Report: Impact of Covid-19 on Infrastructure Companies Forecast Revenues in Q2 2020

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Report: Impact of Covid-19 on Infrastructure Companies Forecast Revenues in Q2 2020

21 minutes
July 12, 2020 12:48 pm

By Jack Lee and the data team.

  1. Overview
  2. IC10 Power Generation x-Renewables
  3. IC40 Energy and Water Resources
  4. IC60 Transport

4.1   IC6010 Airport Companies

4.2   IC6030 Port Companies

4.3   IC6040/60 Rail and Urban Commuter Companies

4.4   IC6050 Road Companies

  1. IC70 Renewable Power
  2. IC80 Network Utilities

6.1   IC8010/20 Electricity Distribution/Transmission Companies

6.2   IC8040 Water and Sewerage Companies

Dividend Outlook for Covid-19 Impacted Infrastructure Investments


1.     Overview

Q2 Update – EDHECinfra downgrades cash flow projections due to the impact of Covid-19 pandemic on infrastructure investments

In the first quarter of this year, our focus for the impact of Covid-19 was mainly on assets within the transport sector, such as airports, ports, and rail and road companies.

However, over the course of the second quarter, we began to see more evidence of how the Covid-19 lockdowns and other side effects were impacting a wider range of the infrastructure universe. We have consequently expanded our focus to encompass more sectors and applied appropriate revisions at the company level. These additional sectors include non-renewable power generation, energy and water resources, renewable power, and network utilities. We have performed our forecasts at the asset level within each sector.

As with the first quarter, those business models most impacted include merchant and regulated arrangements (as per the TICCS® Business-Risk Classification). These are long-term infrastructure contracts where variable underlying elements generate revenues, making an investment more susceptible to external economic shifts. This is in contrast with pure contracted business models, where the income derives from fixed and pre-agreed amounts that are stated within a contract. This latter type are typically far more insulated from shifting economic developments.

Further, we have not filtered these companies according to the TICCS® Geo-economic Classification, and have included those that are exposed to both national and sub-national factors. This is in view of the fact that the pandemic’s effects are not limited to regional and global economic factors and are likely to put assets at a local and national level under pressure.

Based on our Quarter 2 updated review of our TICCS® Industrial Classification, we forecast that the following sectors will suffer the most substantial shocks from the various global lockdowns:

Industrial Superclass Under the Most Threat
Code Name
IC10 Power Generation x-Renewables
IC40 Energy and Water Resources
IC60 Transport
IC70 Renewable Power
IC80 Network utilities


2.     IC10: Power Generation ex-Renewables

The transition away from fossil fuels has already created difficulties for traditional electricity generators. Given the lower operating costs and the intermittency of the generation of renewable assets, those generators that are more flexible are more likely to achieve better returns. As a result, coal-fired generation was facing challenges even before the Covid-19 crash (Schiavo, 2019). Gas-fired generators were also likely to be squeezed by the increasing penetration of renewables and as well as developments in electricity markets such as capacity contracts.

Further, with businesses shutting down or not returning to full operation, demand remains depressed in many regions, which affects realised power prices for merchant assets.

Industrial Class Under the Most Threat
Code Name
IC1010 Independent Power Producers
IC1020 Independent Water and Power Producers

Rules applied:

The table below details the amount by which EDHECinfra has reduced revenue forecasts for the affected IC10 constituents, analysed at the asset level:

Countries Year Basis
Germany, Spain, the UK, Ireland, Italy, Portugal, Australia, the Philippines and Singapore 2020 Decrease forecast projection by 3-22%

These forecasts are based on detailed analysis of individual constituents to calculate the given range in the basis.


For European constituents, we have applied revenue reduction at the mid to higher end of the range. Demand in the power sector across European countries has seen significant slump because of the nationwide lockdowns.

Negative power prices began became the norm at various times in France, Germany and other European countries (Morison and Andrew, 2020), and continue to remain depressed.

  • Despite an easing of lockdown measures, demand for power in Spain is expected to remain low year on year for the remainder of 2020. According to data from grid operator REE, power demand in the country decreased by 21% YoY between 10-16 April (Bektas, 2020).
  • Further, electricity demand in Germany dropped significantly during the pandemic, with the wholesale price of electricity staying negative during the lockdown period. This situation arose mainly due to renewably-produced energy being the first to access the grid, an increase in renewable energy production in the same period and Germany being unable to export the excess electricity to neighbouring countries (Amelang, 2020).
  • The UK has had a record-breaking coal-free run since lockdown began, achieving more than 19 days without electricity generated by the fossil fuel (Rowlatt, 2020). We have applied a 20% average decrease in the year 2020 for all UK constituents.

However, it is our view that in Europe the impact of lowered power prices on cash flows in the year 2020 will not be substantial, mainly due to the hedging strategies adopted by major European utilities. Typically they have hedged about of 80-100% their output for 2020 and at least 50% for the first quarter of 2021 (Steiner-Dicks, 2020).

Taking all this into account, we assume significant economic impact for European constituents in the future, followed by gradual revenue growth once the economy is allowed to recover, but not returning to pre-Covid levels for more than five years.

Australia, the Philippines and Singapore

  • Australia started a lockdown on 23 March 2020 which has affected electricity demand, but not to the degree seen in some European countries. Across the National Electricity Market (NEM), electricity demand to date shows only a small decrease (Carol, 2020).
  • Singapore started a lockdown in early April, and this has effected electricity demand. On day one, peak electricity demand had already dropped by about 8-9% from the average peak of power demand (Yep, Odaka, Kanoi and Kumagai, 2020). We have consequently applied 10% revenue reductions to Singapore constituents.
  • The Philippines’s electricity demand shrank by 30% when compared with the same period a year before, according to the Department of Energy (DOE) (Velasco, 2020). We have incorporated this demand drop into our reduction estimates.

In these countries, we have assumed that the constituents will take the coming two years to recover and see revenues return to their levels level before the pandemic. However, this recovery period may be revised depending as the impact of pandemic responses on the general economy  becomes apparent.

3.     IC40: Energy and Water Resources

Oil & gas prices have plummeted significantly since January 2020, especially for oil, which plunged by approximately 50% (Strachan, 2020). The pandemic has triggered reduced economic activity, and demand for oil and gas fell due to the lockdown measures imposed in most countries. This slump in demand has, in turn, precipitated an excess in overall supply, which has forced companies to rush and secure storage capacities for their supplies. Global oil and gas storages have consequently seen an unprecedented rise in their capacities. As a result, markets are experiencing the pressures of both low demand and excess supply.

As inventory levels rise and weak demand from the industrial, manufacturing and hospitality sectors persists, we anticipate that IC40 Infra-companies will be impacted negatively in the years ahead.

In terms of total expected loss for Energy and Water Resources firms, analysis by Rystad Energy has estimated that Oil and gas companies will incur a total loss of $1 trillion in revenues in 2020 (Turak, 2020). The figure can perhaps be reconciled by the fact that long-term contracts represent 70-75% of the LNG market. Exporters who are highly dependent on oil-linked contracts will hence, be vulnerable to declining revenues as a result of lower oil prices (Yep and Mohanty, 2020). In terms of recovery, this will consequently be highly dependent on the speed with which countries resume normalcy, specifically in those sectors mentioned above that are particularly reliant on oil and gas supplies. We estimate that for this industry, it will take about two years.

Industrial Class Under the Most Threat
Code Name
IC4010 Natural Resources Transportation Companies
IC4020 Energy Resource Processing Companies

Rules applied:

The table below details the amount by which EDHECinfra has reduced revenue forecasts for our affected IC40 constituents, analysed at the asset level:

Countries Year Basis
Germany, Spain, France, the UK, Italy, Netherlands, and Norway 2020 Decrease forecast projection by 5-30% (depending on the individual company’s proportion of revenue stream protected by long-term capacity contracts)
Australia and New Zealand 2020 Decrease forecast projection by 3-5%


IHS Markit estimates a reduction of 4% in the overall gas demand of the leading LNG importing markets in the year of 2020 relative to the pre-COVID outlook. However, the expected demand reduction results predominantly from reduced pipeline supplies, especially in Europe and is partially expected to come from indigenous production (BIC Magazine, 2020). This is in line with our conservative estimate of reducing European gas pipeline and liquefied natural gas companies’ revenue forecasts by 5%.

Snam, a company that shares similar infra characteristics with Italy’s Societa Gasdotti, said that it was difficult to give a ballpark estimate. The company has stated that it expects a minor impact on its 2020 results (Amara and Belaifa, 2020). Similarly, most Italian constituents follow the same expectation. Hence, no significant negative revenue growth rate are imposed for them. Consistent with our Europe’s estimate, we have likewise applied a 5% reduction for the first projection year from the current.

Enagas, the Spanish gas grid operator, highlighted that demand for natural gas in Spain at the end of the first quarter was down 2.4% from the same period a year ago. Still, the results of its first- quarter financial statements didn’t show a heavy impact from COVID-19 (Cawthorne, 2020). Thus, our 5% estimate on the first year is more prudent as we see believe there will be an impact from the pandemic but with limited effects.

Pisto SAS, a France oil pipeline operator that follows a merchant business model, derives its revenue entirely by market forces like demand and supply. IEA has stated that the pandemic caused a drop in global demand in April of 29 million barrels/day year-on-year, equivalent to about 30% of demand (Perkins, 2020). Supported by this statistic, we have similarly applied a similar estimate of a 30% decline to Pisto SAS’s revenues. The rate also extends to other infra-constituents that follow the same business model in the region.

Australia and New Zealand

Australian gas pipelines constituents are likely to see about 3-5% reduction in revenue forecast in 2020, in our view. An example is APA Group, an operator of natural gas transmission in Australia. APA generates revenue based on business and customer capacity contracts, with agreed-upon monthly tariffs. The company, and others that follow the same revenue structure, are therefore shielded against the risks associated with short term volume volatility. It is our view that these companies, including those in New Zealand that we cover, are unlikely to face a substantially negative impact.

4.     IC60: Transport

We have revised our Q1 forecasts for IC60 constituents after studying each constituent in detail.

Industrial Class Under the Most Threat
Code Name
IC6010 Airport Companies
IC6030 Port Companies
IC6040 Rail Companies
IC6050 Road Companies
IC6060 Urban Commuter Companies

4.1       IC6010: Airport Companies

In Q2, many of the travel restrictions previously imposed remain and are ongoing. Global air traffic is expected to take at least three years to return to its pre-COVID level (ABC, 2020).

Rules applied:

The table below details the amount by which EDHECinfra has reduced revenue forecasts for our affected IC6010 constituents, following asset level analysis:

Countries Year Basis
Germany, France, Italy, Portugal, the UK, Australia, Chile and New Zealand 2020 Decrease forecast projection by 45-60%
2021 Decrease forecast projection by 15-30%
2022 Decrease forecast projection by 5-10%



  • We have estimated that German airports will see a reduction of 50% in the year 2020. Frankfurt airport, the largest airport in Germany, experienced a traffic decline of 45% in March and it is likely to see at least a 60% reduction over the next quarter (Weiss, 2020). Furthermore, Hamburg airport, located in the northern city of Hamburg, expects a drop in passengers’ number by at least 40% (DW, 2020).
  • In France, Groupe ADP, an airport operator based in Paris, produced sensitivity analysis from the traffic data obtained and foresees a decrease of 55-65% from April to December 2020 (Groupe ADP, 2020).
  • In the UK, overall passenger demand fell by 12.7% and one of the more heavily affected airports – Gatwick Airport – saw a decline of 20.7%. According to the Civil Aviation Authority (CAA), their passenger traffic data indicates that the traffic of the airports in UK decreased by 53-61% in March 2020 compared with March 2019 as a result of the impact from the pandemic. For example, Edinburgh Airport’s traffic data fell 53%, while Heathrow Airport highlighted a 61% reduction (CAA, 2020).
  • Similarly, in Italy, Aeropoti di Roma, the airport operator in the city of Rome, foresees a 50% passenger traffic decrease year-on-year following the closure of its main terminal (Fabrizio, 2020).

Therefore, based on the available news and statistical data, the passenger traffic decrease is forecast to be in the region of 50-60%, which aligns with our own estimated range.

Australia, New Zealand and Chile

  • In Australia, international borders remain closed and are expected to remain so for at least three to four months from April (Gross, 2020). According to the Airport traffic data released by the Australian Department of Infrastructure, Transport, Regional Development and Communication, the decrease in passenger movements for March 2020 compared with March 2019 is in the range of 21-50% among Australian airports (Bitre, 2020). Taking a prudent approach, we have applied a 50% decrease in the year 2020 for Australian constituents, which is at the higher end of the forecast range.
  • In Chile, following the closure of borders that commenced on 18 March, passenger traffic dropped by 12.5% in the first quarter of 2020 (Fabrizio, 2020).
  • In New Zealand, Auckland Airport has experienced a decrease of 42% in March 2020 as compared to March 2019 (Fabrizio, 2020). A further decline is expected as New Zealand continues to remain in full national lockdown and we have estimated reductions of 50% for the year 2020.


Subsequently, we have moderated our decrease estimates to 15-30% in 2021 and 5-10% in 2022, based on an industry recovery from this economic pandemic. Current predictions are that the global economy will see in the region of $2.7 trillion wiped out by the epidemic (Orlik, 2020).

4.2       IC6030: Port Companies

From the data we have collected on port companies, it is not year clear to what extent they remain fully exposed to the economic impact arising from COVID-19.

Rules applied:

The table below details the degree by which EDHECinfra has reduced revenue forecasts for the affected IC6030 constituents, following consideration at the asset level:

Countries Year Basis
Australia, Spain, France, the UK, Netherlands, New Zealand and Philippines 2020 Decrease forecast projection by 25%
2021 Decrease forecast projection by 10%

According to the New Port Economic Impact Barometer, ports have experienced an average decline of 25% in container volumes (Notteboom, 2020).

Furthermore, the World Trade Organisation (WTO) assumes a material downturn of global trade in 2020 of between 13-32%, which averages about 22%. This finding reconciles with our Q1 assumption of 25% (Bekkers, Keck, Koopman and Nee, 2020).

Although volumes at China terminals have recovered significantly given the easing of factory lockdowns, lockdown conditions are still apparent in importing countries, curtailing demand (Qiu and Woo, 2020). Thus, we maintained the forecast we set out in Q1, but further estimate that port companies will remain affected by global trade as recovery will take some time. Hence, an additional reduction of 10% has been applied in each company’s subsequent year.

4.3       IC6040/60: Rail and Urban Commuter Companies

Rail and Urban commuter companies continue to take a hit from the slump of traffic flow triggered by government measures to control the spread of the virus. In Q2, the impact became significant as governments stepped up control measures and scaled-down commuting services. However, the beginning of Q3, governments in Europe and other countries are beginning to lift the lockdown restrictions, paving the way for some slight recovery.

Rules applied:

The table below details the amount by which EDHECinfra has reduced revenue forecasts for our affected IC6040/60 constituents, following analysis at the asset level:

Countries Year Basis
Australia, France, the UK and Sweden 2020 Decrease forecast projection by 30-80%
2021 Decrease forecast projection by 23-40%



In the UK, following the strict lockdown imposed by the government in March, various transport services have experienced slumping traffic flow, especially rail and urban commuter companies. The London underground, which usually transports 1.35 billion passengers annually, saw a 19% drop compared with levels a year before. It also forecasted that passenger income would decrease by as much as £500m (BBC, 2020). Overland trains saw a drop of 95% during the lockdown period compared with the previous year, according to Transport for London (BBC, 2020).

UK government has come out with emergency measures agreements to sustain the operations of UK rail companies whereby revenue and cost risk will temporarily be borne by the government for six months. And rail companies that entered into the agreement will continue to operate with a small predetermined management fee (Pickard, Powley and Plimmer, 2020).

Our calculations assume that constituents who signed up for the agreements will experience reductions of 80% in the year 2020. Some companies that did not sign up to the agreements may have actually expected smaller declines of 50%, given that the government has started to lift the lockdown restrictions and people may commute to work from July (Macswan, 2020). However, public caution persist, and the survey notes that a majority of workers are uncomfortable with taking public transport.

Similarly, in France, the government has also begun to ease the restrictions on access to public transports, with people able to start commuting to work in early June. We have estimated a 30% reduction in the year 2020 based on actual compiled data from the mobility report by Apple Maps (Apple, 2020).

We have a relevant constituent in Sweden, an airport rail link connecting Stockholm Central Station with Stockholm Arlanda airport. In this case, we have estimated the revenue fall based on the passenger traffic flow, which parallels Swedavia’s release of traffic flight data.


Similarly, reductions for the revenues of our Australian constituent, which is also an airport link, follow the forecast made to Australia constituents in the Airport sector.


We have reduced our decrease estimates for 2021, in keeping with the time estimated taken to recoup from the pandemic impact.

4.4       IC6050: Road Companies

Road concessionaires with revenue models on availability or performance-based mechanisms are assumed to face minimal impact from Covid-19. Merchant road companies generate revenue from toll or shadow toll collection, which is positively correlated to traffic volume. The traffic flow has been adversely impacted by movement restrictions imposed by the government because of the pandemic. Many concessionaires have suffered from a severe decline in revenue based on recent data, and Fitch envisaged that the risk of decline may persist until the middle of 2022 (Fabrizio, 2020).

Rules applied:

The table below details the amount by which EDHECinfra has reduced revenue forecasts for our affected IC6050 constituents, after consideration at the asset level:

Countries Year Basis
Austria, Germany, Spain, France, the UK, Ireland, Italy, the Netherlands, Norway, Poland and Portugal 2020 Decrease forecast projection by 6-30%
2021 Decrease forecast projection by 3-20%
2022 Decrease forecast projection by 5-10%
US 2020 Decrease forecast projection by 18%
2021 Decrease forecast projection by 10%
Australia, Brazil, Chile, Solvakia, the Philippines and Malaysia 2021 Decrease forecast projection by 11-42%
2022 Decrease forecast projection by 5-25%
2023 Decrease forecast projection by 3-15%

We have obtained recent traffic data from Covid-19 Community Mobility Reports by Google Map (Google LLC, 2020). Through the study of the relationship between current movement restriction measures imposed by the government and traffic volume movement, as well as the analysis of the extent of the impact, we have estimated the future traffic volume based on new government measures released.

We have calculated the average traffic volume movements using Google data for the respective existing phases of government controls. Using the calculated rates, we forecasted the traffic volume change for the future period based on news of movement restrictions, taking into consideration the duration and intensity of each phase. The impact on revenue is then determined by the forecasted change in traffic flow.

5.     IC70: Renewable Power

Across the world, there is a downtrend in demand for power due to the lockdown measures imposed by governments. It resulted in the ceasing of production and also halted provision on services like public transport. Furthermore, the fall in oil prices have driven down the prices of electricity as well.

Renewable energy appears to be more resilient to low demand and falling prices, given the fact that producers have priority access to electricity grids over electricity produced by fossil fuels, as well as long-term binding contracts and power purchase agreements (PPA) which insulate them from market prices (Financial Times, 2020).

However, the above does not cover all renewable assets, and those  with the merchant business model are dependent on market demand and the spot price. Furthermore, the PPA in some assets does not cover 100% of their revenue. A portion of their power is sold in the market on short-term contracts.

Industrial Class Under the Most Threat
Code Name
IC7010 Wind Power Generation
IC7020 Solar Power Generation
IC7030 Hydroelectric Power Generation
IC7040 Other Renewable Power Generation
IC7050 Other Renewable Technologies

Rules applied:

The table below details the amount by which EDHECinfra has reduced revenue forecasts for our affected IC70 constituents, after consideration at the asset level:

Countries Year Basis
Germany, UK, Norway, Sweden, Brazil, Australia and Philippines 2020 Decrease forecast projection by 2-9%


A majority of European constituents are classified under the contracted business model. Their PPA includes a long-term agreement with feed-in tariffs (FIT) or fixed feed-in premium (FIP) that ensures revenue is protected from shocks – especially from this unprecedented event we are currently facing.

For constituents classified under a merchant business model, falling energy prices and the drop in market demand affects these constituents. However, we conclude that only a mild downtrend is expected because renewables power has priority access to the European power grid. Thus, we have estimated a 2-5% drop in revenue for merchant assets.

Finally, for constituents in Spain (regulated business model), power generation from renewable sources had been primarily promoted by FIT and a premium tariff mechanism is in place until 2012 when it will be replaced with a regulated remuneration scheme which guarantees a fixed rate of return for assets under this scheme. It ensures stability and predictability for renewable companies in Spain and revenue will not be impacted by current shocks.


In Brazil, all electricity consumption has to be backed by Power Purchase Agreements (PPAs) (Energiewende, 2020). These financial instruments are tied to a “physical guarantee” that limits the amount of electricity (per technology type) that can be sold via PPAs. The physical guarantee thus represents the amount of energy that can be delivered under a pre-defined degree of reliability. The energy produced are sold in two different contractual environments: the regulated market (ACR) and the free market (ACL).

The contract only guarantees the output quantity and not the price. As a result, renewable assets in Brazil are exposed to the spot price in the market and “physical guarantees” only cover up to a certain percentage of generator’s total output, with the remaining portion of the output subjected to market demand. Currently, it would appear that they are over-contracting and may end up suffering losses when they clear up the surplus energy in the short term market at the Settlement Price for the Differences (PLD) (Soares and Barreto, 2020).

Thus, we have estimated revenue growth of between zero to a 9% decline.

Australia and Philippines

Constituents in Australia and Philippines almost all follow a contracted business model. However, a few constituents follow partially contracted business model and these names are exposed to market conditions. Thus, revenue for these constituents will be impacted slightly. We have forecasted a range of zero growth rate to 5% reduction, dependant on the portion of revenue that are exposed to market conditions.

6.     IC80: Network Utilities

Across the countries that make up our index, a common trend can be observed in the network utilities names. Traditionally, this sector enjoys a consistent revenue stream. However, the pandemic has brought in a dynamic change to consumption patterns. As a result of the lockdown measures imposed by governments, there is an apparent increase in household consumption but decrease in non-household usage, which normally contributes to a greater share of network utilities consumption. This combination resulted in an overall reduction in network utilities’ consumption.

The increase in the unemployment rate and accumulated losses from the temporary closure of commercial businesses have also led authorities to introduce relief measures, which include allowing for deferred utilities settlements for a significant range of businesses and households.

Industrial Class Under the Most Threat
Code Name
IC8010 Electricity Distribution Companies
IC8020 Electricity Transmission Companies
IC8040 Water and Sewerage Companies

6.1       IC8010/20: Electricity Distribution/Transmission Companies

Rules applied:

EDHECinfra has used the below calculations to generate revenue forecasts for the IC8010/20 constituents affected, at asset level considerations:

Countries Year Basis
UK 2020 Decrease forecast projection by 14%
2021 Decrease forecast projection by 12%
Australia and New Zealand 2020 Decrease forecast projection by 2-14%
2021 Decrease forecast projection by 4%

Europe – UK

According to Fitch Rating (2020), Covid-19 has changed the utility consumption patterns of different customer groups. Most commercial businesses, education faculties and industrial factories have to close temporarily when the virus outbreak escalated. Many countries including the UK have imposed social distancing measures, including encouraging the maximum extent of working from home. As a result, although there is a slight increase in household consumption of electricity, this has been offset by the greater fall in consumption by non-household groups. Thus, demand for electricity has dampened, falling by the largest drop of 14% in March. It is expected that the industry will receive a further reduction of 20% during the year 2020 (Hussain and Jian, 2020). In addition, non-household suppliers are temporarily allowed to defer up to half of the wholesale charges for their utility bills. However, we have applied an estimate of -14% given that various countries in Europe have begun to lift the restriction measures.

Furthermore, National Grid Electricity System Operator Limited expects the decline in electricity demand to range between 4% and 20% depending on the severity of the impact (National Grid Eso, 2020). This would result in a mean decline of around 12% which fairly coincides with our own estimate.

Australia and New Zealand

In Australia, the demand varies according to different regions where we have applied different reduction rates to revenue. Electricity demand in Victoria fell by 2% in March 2020 compared with March 2019 (Farrow, 2020). While in New South Wales, electricity demand dropped by 6% in March 2020 compared to average consumption in the same period between 2015-19 (Mountain and Percy, 2020). Our estimate applied is in parallel with the demand outlook.

However, in New Zealand, electricity demand was exposed to a more significant impact in March, given that country’s Covid-19 alert system level was at its highest, Level 4, and there was a nationwide lockdown. In March, the total demand dropped by 12-17%, giving a mean rate of 14%. This rate coincides with our estimate applied for March. Nevertheless, New Zealand has since lowered its Covid-19 alert system level and many social and business activities have resumed. Thus, we have applied a less drastic drop in revenue for the subsequent months.

6.2       IC8040: Water and Sewerage Companies

Rules applied:

EDHECinfra has used the below calculations to generate revenue forecasts for the IC8040 constituents affected, following consideration at the asset level:

Countries Year Basis
UK, Spain, and Italy 2020 Decrease forecast projection by 14-23%
Brazil 2020 Decrease forecast projection by 15-30%


Ofwat, a water services regulation authority in UK, has introduced deferred payments schemes for business customers, including retailers (Ofwat, 2020). In the short term, deferment in customer payments will increase the potential for bad debts which would create liquidity issues and shortfalls in revenue, particularly in the current year of 2020. Concerns are apparent as the payment settlement mechanism has yet to be produced by the regulator (Ofwat, 2020). As of the current quarter, based on the limited information available for the water utility sector, we have an estimated decrease of 14% in the year of 2020.

For Italian constituents, we have estimated a reduction rate at 23% based on average consumption rates of electricity given our view that both types of utilities are likely to follow the same consumer usage pattern and with limited water utility data available.


In Brazil, the Covid-19 pandemic has created a severe economic impact on water utility consumers. As a result, there are ever-increasing defaulters and a lack of payments, which will in turn negatively affect the revenue generated by Brazilian constituents. In specific states, including Sao Paulo, the government introduced compulsory water supply continuity and stopped the suspension of water supply to consumers until end July as many consumers found themselves unable to settle overdue bills (Simoes, 2020). We have estimated a reduction of 30% for the year 2020.

Dividend outlook on Covid-19 impacted infrastructure investments

Under normal circumstances, infrastructure companies would pay their shareholder dividends annually with the source of fund typically coming from their reserves, and sometimes current year profits. However, in this unprecedented period where many infrastructure investments companies in the pandemic impacted sectors are trying to keep themselves afloat, are less inclined to distribute the same level of dividends as per previous years. Thus, dividend cuts and suspensions are inevitable.

Some of the listed infrastructure companies observe dividend cuts. For instance, both EDF and Engie are French infrastructure companies have announced that there will be dividend cuts in 2020 due to government pressure where they will not be eligible to receive the financial support (Black, 2020). Both the France and Germany governments have highlighted that they will not provide financial aid to companies still paying dividends (Jennen, 2020). Therefore, we have estimated zero dividend pay-out in 2020 by those of our constituents that are situated in these two countries.

Furthermore, there has been limited information announced by unlisted companies regarding their dividend pay-out decisions for 2020. However, for IC6040/60 Rail and Urban Commuter Companies, specifically in the UK, the constituents are very much unlikely to issue any dividends in 2020. They face a crisis in sustaining their operations given that their revenue is substantially driven by passenger traffic flow. Many have signed up to the government measures for support, which will temporarily take over any profit or loss made by the constituents (Pickard, Powley and Plimmer, 2020). Thus, we have estimated zero dividends being paid out in 2020 by these constituents to be conservative, assuming all have low level of reserves and will be at financial risk should they chose to pay out dividends.

IC6040/60 Rail and Urban Commuter Companies
Country No. of Companies Basis
France 1 Zero dividend in 2020
UK 3

Turning to IC6010 Airport Companies, we have also forecasted that there will be zero dividend pay-out for some of these Airports. These Perth International Airport, which has announced that it  will pay no dividend in 2020 and cut the pay-out in 2021 too (Drummond, 2020). Also, Auckland International airport has announced its intention to suspend its interim dividend payment due to the economic crisis it is facing from the pandemic (Reynolds and Middlebrook, 2020).

IC6010 Airport Companies
Country No. of Companies Basis
Australia 1 Zero dividend in 2020 & 2021
New Zealand 1 Zero dividend in 2020
France 1
UK 3

While for IC6050 Road Companies, there is one road company, Bonaventura Straßenerrichtungs, in Austria where we have applied zero dividend pay-out to three years subsequent from the current year. The company is currently in a distribution lockup and it is facing a potential event of default, with Moody’s expecting the company will not able to distribute dividends until after 2030 (Roumpis, 2020).

IC6050 Road Companies
Country No. of Companies Basis
Austria 1 Zero dividend in 2020, 2021 & 2022
France 10 Zero dividend in 2020
UK 1 Zero dividend in 2020