GLOBAL SUMMARY INFRASTRUCTURE - Week Commencing 15th March MAR 2021 - Fitch Solutions
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
MAR 2021 GLOBAL SUMMARY INFRASTRUCTURE Week Commencing 15th March
Global Summary Infrastructure | 20210315
Contents
Africa.................................................................................................................................................................................................. 4
Infrastructure Investment Supports Double-Digit Construction Growth In Tanzania...................................................................................... 4
Brighter Outlook For Retail Construction In South Africa ............................................................................................................................................ 7
Asia...................................................................................................................................................................................................10
China's 14th Five-Year Plan: Power Transition Toward Cleaner Generation Continues .................................................................................10
Strong Growth In India's Road Sector Despite Slow Pivot To PPP Financing ....................................................................................................15
Europe .............................................................................................................................................................................................18
Electric Vehicle Charging Infrastructure A Key Investment Area For France .....................................................................................................18
Latin America................................................................................................................................................................................21
Public And Private Cooperation Key To Mexico's Road And Bridge Investment Outlook .............................................................................21
Middle East ....................................................................................................................................................................................26
Egypt, Saudi Arabia, The UAE & Morocco Lead MENA Solar Infrastructure Construction ...........................................................................26
North America ..............................................................................................................................................................................30
Stimulus Bill To Provide Boost To US Infrastructure And Building Sectors .........................................................................................................30
© 20
2021
21 Fit
Fitch
ch Solutions Gr
Group
oup Limit
Limited.
ed. All rights rreserv
eserved.
ed.
All information, analysis, forecasts and data provided by Fitch Solutions Group Limited is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch
Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an
affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions
Group Limited.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 3Global Summary Infrastructure | 20210315 Africa Infrastructure Investment Supports Double-Digit Construction Growth In Tanzania Key View • After large-scale infrastructure projects have mostly shielded Tanzania's construction industry from the pandemic's impact throughout 2020, we forecast the country's construction industry to expand by 14% in 2021, up from 8.6% previously forecast. • In the medium term, we expect infrastructure projects, including the standard gauge railway and the East African Crude Oil Pipeline, to keep construction industry growth elevated and we forecast the industry to grow at an average rate of 11.9% per year between 2022 and 2025. • Following the expected completion of the above-mentioned, large-scale infrastructure projects in the medium term, we anticipate a long-term slowdown of Tanzania's construction industry growth rate and forecast the industry to grow at an average rate of 7.7% per year between 2026 and 2030. Short Term: Double-Digit Growth In Tanzania's Pandemic Resilient Construction Industry Tanzania's construction industry has proven very resilient to the impact of the pandemic and we estimate that its construction industry grew by 13.2% in 2020, just slightly slower than pre-Covid-19. As we expect growth to accelerate in 2021, on the back of a global economic recovery, we forecast that Tanzania's construction industry will grow by 14% in 2021, up from 8.6% previously forecast. While, in the absence of meaningful restrictions, the country's overall economy has weathered the pandemic fairly well, the resilience of Tanzania's construction industry, in particular, has been bolstered by construction works on large-scale infrastructure projects. These include Tanzania's standard gauge railway project's phases 1 and 2 between Dar es- Salaam and Morogoro and Morogoro and Makutupora, respectively. The two sections are being constructed by Turkish Yapi Merkezi and Portuguese Mota-Engil. The two phases' estimated cost of USD3.8bn indicates their capacity to substantially support growth in Tanzania's USD10.3bn construction industry (gross added value, 2020 estimate). THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research. fitchsolutions.com 4
Global Summary Infrastructure | 20210315
Tanzania Construction Industry More Resilient Than Regional Peers
East Africa - Construction Industry Value, Real Value, % (2019-2025)
Note: 2019 = 100. e/f = Fitch Solutions estimate/forecast. Source: Fitch Solutions
Medium Term: Large Infrastructure Projects Support Industry Growth
In the medium term, we expect additional large-scale infrastructure projects to keep construction industry growth
elevated and we forecast the industry to grow at an average rate of 11.9% per year between 2022 and 2025. Contracts
for the construction of the standard gauge railway's fifth phase, connecting Isaka and Mwanza, have been awarded to China
Railway Construction Corporation and its subsidiary China Civil Engineering Construction Corporation. We maintain a
positive outlook on the completion of both this section and the other outstanding phases 3 and 4 between Makutopora and Tabora
and Tabora and Isaka, respectively. Although downside risks remain, we also expect that the East African Crude Oil Pipeline,
connecting Uganda's oil fields in the Hoima region with Tanzania's Tanga port, will be constructed over this time period. The
international oil companies involved, French Total and China National Offshore Oil Corporation, are expected to make the
Final Investment Decision on the project in 2021. Bids surrounding the pipeline project, such as for the provision of office space for
the pipeline company, have already been invited. While we maintain a positive outlook on the project's medium-term completion,
strong opposition on environmental grounds and ongoing speculation on the health and whereabouts of Tanzanian President
Magufuli raise the risk that the project may be delayed, with its contribution to Tanzania's construction growth shifting into the long
term.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 5Global Summary Infrastructure | 20210315
Tanzania Long-Term Construction Industry Growth Tapers Off
Tanzania - Construction Industry Value & Real Growth, % y-o-y (2020-2030)
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions
Long Term: Growth Rates Taper Off As Construction Industry Remains In SSA Top 3
Following the expected completion of the above-mentioned, large-scale infrastructure projects in the medium term,
we anticipate a long-term slowdown of Tanzania's construction industry growth rate and forecast the industry to
grow at an average rate of 7.7% per year between 2026 and 2030. As the country's construction industry is forecast to grow
considerably and to retain its position as Sub-Saharan Africa's third-largest behind Nigeria and Ethiopia, base effects will increasingly
weigh on Tanzania's long-term construction industry growth rates. Nonetheless, we expect that the country's positive overall
economic growth outlook, with GDP forecast to grow by 5.6% in 2030, will continue to lend support to its construction industry by
enabling both sustained infrastructure investment and an increased contribution of residential and non-residential building.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 6Global Summary Infrastructure | 20210315 Brighter Outlook For Retail Construction In South Africa Key View • In the short term, medium-scale retail construction projects, such as convenience centres and strip malls, will support retail building growth, as they have proven resilient against the impact of Covid-19 and as essential spending growth will drive retail building demand in rural and sub-urban areas. • In the medium-to-long term, we expect that the recovery of South Africa's high-income bracket will support the construction of large-scale mall developments. • South Africa's logistics profile exceeds the regional average and we expect that this will continue to attract investors seeking to establish a presence in Sub-Saharan Africa's retail sector. We maintain a positive outlook for medium-scale retail construction projects, such as convenience centres and strip malls, as they have proven resilient against the impact of Covid-19 and as essential spending growth will drive retail building demand in rural and sub-urban areas, including South Africa's townships. Like larger mall developments, convenience centres generally count Mass Grocery Retailers, like Shoprite or Checkers, as anchor stores. Unlike larger malls, however, convenience centres usually offer direct access to these essential shops, thereby reducing customers' time spent indoors and mitigating perceived risks of transmission. As they offer essential goods, mass grocery retailers have been excluded from Covid-19 restrictions in South Africa. Their stabilising impact on retail development revenue, as non-essential shops have been affected by Covid-19 restrictions, has shielded convenience centres more than large mall developments, where they account for a smaller portion of overall revenue. These factors will likely continue to support investment in small to medium-sized retail developments, as investors will expect customers' preferences to persist in the short to medium term. Owing to the gradual nature of income growth, combined with a nascent economic recovery, South African households will continue to spend more on essential items over the coming years. We at Fitch Solutions forecast spending on essentials to reach ZAR2.4trn (USD90.3bn) by 2024, up from ZAR1.8trn (USD71.4bn) in 2021, growing at an average of 7.5% per year over the 2021-2025 period. As the growth of essential spending will spread across South Africa's general population, rather than the country's high-income bracket, we expect a rise of small to medium-sized retail developments in rural and sub-urban areas, including townships, and outside the affluent areas targeted by large-scale mall projects. THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research. fitchsolutions.com 7
Global Summary Infrastructure | 20210315
Essentials Spending Growth Supports Retail Construction Demand
South Africa - Essential & Non-Essential Spending, ZARbn (2020-2025)
e/f = Fitch Solutions estimate/forecast. Source: Statistics South Africa, Fitch Solutions
In the medium-to-long term, we expect that the recovery of South Africa's high-income bracket will support the
construction of large-scale mall developments. We estimate that the number of households with a disposable income
exceeding USD10,000 has fallen from over 5mn in 2018 to under 4mn 2020, significantly shrinking the consumer base that
supports demand for mall developments in South Africa. In the short term, this will weigh on investment in new mall construction
projects, as existing buildings will satisfy recovering demand for non-essential retail. In the medium-to-long term, however, South
Africa's fundamentals will support a rebound of investment in large-scale retail construction projects targeting the country's affluent
areas in particular. We at Fitch Solutions expect that a gradual economic recovery will lift the number of high-income households to
an all-time high by 2025. The country's urbanised population is youthful and many will enter employment and enjoy increasing
levels of disposable income. Many South Africans also possess high brand awareness and are familiar with modern retail formats.
This will support continued spending growth and generate new demand, particularly for those international brands and retailers
targeted by mall developments. We note, however, that the extremely high youth unemployment rate will continue to constrain
overall demand for non-essential goods and poses a risk for our positive medium- to long-term outlook for large-scale retail
construction growth.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 8Global Summary Infrastructure | 20210315
High-Income Group To Drive Mall Developments
South Africa - Households With Disposable Income Of USD10,000-Plus, '000 & Non-Essential Spending, USD, % y-o-y (2016-2025)
e/f = Fitch Solutions estimate/forecast. Source: Statistics South Africa, Fitch Solutions
South Africa's logistics profile exceeds the regional average and we expect that this will continue to attract firms
seeking to establish a presence in Sub-Saharan Africa (SSA)'s retail sector, supporting retail construction growth in
the country. The country's good road networks and robust port infrastructure help facilitate the movement of consumer goods
through strong transport links, the absence of which is a key factor challenging retail expansion in many other SSA markets and
mitigating demand for retail construction across the region. While Covid-19-related supply disruptions and rising costs of shipping
containers have elevated import costs in South Africa, we expect that, in the medium term, trade costs will likely become more
competitive and the procedures surrounding the export of goods increasingly streamlined with enhancements to infrastructure
and regional integration. South Africa’s utilities profile is regionally competitive as the country boasts the highest energy-intensity
levels in SSA, which have helped to support industrial and commercial sector development. These factors underpin South Africa's
strong 57.8 logistics risk score in our proprietary Operational Risk Index, as the country comfortably outperforms SSA's regional
average of 32.1. We thus expect that South Africa will maintain its status as a gateway to the region and its higher-risk markets.
Nonetheless, we note that South Africa's electricity profile will remain under significant pressure in the near term. The frequency of
blackouts can significantly disrupt business operations and the need for costly backup generators will adversely impact investment
in South Africa's retail construction sector.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 9Global Summary Infrastructure | 20210315
Asia
China's 14th Five-Year Plan: Power Transition Toward Cleaner Generation
Continues
Key View
• The 14th Five-Year Plan (FYP) had limited mentions about decarbonising the energy sector specifically, although it still remains in
line with our existing views and forecasts for the power and renewables sector in China.
• Emission reduction targets will continue to support growth in alternative low-carbon power generation segments, while
consolidating its coal power sector. That said, any substantial shift away from coal generation will occur only in the longer-term,
beyond our forecast period.
• We expect nuclear to be a key decarbonisation strategy, and for China to maintain its robust growth momentum for the sector in
line with the strong regulatory support in place.
• Improvements toward grid infrastructure will also aid with decarbonisation efforts by facilitating the integration of more
intermittent renewables generation.
While we initially expected climate considerations to be a key policy focus of the 14th Five-Year Plan (FYP), which
was released on 12th March 2021 by China’s National People’s Congress, there were limited mentions about
decarbonising the energy sector specifically. The FYP, which runs from 2021-2025 did include targets for energy intensity and
carbon intensity, but both areas have already been established prior and merely reaffirmed. The FYP has also proposed to increase
the share of ‘non-fossil energy’ in total energy consumption to 20% by 2025, although this remains non-binding. That said,
we expect more detailed targets to be announced in the sector-specific plans that will be released in the later half of this
year. Broadly, the 14th FYP still remains in line with our existing views and forecasts, and we highlight some of the
key features and implications on the power and renewables sector.
CHINA'S KEY FYP TARGETS
14th FYP 13th FYP
GDP Growth Rate No Specific Target 6.5%
Carbon Intensity Reduction (per unit of GDP) 18% 18%
Energy Intensity Reduction (per unit of GDP) 13.5% 15%
Share of Non-Fossil Fuel In Energy Consumption 20%* 15%
Share of Coal Consumption In Energy Consumption No Mention Yet 58%
*Non-binding. Source: 14FYP Draft, Various News Sources, Fitch Solutions
Emission Targets A Slow But Steady Race
The 14th FYP has reaffirmed China’s targets to peak carbon emissions by 2030, in accordance with the country's intended
nationally determined contribution target (INDC), and to achieve carbon neutrality by 2060. We have previously highlighted how this
will accelerate China’s power and renewables growth transition trajectory, as the emission reduction targets will
continue to support growth in alternative low-carbon power generation segments, while consolidating its coal power
sector. This continues to present a significant downside risk to coal-powered generation growth, which will be one of the first
sectors that the government will work on to achieve these emission targets.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 10Global Summary Infrastructure | 20210315
In line with this, the Ministry of Ecology and Environment has requested for provincial governments to formulate a ‘peak emission
action plan’ along several indicators including – energy mix targets and carbon emission caps across several key sectors by April
2021.This will be formulated into a nationwide plan by early 2022. China has also launched its nationwide Emissions Trading
Scheme (ETS) in February 2021 and targets trading to begin by mid-2021, although it currently only covers thermal power plants
that exceeded emissions of more than 26,000 mt/year in any year over 2013-2019.
China To Transition Toward Cleaner Generation Sources
China - Power Generation by Fuel Type, as % of Total
e/f = Fitch Solutions estimate/forecast. Source: EIA, National Sources, Fitch Solutions
We believe that any disruptions from the imposition of a nationwide carbon price in China is likely to be muted over
the short to medium term as we remain cautious over the initial efficiency of the market, as a number of structural
issues we noted at its inception remain. The planned ETS contains risks to liquidity, particularly as the government looks set to
ban financial institutions from trading in the market. In addition, the present nationwide-trial only covers a small scope of
companies, and current compliance obligations are capped at 20% of verified emissions above the free allowance, so the impact will
remain quite limited. Variation across different existing pilot projects, and generally low carbon trading prices, will also weigh on its
effectiveness. There also remains concerns over the credibility and scope of nationally aggregated emissions data in China, and lack
of adequate and transparent legal weight behind the ETS.
Over the more medium to longer term, we expect the ETS rules to tighten and also gradually expand in coverage to include more
sectors. The pace of this happening will in part depend on the strength of the post-pandemic recovery, as policymakers attempt to
balance growth considerations with decarbonisation goals. Technological change will also be a significant factor, with
decarbonisation likely to occur at a faster rate if there are substantial breakthroughs that improve the cost competitiveness of
alternative generation sources, such as batteries or hydrogen.
Coal Question Remains Unanswered
While we maintain our relatively downbeat outlook for coal-fired power in China, we believe any substantial change
will likely occur only in the longer-term, beyond our forecast period. We note that the government has already appeared to
soften its stance on reducing coal generation since late 2019, in line with increasing calls for energy security. Unlike its earlier FYPs,
the latest draft does not indicate an explicit commitment to shift away from coal. In fact, a coal consumption (as share of total
energy consumption) target was dropped this time, and the latest FYP indicates to “promote the clean and efficient use of fossil
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 11Global Summary Infrastructure | 20210315
energy such as coal” and “reasonably control the scale and development pace of coal power construction”, which shows an
ongoing need for coal generation. Coal power has also seen a resurgence in recent years, which stems in large part from a ramp up
in power demand from China's heavy industry sectors, which received financial support from the Chinese government in fiscal
stimulus measures.
Coal Has Been Key To Meeting Power Demand Surges
China - Power Consumption & Coal Generation Growth, 2000-2022f
e = Fitch Solutions estimate. Source: EIA, National Sources, Fitch Solutions
Given that the government is working towards peak carbon emissions in 2030, there remains scope for coal capacity to increase in
line with a robust project pipeline. According to Global Energy Monitor, 73.5GW of coal-fired power projects were proposed across
2020, and China as a whole approved nearly 37GW of coal-fired projects. We now expect China to have approximately more than
250GW of coal-powered capacity in the pipeline. Furthermore, the China Electricity Council (CEC) recommended extending the
cap for coal-fired capacity to 1,300GW by 2030, an increase of 200GW from the existing cap of 1,100GW. As the CEC represents
Chinese utilities, the recommendations could allow for 300-500 new coal plants in the market over the coming decade, and
highlights continued appetite for coal. Furthermore, most of the government's efforts to reduce coal-fired generation remain largely
hinged on boosting expansion of alternative generation segments rather than restricting coal directly. These efforts will also be
undermined by vested interests of provincial governments who continue to show a preference for coal generation.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 12Global Summary Infrastructure | 20210315
Coal To Still Remain Key Generation Source
China - Power Generation by Fuel Type, as % of Total, 2030f
f = Fitch Solutions forecast. Source: EIA, National Sources, Fitch Solutions
Nuclear Power Key Decarbonisation Strategy
We expect China to maintain its robust growth momentum for the nuclear power sector, in line with the strong
regulatory support and commitment in place. As part of achieving its target for 20% share of ‘non-fossil energy’ in total energy
consumption, there were broad mentions in the 14th FYP to “accelerate the development” of wind, solar, hydropower (particularly
pumped-hydro), nuclear generation and energy storage technologies across eight key development zones, three of which are an
extension of ongoing projects from the 13th FYP. That said, details remain vague beyond this statement. The only fuel that was
specifically highlighted was in nuclear generation, which shows its priority over the coming years. The government
now aims to reach 70GW of nuclear capacity by 2025, and will look to develop nuclear power in a “proactive and orderly” manner.
Our nuclear capacity forecasts stand at slightly over 65GW by 2025, which is relatively aligned with their target.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 13Global Summary Infrastructure | 20210315
Robust Nuclear Growth To Offset Thermal Reliance
China - Installed Nuclear Capacity, MW and Generation, TWh
e/f = Fitch Solutions estimate/forecast. Source: EIA, National Sources, Fitch Solutions
Nuclear power is increasingly propelled as a clean energy source, and China has reiterated its ambitions and commitment towards
the use of nuclear power to meet with its Paris Agreement Climate goals, particularly now as they move towards carbon neutrality.
China is also looking to explore the use of nuclear power for more applications such as district heating or seawater desalination as
well. China is also looking to develop new nuclear technologies, most notably in the high-temperature gas-cooled reactor (HTR-PM)
as well as other small module reactor (SMR) designs. We note that China has already been actively investing in the research and
development of cleaner, more efficient nuclear power production, and has plans to develop the world’s first large-scale thorium-
powered molten-salt reactors. We believe that these initiatives will support the continued expansion of its nuclear power sector, as
the use of more domestically developed reactors will further cement its strong, local nuclear supply chain.
Modernising the Energy System With Improved Grid Infrastructure
The 14th FYP also highlighted improvements for its grid infrastructure, with the expansion of more ultra-high
voltage (UHV) transmissions, and integration of smart grid technologies, which are in line with our earlier
expectations. The inclusion of UHV transmissions has been a key investment focus in the working report of the 2020 National
People’s Congress to decarbonise. We believe its success will be a crucial step for the country to transit away from carbon-intensive
power production as it facilitates the integration and higher utilisation of cleaner, renewable sources. Concurrently, we expect China
to remain a global leader in smart grid technologies, with technologies that can support smarter load management and better
support the integration of renewables generation, and a further expansion of the sector without jeopardising energy security.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 14Global Summary Infrastructure | 20210315
Strong Growth In India's Road Sector Despite Slow Pivot To PPP
Financing
Key View
• The road sector will be a solid driver of growth in India, boosted by government initiatives to build a robust, nationwide network
of highways.
• We expect measures to increase private sector participation in road building, such as steps to make public-private partnership
financing more attractive, although we note a reliance on more traditional methods such as the Hybrid Annuity Model and
engineering, procurement and construction contracts.
• We expect support for reform to the National Highways Authority of India to materialise, as the body currently faces criticism of
its project management.
Driven by robust government funding, the Indian road sector will be a key driver of transport infrastructure
development in India over the next decade, with the road sector to see annual average real growth of 6.7% between
2021 and 2030. Using data from our Infrastructure Key Projects Database, we highlight that the road and bridge projects account
for 57% of the total number of projects included in India’s transport project pipeline. This large pipeline of projects reflects the
government’s aim to modernise Indian highways and upgrade the quality of roads, with government projections pointing to
USD270bn of spending over the next five years as part of the country’s National Infrastructure Pipeline. At the centre of the
government’s efforts is the importance to the country of its road network, with roads being the dominant transport mode in India’s
supply chains, accounting for the primary method of transportation of 85% of cargo transported within India. A key example of the
government’s ambitious road plans is the USD83bn Bharatmala Pariyojana Plan, which began in 2015 and aims to construct
34,800km of road. Whilst we note that some of the ambitious targets may not be met, there is clear government support behind
this programme, and the National Highways Authority of India (NHAI) has successfully issued engineering, procurement and
construction (EPC) and public-private partnership (PPP) contracts as part of this programme.
Road Sector Key Driver Of Growth In Transport Sector
India - Transport Infrastructure Value & Growth (2020-2030)
e/f = Fitch Solutions estimate/forecast. Source: National Sources, Fitch Solutions
We expect that the central government will prioritise private investment within its road infrastructure development
efforts, with opportunities for more PPP financing, as opposed to more traditionally-used contract types including
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 15Global Summary Infrastructure | 20210315
EPC and Hybrid Annuity Mode (HAM) contracts. In recent years, India’s government has looked to boost private investment in
road construction and operation, with a number of PPP projects launched. From our Infrastructure Key Projects Database, which
considers projects worth over USD30mn, we highlight that 34% of road projects that began construction in 2020 and 2021 are
financed by PPPs, in comparison to 26% of road projects in 2018 and 2019. Further, the use of PPPs is well-established elsewhere in
the transport sector, with the Ahmedabad-Mumbai High Speed Railway Project and the Hyderabad Metro serving as examples of
this. In our view, this trend is likely to continue, particularly as the government appears to be considering a shift away from HAM
contracts, following a 2019 suggestion by the Prime Minister’s Office to the NHAI that public funding of road infrastructure, and by
extension the reliance on the HAM model, has become financially unviable, along with the 2019/20 budget which saw a 2%
reduction in funds allocated to the NHAI. We therefore expect that the commonly used HAM will be phased out, in favour of PPP
contracts. Currently, HAM contracts in the transport sector allow for the government to contribute 40% of the project cost in the
first five years, with the remaining payments to be made based on the performance of the developer. This has faced criticism from
private investors, which have faced delays in achieving financial closures, often leading to delays in project execution. HAM
developers have further struggled during the Covid-19 pandemic as cash flows have been negatively impacted, leading to less
favourable lending rates. Declining profitability has made HAM projects less desirable to private investors, further increasing the case
for a shift to PPP financing. However, we note that in June 2020 the central government continued as usual with the message that
the government would continue to share the burden of risks in highway projects through the use of HAM and EPC projects. This is
in contrast to the way in which the government has more widely encouraged the use of PPPs. Ultimately, we note that despite this
contradiction, there is a consistent need for creating a more welcoming business environment for PPPs and to reduce the burden
on the central government to deliver India’s USD270bn road pipeline.
Improvements Needed To Encourage PPP Financing
Indian - Investment Grid: Planned Projects In Transport Sector By Procurement Type
Source: Indian Investment Grid, Fitch Solutions
Despite an expansive 2021 budget of INR1.1trn for roads and highways, we expect that repeated criticisms of the
management of NHAI projects will lead to reforms in the road sector. Amid the backdrop of increasing land costs, there has
been an increase in reports of project cancellations or reductions throughout 2019 and 2020 related to the incompletion of land
acquisitions. For example, the USD158mn National Highway 34 Project in West Bengal, which in August 2020 entered its final phase
of construction has faced significant challenges in being completed. Due to disputes in land-acquisitions and law and order
problems in North Bengal, the project will now begin in a different location and 37km of the road remains unaccounted for,
meaning the road will not span four lanes for the entirety of the road as originally planned. Further, NHAI’s debt has been a
consistent problem for the central government, most recently in March 2021 with a Parliamentary panel expressing displeasure at
the NHAI’s INR97.1trn of debt servicing liability. While there has been little indication of what this means for the future of NHAI, there
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 16Global Summary Infrastructure | 20210315 is potential for issues to arise with budget cuts, leading to a slower pace of project implementation that will impact projects that are reliant on the NHAI. We expect that these problems will lend support behind the Union Minister’s goal of reforming the NHAI through operational and structural changes, designed to tackle the issue of slow decision making and inefficiencies within the organisation. This demonstrates a concerted effort to improve the state’s road sector and provides weight to our wider view that Indian road infrastructure will see greater attention amid a pivot to greater private investment. THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research. fitchsolutions.com 17
Global Summary Infrastructure | 20210315
Europe
Electric Vehicle Charging Infrastructure A Key Investment Area For
France
Key View
• France will sustain its existing position as one of the most attractive markets for investment in EV charging infrastructure, as
efforts to permanently decarbonise the transport sector create widespread opportunity for investment in this nascent
area alongside growing EV uptake.
• Supporting this outlook, our Autos team forecasts France's EV fleet to increase by a substantial 1184% from 2020 to 2030 and
exceed 5.2mn EVs by the end of the period.
• Efforts at the EU-level, particularly the allocation of Next Generation EU recovery funding, will offer an additional degree of
incentives for EV uptake in France and thus for greater investment in EV charging infrastructure.
France will emerge as one of Europe’s most attractive markets for investment in electric vehicle (EV) charging
infrastructure, with efforts to decarbonise transport offering sustained opportunity for establishing a
comprehensive network of charging points. Greater consideration of the emissions entailed in the use of petrol and diesel
vehicles, both amongst policymakers and the wider public, will see both cohorts move towards viewing EV use as a preferable
choice of transport, alongside other low-emission modes including public transport and micro-mobility devices. With 46,045 public
EV charging points at the time of writing, according to the European Alternative Fuels Observatory, France hosts the second-highest
number of public EV charging points of any EU member state, behind the Netherlands’ 66,461 and just ahead of Germany on
43,633. Within this, 42,000 charging points charge at or below 22kW, with 4,045 capable of charging above 22kW and thus deemed
‘fast charge’.
Growth In Number Of EV Charging Points To Accelerate
France - Number Of Public EV Charging Points By Charge Speed (2010-2020)
Note: Normal charge < or = 22kW; fast charge > 22kW. Source: European Alternative Fuels Observatory, Fitch Solutions
Led by the Ministry of the Ecological Transition, the French government is aiming to have 100,000 public EV charging points
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 18Global Summary Infrastructure | 20210315
operational by the end of 2022, with 7.0mn public and private EV charging points operational by 2030. France’s ADENVIR
programme, launched in 2016, offers the overarching framework for incentivizing the deployment of both public and private EV
charging infrastructure. Specifically, ADENVIR offers support to entities seeking to install EV charging points by covering up to 60%
of the supply and installation costs, with the maximum aid amount ranging from EUR2,100 to EUR9,000.
As with other European markets, the deployment of EV charging infrastructure currently sees local authorities, publicly-owned
utilities and other dominant utility companies spearhead initial investment, before nationwide networks reach a critical mass
capable to attract more widespread private investment. France-based Engie, EDF and Vinci (VINCI Autoroutes) have established
themselves as key providers of EV charging points, while a number of automakers such as Tesla, Renault and Volkswagen each
maintain EV charging points throughout France. Retailers also face opportunities to deploy EV charging points, with the likes
of Carrefour and Lidl having already installed charging points at many of their locations.
We also highlight the greater expansion of energy majors into owning and operating EV charging infrastructure as a long-term
industry trend, in their efforts to diversify their operations away from their current reliance on widespread internal combustion
engine vehicle ownership. Already, the likes of BP, Total and Shell provide EV charging points in France - BP under
its Chargemaster subsidiary, Total as Total EV Charge and Shell as Shell Recharge - with their existing service station networks
offering an obvious location for the widespread rollout of EV charging points. Providing prominent, widespread EV charging points
remains pivotal to alleviating any public concerns regarding the viability of EV ownership and so-called ‘range anxiety’, therefore
service station operators will play a key role in the deployment of EV charging infrastructure and ultimately persuading consumers
on this viability question.
Growing Share Of EVs Within Domestic Vehicle Fleet
France - Battery & Plug-In Hybrid EV Fleet, % of total domestic vehicle fleet (2019-2030)
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions
Our Autos team’s forecasts for EV uptake in France inform our upbeat expectations for this nascent area of
investment, with a bullish outlook for EV adoption across the decade highlighting the scale of the growth potential
offered by concurrent investment in EV charging infrastructure. Currently, our Autos team at Fitch Solutions forecasts
France’s battery and plug-in hybrid EV fleet to account for a combined 13% of France’s total domestic vehicle fleet in 2030, up from
just 1% during 2020. In absolute terms, this will mean 5.2mn EVs on the road in 2030, up from 407,000 in 2020.
Offering further upside to this outlook, France’s existing commitments to phase-out the sale of petrol and diesel vehicles will add
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 19Global Summary Infrastructure | 20210315
further impetus to the need to deploy sufficient EV charging infrastructure. France committed in 2017 to ban the sale of petrol and
diesel vehicles by 2040, while authorities in Paris announced in late-2016 their intention to ban all diesel vehicles from the capital by
2025.
Given the European Union’s (EU) overarching aim to realise net-zero greenhouse gas emissions by 2050, and thus
the need to permanently decarbonise transport, policy at the EU-level will offer additional support for investment in
EV charging infrastructure in the long-term. The EU's European Green Deal, along with the subsequently proposed 'Next
Generation EU' recovery funding, will continually provide impetus for the proliferation of EV uptake, amid the broader need to
permanently decarbonise transport on the route towards carbon neutrality. Alongside investment in renewable energy assets and
energy-efficient building stock, low-emission travel is a primary pillar of the EU's investment ambitions on its intended path towards
carbon neutrality by 2050, therefore efforts by the EU and its associated institutions to attract investment in EV charging
infrastructure will remain high. Under the Next Generation EU recovery funding, member states are required by the European
Commission to spend a minimum of 37% of their respective grant allocations on climate change-related investments. We,
therefore, expect France’s spending plans for the recovery funding, as with numerous other member states, to feature EV charging
infrastructure as a priority area for investment. In particular, this will be due to the attractiveness of spending on smaller-scale, more
immediate projects such as EV charging points to boost near-term economic growth, relative to infrastructure projects that would
require a longer timeframe for completion.
Proportion Of EVs To Charging Points Progressing In Line With EU Average
EU & France - Number Of EVs Per Charging Point
e = Fitch Solutions estimate. Source: ACEA, EAFO, Fitch Solutions
As mentioned, France currently hosts the second-highest number of public EV charging points of any EU member state.
Considering the number of EVs per charging point, the more-informative metric for country comparisons, France featured 8.8 EVs
per charging point in 2020 below the EU’s 9.5 on average. Currently, the EU recommends that member states work to achieve a
ratio of 1 EV charging point for up to 10 EVs, according to a 2014 Directive. Crucially, we note that this ratio has risen for France from
5.2 in 2015, indicating that the current rate of deployment of public EV charging points is failing to keep pace with EV uptake. In the
EU’s case, this ratio similarly stood at 5.2 in 2015 and has since similarly risen, which in our view further highlights the need for
concurrent investment in EV charging infrastructure across the bloc to keep pace with the ongoing rapid EV uptake. Again, the ratio
of EVs per charging point is the most relevant metric for identifying markets most in need of investment, with a higher ratio
indicating a greater need for investment.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 20Global Summary Infrastructure | 20210315 Latin America Public And Private Cooperation Key To Mexico's Road And Bridge Investment Outlook Key View • Mexico’s road and bridge infrastructure will be a key focus of investment within Mexico’s transport infrastructure sector over the coming decade, spurred by the economic importance of the country’s road network and significant demand for improvements in road quality. • Public and private investment will both play roles in road and bridge construction as well as maintenance and operation, with expectations of cooperation between the government and private firms underpinning our outlook for the sector. • Among potential targets of road investment, we expect the need to improve road links between Mexico City airports will be a priority in the country the next several years, with a particular focus on improving links to the new Felipe Ángeles International Airport. Road and bridge infrastructure development will be a considerable focus of transport infrastructure investment in Mexico over the next decade, with numerous projects set to advance. Mexico is home to a well-developed network of roadways throughout most of the country, a characteristic reflected in the country’s high score on the road connectivity component of the Infrastructure Pillar of the World Economic Forum’s 2019 Global Competitiveness Report. In this component, Mexico holds a score of 90.3 out of 100, making the market the 22nd ranked market globally. The quality of Mexico’s road infrastructure is not as strong, however, with roadways in rural areas in particular in significant need of improvement. In the road infrastructure quality component of the Global Competitiveness Report, the country scores just 58.4 out of 100, the 49th ranked market globally. In line with a need to improve road infrastructure, the market is home to a considerable pipeline of road and bridge infrastructure projects. According to data from our Infrastructure Key Projects database which includes projects involving at least USD30mn in value, the market is home to 69 road and bridge projects either in pre-construction or construction phases, accounting for more than half of all transport infrastructure projects in Mexico’s project pipeline. Road and bridge projects included in Mexico’s pipeline involve a combined investment of 10.8bn, the second highest value of any of sub-sector following the rail sub- sector, with road and bridge projects accounting for 19.2% of the combined value of transport infrastructure projects. In our view, the market will see a strong realisation of planned projects, spurred by federal and state government support as well as private investment. The advance of road and bridge projects will in turn underpin the recovery of road and bridge construction, which we forecast will see annual average real growth in industry value of 3.7% y-o-y between 2021 and 2025 and of 2.2% y-o-y between 2026 and 2030. This will follow a contraction of 17.7% y-o-y in 2020 as the Covid-19 pandemic weighted heavily on project development. THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research. fitchsolutions.com 21
Global Summary Infrastructure | 20210315
Project Pipeline To Underpin Rebound
Mexico - Road & Bridge Infrastructure Industry Value & Real Growth (2020-2030)
e/f = Fitch Solutions estimate/forecast. Source: Camara Mexicana de la Industria de la Construction, Banco de Mexico, Fitch Solutions
The road and bridge sector will remain a key area of public and private sector cooperation, with PPPs and
concessions accounting for a sizeable share of investment into the sector. Given the relative importance of road
infrastructure in Mexico, representing the most important transport mode within the country both in terms of passengers and
goods, we expect the sector will remain a priority of government spending over the coming years, supporting project activity. Road
and bridge construction will be a key focus of federal infrastructure funds in 2021 with the budget of the Secretariat of
Communications and Transport in 2021 including considerable funding for road and bridge projects including MXN5.2bn
(USD250mn) in funding from the SCT’s central budget for economic investment projects, MXN11.7bn (USD570mn) for road
projects in funding for the SCT’s central budget for maintenance project. Additionally, we note funding increases for key
dependencies of the SCT linked to road infrastructure development and maintenance. Among these the Dirección General de
Conservación de Carreteras, which will receive MXN8.2bn (USD400mn) in investment funding in 2021, up from MXN775mn
(USD38mn) in 2020, and the Dirección General de Carreteras, set to receive MXN3.8bn (USD185mn) for funding for investments, up
from MXN550mn (USD27mn) assigned in 2020.
Along with significant public government funding, however, we also expect private investment will also play a significant role in road
and bridge development, through the continued use of PPPs and concessions in road development, maintenance and operation in
the country. The López Obrador government has been less willing to launch new federal road and bridge projects as PPPs, a
position highlighted recently by the decision to cancel a tender for a planned road PPP which would have seen a private group
undertake the maintenance, repair and operation for 10 years of 523km of roadways in southeastern Mexico (Southeast Package or
Paquete Sureste), which will now be kept under public control, with operations to be undertaken by state agency Caminos y
Puentes Federales (Capufe). That said, recent months have also seen considerable efforts by the government to boost private
investment in the roads sector and more broadly in the infrastructure sector in other ways, in particular plans to support the
advance of two large packages of infrastructure projects including numerous roads announced in late in an agreement between
the government and Mexican business federation Consejo Coordinador Empresarial (CCE). The two packages, announced
respectively on October 5 2020 and November 30 2020, involve a combined 68 projects and MXN526bn (USD26bn) in investment,
with the majority of funding for each project to come from the private sector according to the agreement. Road and bridge projects
appear prominently among the projects included in the infrastructure packages, with the two packages including 43 road or
highway projects, with 27 included in the first package and 16 in the second package. In total, road and bridge construction projects
included in the two packages account for a combined MXN201bn (USD10bn) in investment, 38.2% of total investment considered
in the two infrastructure project packages.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
fitchsolutions.com 22You can also read
