Roundtable 17 September: Highlights

Our September 2025 roundtable brought together a full house of senior investors, regulators, utilities, and policymakers to explore how the macroeconomic environment since the 2022 structural break is reshaping infrastructure investment - and what to do about it.

We set out to answer one central question:

Can ambitious infrastructure investment still be delivered in today’s macro environment?

The conversation unfolded across three themes:

Global supply (and pricing expectations) of infrastructure capital

Vallorii's VAPRI model shows substantially higher return expectations for equity infrastructure investments (especially for higher risk assets) since 2022.

Roundtable participants stressed the divergence between global and UK conditions. International appetite for infrastructure investment remains strong, particularly for investment in the US.

The UK was seen as a more challenging environment, however: construction costs are high, regulatory uncertainty weighs heavily, and equity investors are increasingly selective. While political ambitions for growth are substantial, capital deployment lags, with the cost of raising even core infrastructure funds now at 12–15% (nominal).

VAPRI ranked a selection of UK infrastructure assets by risk - with gas and electricity distribution assets showing the lowest risk, and greenfield infrastructure projects at the high end. Airport risk changed depending on leverage and regulatory protections in place.

A majority of attendees felt that the UK infrastructure pipeline cannot be fully delivered without providing higher equity returns, or government underwriting more risk.

Bond Market Risks and the potential for a bond market crash

We stress-tested how bond-market volatility could affect infrastructure returns. Using Heathrow as a case study, VAPRI modelling suggested that highly geared assets face outsized risks - adding 480bps to Heathrow's cost of equity (mitigated by the ability to pass through a portion of increased cost of debt to passengers under the regulatory framework).

Sustained yields above 8% could eliminate dividends - VAPRI calculates an 18% probability of 10-year UK gilt yields exceeding 10% before 2030.

How to mitigate bond market risks for infra, particularly for heavily geared assets

The group then explored how regulatory financing models affect resilience. Under the UK RAB framework, equity returns rise with leverage—but so too does exposure to bond market volatility. Lower gearing can reduce risk but also significantly dilute returns, underlining the importance of trade-offs and timing in financing strategies - see Heathrow example below.

Under the UK RAB framework, equity returns rise with leverage—but so too does exposure to bond market volatility.

WACC-based regulation came under fire from some participants for under-rewarding equity and incentivising higher leverage - with the empirical limitations of CAPM also emerging as a common theme.

We'd be delighted to discuss any of these topics, and show how Vallorii is bringing together advanced financial theory, analytics and AI to transform infrastructure risk and valuation.

Send us a message (opens in a new tab) to get in touch and set up a call. Find out more about applying VAPRI to your asset or portfolio here.