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Not all roads are made equal: Interest rate sensitivity in road infrastructure valuations
- April 1, 2019: Vol. 12, Number 4

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Not all roads are made equal: Interest rate sensitivity in road infrastructure valuations

by Francisco Clemente

A variety of different concession structures and subsequent values can be impacted by general economic conditions and interest rate movements. While non–toll road concessions have none, or limited, sensitivity to interest rates, the same cannot be said for free-rate tolling mechanisms. This article explores road infrastructure assets in Ferrovial’s Cintra portfolio to illustrate the point.

Toll road case study — Cintra

“When interest rates rise, the value of infrastructure assets decreases.” You may have heard this remark in the past among the investment community, but we believe this is unfounded in many cases. The aim of this article is to dispel this rather sweeping statement and provide the reader with clear examples of when this is simply not the case.

First, we go back to basics and see how future cash flows are built in a road infrastructure asset.

Road-asset cash flows depend on two factors: inflows and outflows. On the

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