Infrastructure: More Privatization, More Jobs
The Pennsylvania Turnpike Commission has voted to seek private bids for toll projects, specifically the construction and management of 50 miles of new roads that comes with a price tag of nearly $5.2 billion. House Transportation Committee Chairman, Joseph Markosek, (D-Allegheny/Westmoreland) believes public dollars alone will never be enough to complete the project, given the magnitude of the endeavor.
The evidence is everywhere of the large and growing gap between infrastructure needs and historical rates of investment, according to Deloitte. The firm adds that private investment in public infrastructure - or public-private partnerships (PPPs) - has emerged as one of the most important models employed by many governments to rebuild the nation’s infrastructure. A new study also contends that more infrastructure deals could enter the market as infrastructure matures as an asset class and as governments become more comfortable with privatizing, reports Pensions & Investments.
Now, global investors are on the hunt for opportunities in infrastructure. As a result, executive search firm, A.E. Feldman, says infrastructure finance jobs are opening up for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. The most sought after candidates are those with experience in infrastructure transactions and environmental engineering
The Pennsylvania Turnpike Commission approved a measure to advertise for a Request for Expressions of Interest (REI) “for the financing and/or design, engineering, construction, operation of un-built segments” of the two toll roads. According to Turnpike CEO, Joe Brimmeier, “A public private partnership may indeed prove to be the best way to ensure the timely completion of these long-awaited projects, and by issuing the REI we’re taking the next step in the process.”
“At some point, the waiting game has to end,” adds Rep. Markosek. “State funding is not getting the job done on a reasonable timeline, and the federal government has made no significant contribution. People rightly want to see the fruition of these highways. The possibility of what a public-private partnership may offer relative to the new construction components of these projects are worthy of further exploration,” he says.
Renewed government confidence in privatization and could create new avenues for committed capital waiting to be invested in infrastructure, according to Pensions & Investments, citing a study by Ernst & Young LLP. The report states that there is more capital available to invest in infrastructure deals than there are projects, but that imbalance could soon reverse and build to nearly $1 trillion a year in new and secondary market infrastructure transactions worldwide. Ernst & Young also projects $240 billion to $360 billion annual private investment in new infrastructure projects and $600 million annually in secondary transactions, according to P&I.
Ernst &Young’s study also contends that more infrastructure deals could enter the market as infrastructure matures as an asset class and as governments become more comfortable with privatizing, reports P&I. The Pennslyvania Turnpike commission fought off efforts last year by Pennsylvania Governor Edward Rendell to lease the toll road to a private company and use the money to help fund a $1.7 billion gap in transportation funding, according to the AP. The AP also says that Rendell is once again trying to win support in the Legislature to privatize the road. According to
Toll roads exhibit attractive investment fundamentals for private sector investors, according to Macquire Infrastructure Group. The firm says toll road concessions are typically long term and that the combination of traffic growth and toll increases can produce strong and predictable revenue growth.
Since 1990, the total vehicle miles traveled on the nation’s highways have jumped by more than 35%, according to research compiled by Deloitte. The firm says that growing transportation needs require major investment: $40 billion annually for roads alone. Demand for public transit, has increased 23% over the past decade. According to the U.S. Department of Transportation, $20.6 billion in capital investment is needed each year just to maintain current facilities.
States are Falling Behind
Almost half of the states in the United States are falling behind in their infrastructure maintenance, according to a new report by the Pew Center on the States and Governing Magazine, according to Reuters. The report states that the groups gave 23 states grades for infrastructure that were below the national average. According to a scale where A is excellent and F is failure, 23 states had grades below a C+. Ten states received a B- for maintaining capital assets such as bridges and roads. Only 17 states earned grades of B and above. Lagging behind, Massachusetts and New Hampshire both scored the lowest grades, earning a D+.
Overall, the aging U.S. infrastructure needs billions of dollars of new investment and repairs from roads to rails, ports and the electrical grid, executives told the Reuters Manufacturing Summit this week. Enrique Santacana, Head of U.S. operations for Swiss engineering company, ABB, concludes, “Here in the U.S. and other western economies like Western Europe, you have aging infrastructure that has to be replaced and for many years, we should have been replacing it and we didn’t and it is almost like catching up.”
