The infrastructure needs of both developed and developing economies requires very substantial investments in the years and decades to come. Road networks, power transmission systems, train lines, marine ports and airports all provide services essential to a well-functioning economy. Where will all the required capital come from?Fortunately, both professional and retail investors see infrastructure as an asset class that allows them to access dependable and material yield on their capital. Investors in infrastructure are usually seeking long term, stable dividends or yield. In the long term, the returns from infrastructure outweigh the growth rate of inflation, and the market for the product is stable and enduring. Infrastructure fundraising is usually one of two types – infrastructure debt funding and infrastructure equity funding.
Infrastructure Debt Funds
An infrastructure debt fund is an investment vehicle for providingor refinancing the debt of infrastructure companies. Because of the generallystable and dependable cash flows from infrastructure projects, they tend to begood candidates for debt financing. As mentioned above investors in infrastructure debt will be looking for stable,long-term income from their investment. There are a variety of vehicles and providers for infrastructure debt funding. The can be done commercial banks, investment trusts, open-ended funds,private funds or even crowdfunded vehicles. Typically, the sponsor of an infrastructure project will seek to maximize the debt funding on the project as a proportion of the total cost, as this will limit the dilution of sponsor equity and improve returns for equity investors. The interest payable to debt investors will generally take priority to dividends for equity investors so where profitability is limited, however, it is the debt investors who will get paid first. This makes a debt investment in an infrastructure project generally less risky than an equity investment.
Infrastructure Equity Funds
An equity investor will take part ownership in the infrastructure company being invested in. Any rise in the share prices of these companies would see an increase in the value of the entity that has invested in these infrastructure equity funds. Equity investors will also share in the dividends paid by the company from its net profits after all costs and debt service have been paid. Equity investors do not receive a guaranteed return in the way that debt investors do, but the returns of equity investors are not capped and where a company is very profitable, the returns to equity investors can be very good.
Whether it is for equity participation or debt,infrastructure companies need to ensure they attract adequate investments to fund their capital assets. Kapok Capital has significant experience in equity and debt fundraising for infrastructure and other companies. We have a strongnet work of family office, and private equity investors as well as bank lenders.Kapok Capital can arrange for infrastructure funding using this network of contacts. Our past experience of arranging funding is very impressive and wehave successfully completed project financing for a large number of infrastructure projects, particularly in the energy industry.
Whether oil or energy, Kapok has been able to easily arrange for infrastructure funding in both equity and debt. In equity fundraising, we have worked on investments of $50 million by Kerogen Capital in Energean Israel and a £7 million AIM share placement by Encore Oil, amongst others. On the debt fundraising side, the experience of Kapok includes multiple energy-related bank facilities, like the $650 million reserves-based lending facility for Tullow Oil, $2.8 billion lending facility for Perenco SA, and a $200 million borrowing base facility for Svenska Petroleum.