Lesson 6 of 7 · 13 min
Greenfield, brownfield and secondary stage; forms of investment
Infrastructure can be bought at three stages, new-build greenfield, expansion or privatisation brownfield, and fully operating secondary stage, and held directly (control but concentration and illiquidity) or indirectly through funds, ETFs, listed companies and MLPs.
In short
- Greenfield: develop new assets; opportunistic; often alongside specialist developers; capital appreciation rewards construction and commissioning risk.
- Greenfield PPPs often follow build-operate-transfer (BOT): negative cash flows while building, concession income while operating, then transfer, sale or decommissioning.
- Brownfield: expand existing facilities, privatisations, or sale-leasebacks of finished projects; shorter period, immediate cash flow and operating history.
- Secondary stage: fully operational assets needing no further investment over the horizon; immediate cash flow.
- Direct investment: control and full value capture, but large size, concentration and liquidity risk, so usually via consortiums of pension funds or sovereign wealth funds.
- Indirect: infrastructure funds, ETFs, listed infrastructure companies and MLPs (pass-through, minimise double taxation); listed securities give liquidity and transparency but cover a small, clustered segment.
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