Editor’s note: The following is an opinion submission from André Wright, executive vice-president of the New York City-based Standard International Group, a financial advisory firm he founded in 1996. Here Wright outlines the necessary processes Caribbean governments must go through to ensure the completion of infrastructure investment projects, including due diligence and factoring the cost of eventualities.
The demand for infrastructure investment across the Caribbean is significant. From airports and power grids to waste management and telecom, there is an urgent need for greater sustainability and assets that can weather the negative effects of climate change, natural disasters, and even COVID-19.
For Caribbean islands, infrastructure improvement and advancement is an essential step toward greater economic well-being and prosperity, but leadership often struggles with getting large-scale projects done.
For any large-scale project, commercialisation and financing are critical first steps. Commercialisation — or due diligence — must occur prior to project financing. This includes understanding the project’s feasibility, environmental impact, legal and political implications, and most importantly ensuring the project will get buy-in from the local community. An expert can help governments and other decision makers with these critical efforts and ensure infrastructure jobs are carried out in a cost-effective and time-efficient manner.
Once due diligence is completed, project leaders must identify and secure the right capital structure. An experienced professional can help project leaders figure out the right capital mix comprising debt, equity, and sub-components. The right capital mix will factor in the current economic landscape, known industry investment metrics, investor reporting, as well as what’s going to be acceptable to the investment community to close the deal.
Project leaders must also perform credit and financial analyses, as well as create a financial structure. This could include local financing, multilateral financing, or institutional financing that oftentimes require leaders to meet with potential investors on a roadshow. If the investment is for a Government-owned company, it may require a request for proposal process. Once the selections are shortlisted, the terms and conditions are negotiated.
Most infrastructure aspirations in the Caribbean are underfunded and struggle to stay realistic. It is imperative to have an advisor with experience to guide and facilitate this process and, importantly, to ensure the deal gets completed. Partnering with a professional who understands the investment landscape, the nuances of projects, as well as how comparable projects successfully completed financing, is of critical importance to getting the job done.
The infrastructure financing business is cyclical and approximately every fifteen years existing assets need to be rebuilt. With a longer project lifespan ranging from months to years, projects have much longer lead times than an average Wall Street deal. Government officials and project leaders should understand that development can cost more than originally anticipated, because, over time, many factors — labour and material costs, advanced technology, country leadership, political climate — can and do change. Building uncertainty into the deal is a critical yet often overlooked step. High-stakes projects can bring great risk but also great reward. Contingency planning for anything that may happen is important. Making an island more readily accessible with a modern airport, having strong islandwide connectivity — especially Wi-Fi — and reliable power and electric supply can mean the difference between earning significant income as a popular tourist destination or not.
Decision makers are often surprised by the details that go into upgrading and rebuilding a country’s infrastructure, and the work that is required to complete the process long before ground-breaking. Without experience and historical knowledge, whether it’s in the region or country, deals are prone to fall through. Partnering with an expert can bring all-important historical knowledge to deals, help leaders understand and reduce risks, and take advantage of opportunities. When a project is completed with greater financial and economic efficiency, the cost of the advisor is nominal —especially when compared to not having one.
Creating positive change and greater infrastructure in the Caribbean means knowing what needs to be done, and structuring the deal correctly. Investors and financial partners want to see a plan and anticipated results and outcomes. Partnering with an experienced advisor can help ensure win-win situations in which the infrastructure is transformative for local communities as well as local leaders and investors. This is only possible when the deal is structured properly.
André Wright is the executive vice-president of Standard International Group, the New York City-based boutique financial advisory firm he founded in 1996. With a focus on revitalising critical infrastructure projects across the US, Caribbean, and West Africa, he brings a decade of Wall Street experience and over thirty years of financial advisory and investment banking expertise to some of these regions’ most pressing infrastructure problems.