Module 2

Question 1

What are 4 different types of Infrastructure Investments?

Answer 1

1) Regulated Assets - Electricity, gas, oil pipelines
2) Transportation Assets - Trains, roads, bridges
3) Communication Assets - Radio, television, etc
4) Social Infrastructure - Schools, Hospitals

Question 2

What are the 4 Key Characteristics of Infrastructure Investments?

Answer 2

1) Stable Cash Flows and Economic Insensitivity
2) Diversification Benefits
3) Long-term Duration and Attractive Long-term Returns
4) Regulatory Rates or Inflation Protection

Question 3

What are key traits of Infrastructure Investments?

Answer 3

1) High barriers to entry
2) Long-term income stream/duration
3) Highly regulated
4) Natural Inflation Hedges
5) Low Volatility
6) Potential for growth through asset management beyond organic status quo

Question 4

What are the two main strategies implemented by Active Asset Management in Infrastructure?

Answer 4

1) Getting more out of existing Capital

2) Realizing Opportunities for above-average growth and profitability

Question 5

What methods or processes are used to execute on active Asset Management Strategies?

Answer 5

1) Active Participation in Management of the company
2) Development of Value Creation Strategies
3) Recruiting Senior Management to work for Investee company or asset level
4) Develop appropriate performance incentives to align with senior management
5) Develop new business plan
6) Monitor Financial performance and re-assess major risks associated with assets

Question 6

What are the 6 General Risks for Infrastructure Investments?

Answer 6

1) Uniqueness of Sub-Sectors - low correlation across
2) Political and Regulatory Risks - diverse areas
3) Stages of Development - costs / return risk
4) Liquidity - due to size and limited buyers
5) Credit Market Risk - Refinancing issues/assumptions
6) Currency Volatility - Global investment expose risk

Question 7

What are the 3 Life-Cycle Phases of an infrastructure asset?

Answer 7

1) Planning/Design/Construction
2) Operation Phase
3) Termination Phase

Question 8

What is a Public Private Partnership?

Answer 8

A government service or private business venture that is funded and operated through a partnership of government and one or more private sector companies.

Question 9

What are a few Key Benefits of PPP Infrastructure Investments to Governments?

Answer 9

1) Improves Efficiency using Private sec. Tech/Innovation
2) Incentivize Private Sector to deliver projects on time
3) Impose Budgetary Certainty over time
4) Utilize joint ventures to stimulate economy
5) Expose State-owned enterprise to private participation
6) Transfer skills from private to public sector
7) Create Diversified and Competitive Economy

8) Extract long-term value-for-money through appropriate risk transfer to private sector over life of project