What is Infrastructure Investment Banking? Why You Should Consider This Career Field

Nguyen Nguyen

What is Infrastructure Investment Banking? Why You Should Consider This Career Field

What is Infrastructure Investment Banking?

According to Goldman Sachs’ Brian Bolster, the traditional infrastructure asset class is associated with “bridges, toll roads, ports,” which produce consistent and low-risk dividends.[1] However, in recent years, the definition of the asset class has expanded to investments that offer higher returns and higher risk such as: “data centers, energy infrastructure, pipelines, and renewable projects.” This infrastructural asset class is capital intensive and has a high barrier to entry, which creates a hyper-competitive market. 

Role of an Investment Banking Analyst in Infrastructure Investment Banking:

The role of an investment bank is to raise capital for governments, companies, and other organizations and is responsible for executing deals on acquisition, merger, or sale, which helps investors to save time and money. The investment bank offers clients many different services or products including mergers & acquisitions, equity capital markets, debt capital markets, and leveraged finance. For analysts working in the infrastructure coverage group, the investment banking analyst must focus on the health of the economy, treasury yield, taxes amount, construction budget, and federal funds rate.

Why Infrastructure Investment Banking?

The global infrastructure market size is valued at over $400 billion, and currently, the supply of attractive projects has fallen short compared to the demand. According to the American Society of Civil Engineers, over the next decade, it is estimated that the U.S. infrastructure requires a $2.39 trillion investment to reverse six decades of under-investment.[2] Additionally, the proposal of the Biden administration’s ‘American Jobs Plan’ will allow for more public investments.[5] Currently, the infrastructure sector has extensive funds that are ready to be deployed as investors raised $97 billion in total equity in 2019, however, investment opportunities have been stagnant in North America.[1] Therefore, the substantial amount of capital combined with the initiative to modernize American infrastructure offers a promising outlook for any future investment banking analyst who is interested in covering the infrastructure asset class.

Top I.B. Infrastructure Deals in 2019 – 2020

According to IJGlobal, an infrastructure journal and project finance magazine, the 2020 Infrastructure and Project Finance League Table Report provides a comprehensive view of the global market. The acquisition of 70% in Saudi Basic Industries Corporation (SABIC), in the Middle East and North Africa region, by the petroleum and natural gas company Saudi Aramco was the largest infrastructure finance deal, having been closed on June 17th, 2020. In March 2019, Aramco had agreed to pay $32.90 a share for 70% of Saudi Arabia’s sovereign wealth fund (PIF) stake in SABIC, having a total value of $69.1 billion.[3] The transaction allowed Saudi Arabia’s government to gain a significant amount of cash for the country’s sovereign wealth fund, which was essential to Saudi Arabia’s economic transformation plan to reduce its oil dependency.

Global Top 10 Infrastructure Finance Deals – Full Year 2020

RankTransaction NameTransaction LocationTransaction SectorTransaction Value ($m)Financial Close Date
1Acquisition of 70% in Saudi Basic Industries CorporationMENAOil & Gas69,06417/06/2020
2Area 1 Mozambique LNGSub-Saharan AfricaOil & Gas22,57801/10/2020
3Amur Gas Processing PlantEuropeOil & Gas21,37403/03/2020
4General Electric RefinancingNorth AmericaRenewables, Power15,00020/04/2020
5Acquisition of CK Hutchison European Tower PortfolioEuropeTelecoms11,77012/11/2020
6Dogger Bank A and B Offshore Wind Farms (2.4GW)EuropeRenewables10,74326/11/2020
7Acquisition of 49% in ADNOC Gas Pipeline AssetsMENAOil & Gas10,14023/06/2020
8Saudi Aramco Additional FacilityMENAOil & Gas10,00007/05/2020
9Glencore RefinancingEuropeMining9,97520/05/2020
10ExxonMobil Bond FacilityNorth AmericaOil & Gas9,50015/04/2020
Source: IJ Global League Tables Full Year 2020

North America Top 5 Deals – Full Year 2020

RankDeal NameLocationSectorValue ($m)Close Date
1General Electric RefinancingUnited StatesRenewables, Power15,00020/04/2020
2ExxonMobil Bond Facility AprilUnited StatesOil & Gas9,50015/04/2020
3ExxonMobil Bond Facility MarchUnited StatesOil & Gas8,50020/03/2020
4Acquisition of Zayo Group HoldingsUnited StatesTelecoms8,40009/03/2020
5JFK International Airport New Terminal 1 P3United StatesTransport8,08715/06/2020
Source: IJ Global League Tables Full Year 2020

Key Professional Investment Bankers 

From the rating agency for top executives, Leaders League, the key professional investment bankers for the energy & infrastructure sector are listed below. For 2021, the leading firms covering energy and infrastructure all belong to the top bulge bracket investment banks. Along with bulge bracket investment banks, elite boutique banks such as Evercore, Jefferies, and Centerview Partners trail closely behind. Among bulge bracket and elite boutique investment banks, Tudor, Pickering, Holt & Co., an investment firm that focuses on the global energy industry, maintains its position as a leading firm. 




Source: Leaders League

Infrastructure Investment Banking League Tables

From the IJGlobal report, the two figures below represent the value amount created from financial advisers globally and in North America. Overall, global infra deals value a total of $1.43 trillion for over 3,000 transactions.[6] While North America infrastructure finance value and deal count figures amount to $450 billion for 932 deals in 2020, which comes in second after Europe.[6] For financial advisers from the top 20 companies, the value amount created a total of $372 trillion globally and $98 trillion in North America.[6] 

If you want to take the initiative and equip yourself with market research, industry knowledge, and your due diligence on the promising infrastructure industry, there are some next steps you can take. Once you build this industry knowledge, it is time to bolster that with fundamental and technical skills that you can apply on the job. There is no better option to gain these professional and technical skills than through the programs offered by Romero Mentoring.

Global:


Source: IJ Global League Tables Full Year 2020

Global:

Source: IJ Global League Tables Full Year 2020

North America:

Source: IJ Global League Tables Full Year 2020

Sources:

  1. Goldman Sachs Briefings. “The Evolution of Infrastructure Investing.” Goldman Sachs. 4 Feb. 2020.
  2. Monier, Stéphane. “Investing in the US’ infrastructure recovery.” Lombard Odier. 19 April, 2021.
  3. Martin, Matthew. “Oil giant Saudi Aramco completes $70 billion takeover of Sabic.” Bloomberg. 17 June, 2020.
  4. Leaders League. “Mergers & acquisitions, Sector: energy & infrastructure – large-cap.”
  5. Briefing Room. “FACT SHEET: The American Jobs Plan.” The White House Briefings. 31 Mar. 2021.
  6. IJGlobal. “IJGlobal League Tables – full-year 2020.” IJGlobal. 02 Feb. 2021

About the Author

Nguyen Nguyen