Increased infrastructure spending and market uncertainty could bolster project finance debt, says S&P Global Ratings

As of June 2016, S&P Global Ratings had rated $159.7 billion of global project finance debt. The majority of the debt is for projects in the U.S. (46%) and Europe (23%), with two thirds rated at investment grade (BBB- and higher).

A recent study, published by the S&P Global Fixed Income Research Group, finds that project finance debt could rise globally within the coming years; additionally, S&P estimates that there are tens of trillions of dollars needed for infrastructure investment. National governments’ promises to increase investment in infrastructure will spur much of this project financing – especially in the U.S., and if increased spending commitments are funded through public/private partnerships.

It is also speculated that rising interest rates and economic instability will draw investors to project finance. “With uncertainty looming from the impact of Brexit, ongoing volatility in commodity prices, and the likelihood that the U.S. Federal Reserve will (further) raise interest rates this month, global investors face uncertainty on several fronts in the current credit market,” noted Diane Vazza, head of the S&P Global Fixed Income Research group. “In this uncertain environment, investors could be drawn to the inflation-linked yields and real assets of project finance debt.”

More news regarding this research can be found at Windpower Engineering and FTSE Global Markets.

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