EDHECinfra Paper
2016 EDHEC-Risk Institute Research Insights

This special supplement of IP&E highlights the findings of new research on infrastructure investments that were presented at EDHEC-Risk Days 2016.

Drawing on research from the Meridiam/ Campbell-Lutyens research chair at EDHECinfra, we analyse the characteristics of cash flows in private infrastructure firms and find that infrastructure firms exhibit a truly unique business model compared to public and private rms. The equity payout behaviour of infrastructure firms is very different from that of other firms: infrastructure firms pay more often and in significantly higher proportions of their revenues than other firms once the lifecycle of the rm is taken into account. We conclude that infrastructure firms have significantly lower volatility of revenues and profits and pay a much higher proportion of their revenues much more frequently to their owners, independent of the business cycle.

On the subject of the cash flow dynamics of private infrastructure project debt, as part of the Natixis research chair at EDHECinfra, we produce new results using a new infrastructure cash ow database. We show that a powerful statistical model of credit ratio dynamics provides insights for the valuation of private credit instruments in infrastructure project nance. It also militates for standardising the data collection and computation of items such as the debt service cover ratio in infrastructure project nance, and for pooling this information in central repositories where it can be used to create the investment metrics that investors need (and regulators require) to be able to invest in large, illiquid assets such as private infrastructure project debt.

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