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Welcome to the March 2017 edition of Voices on Infrastructure. This collection of articles by industry leaders and McKinsey experts focuses on the crucial opening phases of infrastructure projects: project development and financing. Smart development and stable financing can make the difference between a successful project and one that falls short. These elements, however, are often missing on projects ranging from toll roads in North America to renewable energy installations in Africa.

In principle, developing and financing should not be as challenging as they sometimes turn out to be. The world needs infrastructure financing: $3.3 trillion per year, or almost $50 trillion through 2030, to sustain economic growth, according to McKinsey’s latest estimates. Institutional investors and banks manage $120 trillion in assets. What would it take to direct more of that capital toward the development and renewal of the world’s infrastructure?

Better financial terms and conditions could help increase the flow of capital toward investment in infrastructure. These might include loan guarantees, changes to tax structures, or corporate-risk management measures such as foreign-currency hedges. We believe, however, that investors are deterred by a more fundamental problem: too many infrastructure projects offer unattractive risk-adjusted returns because they are poorly structured or make little financial sense.

We have dedicated this issue of Voices to ideas about how project owners and investors can overcome these challenges. The articles feature lessons on mitigating risks and boosting returns, drawn from projects such as Heathrow Airport’s proposed third runway and BP’s Mad Dog 2 offshore-drilling project. Our contributors also look at how governments can catalyze investment with infrastructure banks and public–private partnerships. We hope you find their insights helpful in developing and financing the large projects the world needs.

–Rob Palter
Senior partner, McKinsey & Company

–Mike Kerlin
Partner, McKinsey & Company

More Articles

Article

Tony Hansen, Global Infrastructure Initiative

Article

Karl Kuchel of Macquarie Infrastructure Partners believes the United States could become a much bigger market.

Karl Kuchel, Macquarie Infrastructure Partners

Article

The market for solar power is growing faster than ever, but profitability has been lagging. The keys to improvement are better capital and operational efficiency.

David Frankel and Dickon Pinner, McKinsey & Company

Article

Financing costs are higher but the results are worth it.

Brian Budden, Plenary Group

Article

America’s approach to planning, financing, building and maintaining public infrastructure is fragmented and inefficient. Here is how to improve it.

Michael Della Rocca, Tyler Duvall, and Rob Palter, McKinsey & Company

Article

Singapore shows how an effective housing program can promote social and political stability.

Wong Heang Fine, Surbana Jurong

Article

How and why Europe’s largest airport plans to manage a major expansion.

Emma Gilthorpe, Heathrow Airport

Article

​BP’s Starlee Sykes discusses the future of deepwater development.

Starlee Sykes, Offshore at BP, Laura Borland and Kassia Yanosek, McKinsey & Company

Videos & Podcasts

Video

City infrastructure projects are extraordinarily complex—but they can also be an avenue for new economic growth and digital disruption. GII spoke with the mayors of Bristol, Seattle, and Syracuse about how new approaches to financing, big data, and technology are making their cities more accessible and efficient. From predictive analytics for water mains to integrated spatial plans for housing and transportation, here’s how cities are exploring newfound potential.

Video

Today’s airports must evolve to meet growing demand, new technologies, updated security requirements, funding pressures and rising customer expectations. These forces will grow stronger, as will the complexity of projects and the public’s desire for transparency into performance. McKinsey leaders joined executives from some of North America’s busiest and largest airports to discuss major issues facing the sector today.

Video

Today’s airports must evolve to meet growing demand, new technologies, updated security requirements, funding pressures and rising customer expectations. These forces will grow stronger, as will the complexity of projects and the public’s desire for transparency into performance. McKinsey leaders joined executives from some of North America’s busiest and largest airports to discuss major issues facing the sector today.

Video

Three experts give their views on attracting private capital to public infrastructure efforts.

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