CH 10 - 8 Infrastructure Assets

Question 1

1. Definition and Key Features

Answer 1

Infrastructure Projects:
* Large projects undertaken by governments and private institutions.
* Examples: Highways, telecommunication networks, hospitals.

Characteristics:
* High development costs.
* Financed on a long-term basis.

Question 2

2. Financing of Infrastructure Projects

Answer 2

Funding Sources: Typically through debt and equity.
Cashflow Generation:
* Example 1: Toll roads generate revenue directly from motorists.
* Example 2: Public hospitals may not generate direct cashflows; funding is repaid via tax revenue.

Question 3

3. Risks in Infrastructure Investments

Answer 3

Specific Risks:
* Risks related to design, construction, and operation.
* Highest during the early construction phase.

Broader Asset Class Risks:
* Includes market/economic risk, regulatory risk, and political risk.

Question 4

4. Return Variability

Answer 4

Returns depend on:
* Underlying asset characteristics.
* Maturity, risk level, and taxation treatment.
* Macro environment.

Question 5

Government Regulation

Answer 5

Infrastructure assets often have varying degrees of government involvement due to their size and importance.