The number of private infrastructure deals surged in 2022, but income disparities persist

Source: Global Infrastructure Hub based on Realfin data.

Globally, the number of primary private infrastructure transactions increased by 18% in 2022, the strongest annual growth since 2017 and 30% above its five-year (2017-2021) average. The number of private infrastructure deals has been on an increasing trend since 2016 and in 2022 was 81% higher than its 2016 level, totalling USD 424 billion across 1,293 transactions.

Annual growth was similar across income groups, with transactions rising by 19% in 2022 in high-income countries (HICs) and 16% in middle- and low-income countries (MLICs). However, clear disparities between the two markets persist, with 65% of total deals occurring in HICs, or 71% in terms of value (reflecting the relatively higher average transaction size in HICs). Longer term trends also show that while investment activity has accelerated in HICs, it has seen a lot less momentum in MLICs. Despite growth in the last two years, it remains to be seen whether this will be sustained, and volumes remain on par with pre-COVID levels (2018-19 average). The number of transactions in HICs now sits at 40% above its five-year average, and only 15% for MLICs.

Within HICs, virtually all growth in 2022 was driven by renewable projects in the US, UK, and Spain, and energy storage and transmission projects in the US and the UK. Growth in these five areas accounted for 94% of the total growth in the number of projects in HICs in 2022. Meanwhile in MLICs, 2022 growth was driven by renewable projects in Brazil and transport (mostly road) projects in India. These two areas accounted for 88% of the total growth in the number of projects in MLICs in 2022.

Regionally, the largest contributors to 2022 growth in the number of private infrastructure transactions were Western Europe (up by 24%), followed by North America (up by 22%) and Asia (up by 21%).  This aligns with historical trends, with Western Europe and North America consistently leading as the two most active regions, averaging 25% and 23% of total transactions, respectively, over the past five years. Asia and Latin America follow, each accounting for an average 18% of annual transactions over the past five years. However, these regions stand out for having the highest transaction volumes among emerging markets. Specifically, in 2022, Latin America accounted for 44% of transactions in MLICs, while Asia accounted for 36%.

On a sectoral basis, the largest contributors to 2022 growth in the number of private infrastructure transactions were renewable energy, and energy storage, transmission and distribution. In other words, growth was driven by investment in projects supporting the clean energy transition – both renewables generation and the energy storage and grids required for its successful integration and deployment. Renewable projects grew by 24% in 2022 with strong growth in HICs such as the US and Spain (mostly solar PV), but also in MLICs such as Brazil (mostly onshore wind). Meanwhile, virtually all growth in the energy storage, transmission and distribution sector was driven by HICs, specifically the US and UK. The sector has grown strongly since 2017 and now makes up 14% of total private infrastructure transactions – the third largest sector behind renewables (55%) and transport (19%).

The continued growth in the number of private infrastructure transactions in 2022 is positive news, even more so as it was driven by particularly strong investor appetite for projects supporting the clean energy transition. However, growth is mostly being driven by HICs in North America and Western Europe, with MLICs making up only 35% of global deals in 2022. Despite some pockets of strength in MLICs – most notably renewable energy generation in Brazil and road projects in India – private investment activity in MLICs is still yet to achieve any significant momentum.

The number of private infrastructure deals surged in 2022, but income disparities persist.