-Toledo and M-12 Eje Aeropuerto
  2. Circunvalación de Alicante and the AP-7 Cartagena-Vera

The PIC roads will be tendered as public works concessions with a maximum term of 30 years, in 20 projects with investment values between 100 and 400 million euros. Payment mechanism will be availability, to provide commercial appeal to the contracts. The first two projects tendered will be the Murcia ring roads.

The European Investment Bank (EIB) will finance up to 50% of the investments, since they are part of the Trans-European Transport Network.

Commercial attractiveness of the projects

The private sector pointed out that after a number of years (6-7) in which there have been no road concessions in Spain, and the problem of the bankruptcy of Radiales, there is a great interest in the tenders being prepared by Fomento. For the screening of projects, the private sector takes into account the size of the investment (minimum), the bankability, the economic sense of the project, participation of the EIB and other factors. On the other hand, there is strong competition due to the entry of institutional investors.

The Government will establish the contract duration based on the return of investments and market competition, since there must be explicit justification for any duration above the 5-year maximum term established by the new Law on Public Sector Contracts.

Main Risks

An interactive poll used during the event revealed that the main risks for the private sector are the cost / timeframes for land acquisition and demand risk, followed by technological disruption and construction risk. The availability risk and the possible shortage of capable professionals in the sector are considered marginal.

Land Acquisition

In the PIC it seems the proposal will be that the State assume the excess costs of land acquisition between 150% and 250%, but not lower or higher than those thresholds. In the past, the private sector relied on the Responsabilidad Patrimonial de la Administración as a safety net for investments. The problems with the determination of the RPA in Radiales will probably cause the risks to be analysed more meticulously in the future.

Availability Payment

The PIC contract documents will include 15 performance indicators. Given the past experience with availability indicators (complexity in actual management, especially in terms of response times), the structure of indicators has been simplified with respect to previous projects (28 in the case of Benavente-Zamora, 2012) and the General Directorate of Roads will be in charge of monitoring these.

The availability payment for PIC projects will include a deduction in case the demand is lower than expected. The legal services of the Government have determined that, in order to consider the contract as ‘concesión de obras’ -based on the new Law on Public Sector Contracts of 2017- there must be demand risk in addition to availability on the private side, since it is interpreted that the availability – as defined by the existing indicators – does not constitute full transfer of supply risk.

The deduction mechanism that is proposed is up to 10% deduction of the availability fee if the demand drops to 40% of the forecasts, and up to 25% deduction if the drop in demand is 50%*.

*This text was edited to reflect the correct thresholds.

Technological disruption

The feasibility studies of the PIC do not incorporate the possible impact of technological changes such as the autonomous vehicle or MaaS (mobility as a service), since they are considered emerging, untested technologies.

The Radiales contracts and the PIC will only consider the possibility of re-equilibrium due to technological changes in cases where the obligation of new investments or incurring higher costs come from decisions by the contracting administration (i.e. the Ministry of Fomento). This would be the case of updates required as a result of new tunnels safety regulations, but would not apply to new requirements imposed by the Ministry of Industry, for example.

The concessionaire companies are considering innovations such as the monitored highway toward the upcoming tenders, but the experience of innovative initiatives in the past has not been satisfactory and the private sector understands that it has to arise at the request of the Administration.

The event attendees considered that autonomous vehicles, artificial intelligence and mobility as a service are the technologies with the greatest potential for disruption in road PPPs, far beyond new construction materials, electric vehicles or the introduction of open data policies.


It became obvious the concern of the sector about the social opposition to private participation in infrastructure management, wrongly named “privatisation”. The session saw an interesting discussion about how to strengthen the legitimacy of this public service provision mechanism.

It was highlighted the need for greater efforts in transparency, making more information publicly available on the real figures of roads with private operation, so that the public perceives in a clear way that infrastructures are costly to maintain and operate, and that private participation can bring benefits to the quality of the service.

The discussion also emphasised the importance of dedicating greater efforts and resources to the preparatory stages of the projects, for a better structuring of the PPPs.

Closing of the Session

The event finished with an informative note by Agata Skrzypczak (IPFA European Operations Manager) on the IPFA activities internationally and in Spain, followed by a lively networking drinks reception sponsored by Solvere.


Solvere provides has developed its own methodology for the estimation of contractual and financial risks in complex performance-based and availability payment contracts.

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