Impact of private equity investments in infrastructure projects

Private financing of infrastructure projects is commonly seen in many countries today. In recent years, many private infrastructure projects have also attracted investment from Private Equity (PE) firms. Though there have been instances of PE investment in infrastructure even in the past, the growth has been substantial in recent years. This paper analyses the role of PE investments in infrastructure financing. The findings are based on an analysis of 2821 infrastructure projects that were announced during 1990–2009. It was found that projects with PE investment were larger when compared to projects that did not have PE investment, indicating that that PE investment helped in successfully financing larger projects. Our analysis also indicated that PE investment in infrastructure is more frequently seen in developed countries as compared to developing countries. In developing countries, the number of sponsors is higher in projects with PE investment without any corresponding increase in project size. This indicates that PE investors have helped in sharing the project risk among a larger group of investors, thereby reducing the risk faced by the individual sponsors.

► We find the impact of Private Equity (PE) investments on infrastructure projects. ► Projects with PE investment were larger than those without PE. ► Large projects that have PE investment successfully achieve financial closure. ► PE investment in infrastructure was more frequently seen in developed countries. ► In developing countries PE helps in sharing project risk between the sponsors.