Infrastructure businesses are usually impacted by the tail end of recessions as demand for essential services flags or public counterparty risks increase. But from the onset of the COVID-19 crisis, it was clear that they were going to be impacted first. The initial phase of this crisis was not an economic shock but a state of emergency requiring nation-wide lockdowns, effectively shutting down most key transport links. The impact of the oncoming economic recession on infrastructure assets will only come later.
Who could doubt that equity returns for unlisted infrastructure companies were lower and often negative in the first quarter of 2020? Major airports, ports and roads saw their traffic collapse often by more than half. Along with lower expected revenues and dividends, investors’ required risk premia had also increased, not only for so-called merchant assets, but also for holding any illiquid assets, including infrastructure.
The first quarter 2020 relea