In this course, we will explore how debt and equity can be used to finance infrastructure investments and how investors approach these investments. We will discover the crucial importance of infrastructure in modern economies and the evolution of financing methods in the context of growing global needs.
The course is divided into 5 modules lasting approximately 7 hours, spread over 5 weeks. We will cover the importance of infrastructure, public and private sources of financing, the evolution of infrastructure and project financing. We will also look at the increasing focus on sustainability and ESG (Environmental, Social, Governance) criteria.
The course includes video lectures, readings and talks by expert guests. It is presented in an accessible and simplified format, suitable for a general audience, including high schools and new entrants to university. Available in Italian and English with subtitles, it is accompanied by materials in both languages.
Overview
Syllabus
- Week 1 - The importance of infrastructure and its definition
- The first module introduces the topic of the importance of infrastructure in modern economies. First, an attempt is made to point out that in the next 20 years, the need for infrastructure at a global level and at the level of industrially developed countries (USA and Europe) will be particularly significant and will require the mobilisation of significant financial resources. Next, an attempt is made to clarify the meaning attributable to the term 'infrastructure'. In the jargon used by private investors, in fact, several classifications are possible, some based on a traditional/sectoral approach (economic infrastructure vs. social infrastructure), others based on the different quantification of the underlying risk and return (core, core+ and value added). Finally, the focus is on ESG impacts, with particular reference to the E and S elements that infrastructures pose in the face of a growing awareness of the need to make such investments sustainable over the long term.
- Week 2 - What are the sources of infrastructure funding?
- The module presents the categories of investors in the infrastructure sector. The initial introduction provides a high-level view of the two categories (the public investor and the private investor) and the investment motivations underlying each of the two groups. It then moves on to an examination of public financing of infrastructure: the driving role of infrastructure on the growth of the economic system and jobs (fiscal multiplier and job multiplier) is clarified, but it is also pointed out that in recent years privatisation policies and budget constraints have led to a steady reduction in public investment and an increase in the infrastructure gap. The plans of the US government (IRA), the EU (NextGen and Repower EU) and Italy (PNRR) are a response to this decline. Finally, private financing of infrastructure is considered and the attributes of infrastructure that are attractive to a private investor are clarified. The different types of investors (greenfield and brownfield) are clarified and it is shown that infrastructure investments are very stable even in times of market crisis and recession (recession-resilient investments).
- Week 3 - Infrastructure 'on the move': new segments and themes
- The module clarifies why the concept of infrastructure is 'in motion', evolving. The general introduction gives a high-level overview of why what we define as infrastructure today may no longer be so in the coming years (the 'stranded assets') as well as investments that were not considered infrastructure until a few years ago are perfectly so today. The first interview presents the energy sector and the evolutions it has undergone (decarbonisation and ecological transition), the situation in Italy is assessed and the possible implications for the future. The second interview focuses on a very innovative sector and therefore seemingly far removed from the concept of infrastructure (but not resource infrastructure as seen in module 1) such as agritech. It is clarified why agriculture is the infrastructure of the future, the Italian situation and the implications for investors. The third interview focuses on an even more innovative sector such as the space economy. The perimeter of the space economy, the implications for investors and the Italian situation are clarified. The last interview with F2i's Alberto Ponti clarifies sustainability issues in infrastructure investment. From the perspective of a large national infrastructure investor, we analyse how ESG issues enter into the investment process of a large fund and guide its strategic decisions.
- Week 4 - Il finanziamento privato delle infrastrutture e il project financing
- The module introduces the financial technique used for greenfield infrastructure projects: project financing. A high-level overview of this technique is given in the introduction together with some data on the market in question. In the first part, a simple definition of project finance is presented using the example of the "time bomb" to clarify the difference with traditional financing of any other investment. It then goes on to examine the network of contracts used in project finance transactions by identifying the four key contracts that are essential to the success of the operation (EPC, supply of raw materials, sale of products or services, maintenance and operation contracts).Finally, it clarifies the main categories of risk underlying infrastructure projects, both during the construction and operational phases, and presents the main solutions that can be used to reduce/mitigate these risks.
- Week 5 - Course Conclusions
- This Week is dedicated to the final evaluation of the course.
Taught by
Stefano Gatti and Mattia Pianorsi
