Sovereign Funds Weary of European Infrastructure Risk

Owning European infrastructure can be a profitable venture for institutional investors like pensions and sovereign funds. However regulatory risk can hamper returns, leaving a sour taste in the mouths of sovereign wealth funds, pensions, and infrastructure funds. On January 10th, London’s Heathrow Airport, regulated by UK’s Civil Aviation Authority, was mandated to cap prices it can levy from airlines from April 2014. The British aviation regulator said prices must be 1.5% below the retail prices index – a far greater price cap than originally proposed. Heathrow officials contend the regulator’s assumptions and forecasts are aggressive. Airlines like Virgin Atlantic Airways praised the ruling, mentioning that there was a need to lessen the steep rise in customer prices in Heathrow.

Investors in Heathrow, through investment holding vehicles, include Spanish giant Ferrovial S.A., GIC Special Investments (a subsidiary of GIC Private Limited), Qatar Holding LLC and the China Investment Corporation perceive the levy caps as draconian.

Across to Norway

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