Infrastructure development is big business. A key driver of growth and job creation, it is often seen as a win-win for governments and national economies. As more countries explore the possibilities offered by public-private partnerships (PPPs), such projects can also prove an attractive and viable prospect for private investors.

Many private investors are drawn to infrastructure projects given their reputation as a lower risk investment opportunity. As such, infrastructure schemes often attract commitments from a variety of investors, including sovereign wealth funds, pension funds, insurance companies and asset managers. Indeed, in recent years, due to an increased willingness among governments to embrace private investment in infrastructure projects, several new multi-billion dollar infrastructure funds have emerged. As a result of this renewed interest, private investment in infrastructure assets soared in 2016 as fierce competition for roads, airports, ports and power plants pushed prices higher. Investment in global infrastructure assets hit a record $413bn in 2016, a rise of 14 percent on 2015, according to Preqin.

Yet infrastructure investment is not risk free; many problems can emerge during a project. Regulation, environmental issues, complex ownership structures and increasing pressures on margins are just some of the challenges which must be overcome, and which can also generate significant numbers of disputes. Given the level of finance involved in these projects, as well as the number of parties involved, from investors to construction firms and materials suppliers, such disputes can be complex and detrimental.

Jul-Sep 2017 issue

Richard Summerfield