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How Important is Infrastructure For Indian Economy And Expectations of Future Growth?

Over the past few years, the investor interest in accessing high-quality brownfield assets to deploy capital has been a natural first step taken by both large and small players entering the Indian markets.

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Given the constrained balance sheets of many Indian businesses, especially infrastructure companies, has meant that carving out and monetisation of assets to reduce debt was a natural progression in the market. Pixabay

BY: TAPONEEL MUKHERJEE

Given the size of the Indian economy and expectations of future growth, infrastructure remains a crucial area of focus for both financial and strategic investors alike. As capital flow gradually picks up in the sector over the last five years and operational assets are bought out, the obvious question is: What next in terms of infrastructure projects?

The last few years have seen a significant focus from a plethora of global infrastructure investors in India, especially in the transportation and energy sectors. The primary strategy has been buying out companies or a portfolio of operational brownfield projects. Sellers of such projects have been motivated by the need to reduce their debt and in some cases carve out non-core assets. Buyers of brownfield assets have been motivated by getting access to assets that are operational, thereby giving them a foothold in the Indian market.

However, as brownfield assets see more capital pursuing them, we see two trends emerging. Firstly, high-quality brownfield assets for sale are fewer now, given the capital inflow over the last few years. Secondly, given the increased competition, from an investor’s perspective, due to the yield compression in brownfield assets, the returns available may not be commensurate to the underlying risk. Therefore, the need for investors to move beyond brownfield assets is one that needs attention.

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The capacity of investors and the strategies adopted to deal with non-brownfield projects will lead to increased infrastructure investments and will expedite infrastructure creation. Pixabay

For India, focused investors such as pension funds and private equity funds, the requirement to look beyond brownfield infrastructure assets was in the works for a while. Mainly, extending further out on the risk curve is required to deploy more capital to work. Beyond brownfield assets, investors must now consider assets that aren’t necessarily purely greenfield but are under-construction and close to completion.

The move towards under-construction projects will allow investors access to a larger pool of assets to choose from. Given the still strained balance sheets in the infrastructure sector, opportunities exist that need to be tapped into. The move towards assets that aren’t operational or a portfolio of such assets is a natural progression in the market.

The vital question is the valuation of such assets. Fundamentally, for distressed projects and under-construction projects, there is a potential for unlocking value by investors accessing such projects. Acquiring projects suffering from either time and cost overruns, or both for that matter, at attractive valuations is the key. The seller of such assets can unlock much-needed capital, and the users of such assets can hope to access the much-needed infrastructure sooner.

In effect, investors will have to be more “hands-on” with which to approach under-construction projects. The need for a more operationally intensive plan will require financial investors to team up with operator companies. Such partnerships will take a variety of forms ranging from joint ventures to the utilisation of financial vehicles that allow for partnerships between operators and capital providers.

For operational industry players such as integrated energy businesses, an opportunity exists wherein they can potentially utilise their operational expertise to get an edge in the infrastructure market.

The recent deal in which Hindustan Construction Company (HCC) monetised a pool of arbitration awards is a variant of this strategy, and a deal that displays how investors can unlock value through moving higher on the risk curve. In this particular case, HCC gets access to much-needed liquidity and the investors, the Blackrock-led consortium, get an opportunity to utilise their long-term capital to generate investment returns.

money
For India, focused investors such as pension funds and private equity funds, the requirement to look beyond brownfield infrastructure assets was in the works for a while. Pixabay

Over the past few years, the investor interest in accessing high-quality brownfield assets to deploy capital has been a natural first step taken by both large and small players entering the Indian markets. Given the constrained balance sheets of many Indian businesses, especially infrastructure companies, has meant that carving out and monetisation of assets to reduce debt was a natural progression in the market. However, in a multi-decade time horizon, given India’s vast infrastructure needs, a move higher on the risk curve towards under-construction projects to be able to deploy more significant amounts of capital is only natural.

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From an investor perspective, accessing non-brownfield projects implies dealing with three primary issues around land acquisition, construction risk and an effective infrastructure-linked ecosystem. The immediate investment focus must shift towards projects or portfolios of projects where risk linked to the latter two must be undertaken, while land acquisition issues have primarily been resolved.

The capacity of investors and the strategies adopted to deal with non-brownfield projects will lead to increased infrastructure investments and will expedite infrastructure creation. Investors and the government will have to keep a keen eye on any policy changes that might be needed as the market evolves with increasing amounts of capital looking towards incomplete and yet attractive infrastructure assets. (IANS)

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No Amount of Money Can Restore Families and Institutions that Were Upended by Prescription Painkillers, Heroin

But for public officials in Akron, no amount of money will restore the families and institutions that were upended by prescription painkillers

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Money, Families, Institutions
Eddie Davis walks past tributes on his way to his son Jeremy's gravestone, who died from the abuse of opioids, July 17, 2019, in Coalton, Ohio. VOA

The tentative settlement involving the opioid crisis and the maker of OxyContin could mean that thousands of local governments will one day be paid back for some of the costs of responding to the epidemic families.

But for public officials in Akron, no amount of money will restore the families and institutions that were upended by prescription painkillers, heroin and fentanyl.

“The overwhelming sense of hopelessness that took over this community in 2016, you can’t monetize that,” former Assistant Summit County Prosecutor Greta Johnson told lawyers in a deposition in January. “Every single day the newspaper was reporting on the overdose death rates. You could not go into a community setting where there were not weeping mothers talking about their children.”

OxyContin maker Purdue Pharma struck a proposed deal Wednesday with about half the states and thousands of local governments over its role in the crisis. But criticism by several state attorneys general clouded prospects for an end to litigation against the company and the family that owns it.

Money, Families, Institutions
Narcotics detective Will Pfeiffer displays an evidence bag containing methamphetamine before it is destroyed in Barberton, Ohio, Sept. 11, 2019. Pixabay

Some people in Akron say the once-proud rubber capital of the world will never be the same. Hundreds of overdose deaths shattered families, orphaned children, exhausted first responders and drained government resources. At one point, city officials needed a mobile morgue to house all the corpses.

Ohio’s fifth-largest city, home to NBA legend LeBron James, and surrounding Summit County, population 540,000, were scheduled to be the first of some 2,000 governments scheduled to go to trial against drugmakers next month. Local officials sought damages from the manufacturers they hold responsible.

Overdose deaths — which hit 340, or nearly one a day, in 2016 — took a toll on the county medical examiner’s budget and her staff. At the height of the scourge, they often had to perform two or more drug-related autopsies in an average day.

Dr. Lisa Kohler, the county’s chief medical examiner, recalled “the mental stress of dealing with repeated cases of having multiple deaths in the same families over a period of weeks to months.”

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The calls about overdose deaths were constant, and “it just felt like it was never going to stop,” Kohler said.

The need for the mobile morgue laid bare the devastating extent of the crisis. The trailers were originally intended for a mass-fatality event, such as a natural disaster, plane crash or terrorist attack.

Akron Fire Chief Clarence Tucker said it sometimes felt as if his community was under attack.

“We handle 45,000 calls a year, and it just kept climbing and climbing,” he said. The fire department had to accelerate maintenance schedules on vehicles, mobilize off-duty paramedics and cope with staff burnout.

Money, Families, Institutions
The tentative settlement involving the opioid crisis and the maker of OxyContin could mean that thousands of local governments will one day be paid back for some. Pxabay

“You can get a call someone has overdosed and you get there, you can bring them back with Narcan. Then you’ll go to the same address in the afternoon,” Tucker said. “Or you go to that address in the morning and the two parents have overdosed and there’s a child there. It’s just horrible. It really is.”

Summit County’s estimated payout from the $12 billion tentative Purdue settlement was estimated at $13.2 million. Akron would receive about $3.7 million. Barberton, the county’s second-largest city, would receive $492,000.

Those dollars are intended to compensate for the many financial effects of opioids, including not only the demands on fire, police and medical services, but the crowded jails, the bulging foster-care system, the bursting drug-court dockets, the overloaded addiction programs and the inundated emergency rooms.

Summit County Common Pleas Judge Joy Malek Oldfield sees about 50 felony offenders in her drug court every Monday morning. It’s one of two drug-court dockets totaling 80 to 100 people, about double the number before the crisis.

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“We’re nearing capacity for both dockets, and most of them are opiate-dependent,” Oldfield said.

In the past, most drug offenders used crack cocaine or marijuana, and “the treatment was tailored to those users,” Oldfield said. “If someone had a bad day and relapsed, they didn’t die.” But opioid addiction requires residential treatment, the judge said.

By October 2017, the opioid outlook was so bad that County Executive Ilene Shapiro declared an emergency, noting in her proclamation that “local response efforts have been exhausted and local resources in Summit County have been overwhelmed, and capabilities have been exceeded.” That year, the county saw another 269 overdose deaths.

For police officers, the crisis meant a slew of extra duties beyond fighting crime, said Barberton Police Chief Vincent Morber.

“They’ve had to be everything. Not just law enforcers, but social workers and drug counselors, trying to hook everybody up with resources,” Morber said. “These poor young officers have done more death notifications in their short time span in 10 years than I have done my whole career.”

Thomas Heitic, chef and general manager of the Green Diamond Grille and Pub, said he hoped the settlement would offer more money for addiction counseling.

“Any of this money that goes towards awareness to me is a joke. We’re all aware of what’s going on. Our medical examiner had to bring in refrigerated trucks because the bodies were piling up. We’re constantly aware of this problem. We need to focus, use that money to focus on treatment.” (VOA)