Infrastructure Groups Hiring
Citigroup is reportedly joining a growing number of firms looking to capitalize on the vital need for infrastructure investment. The bank, which is targeting utility and airport assets, is seeking as much as $5 billion for its first infrastructure fund, according to Bloomberg. Back in May 2007, Citigroup Alternative Investments announced the creation of a new investment center, Citi Infrastructure Investors (CII), which will take advantage of increased private sector involvement in the infrastructure industry. “This new initiative will greatly complement the management of our existing asset classes “private equity, hedge funds, real estate and structured products,” said Lew Kaden, interim CEO of Citi Alternative Investments.
The American Society of Civil Engineers forecasts that $1.6 trillion needs to be invested in U.S. infrastructure over the next five years. A recent report by Ernst & Young finds that private investment is critical to the improvement of public infrastructure. The report also contends that renewed government confidence in privatization could create new avenues for committed capital waiting to be invested in infrastructure. Now, a number of firms are looking to tap opportunities in the burgeoning sector, which is typically a predictable source of revenue. Amid the trend, 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.
Decaying Infrastructure
The list of desperately needed improvements to the country’s infrastructure is long and growing.
Two hours north of New York City, a cracked old tunnel is leaking up to 36 million gallons of water each day, according to the AP. The report states that the Environmental Protection Agency says utilities will need to invest more than $277 billion into drinking water systems over the next two decades. The AP says water industry engineers are less optimistic, projecting a price tag of about $480 billion.
The Federal Transit Administration says $21.8 billion is needed annually over the next 20 years to maintain and improve the operational capacity of transit systems. Billions more is needed to repair the nation’s deficient roads, bridges and public housing.
Banks Capitalize on Infrastructure Investment
Citigroup’s infrastructure fund was part of a bidding group that bought Kelda Group Plc back in November. The CII fund may reportedly also target U.S. assets, including Chicago’s Midway Airport and the Pennsylvania Turnpike, according to Bloomberg.
But Citigroup isn’t the only bank looking to capitalize on demand for infrastructure investments such as toll roads, airports, utilities and bridges. More and more firms are staffing up to work as advisers on infrastructure deals or arrange related financing.
RBC Capital Markets, a unit of Royal Bank of Canada, recently hired a Managing Director to boost its infrastructure business in the U.S., according to Dow Jones Financial News. RBC Capital Markets’ Global Infrastructure Group is comprised of 90 industry specialists. A total of 18 professionals staff the bank’s U.S. Infrastructure Group.
Credit Suisse Group, Goldman Sachs Group and UBS AG are also among the banks which started infrastructure funds in the past two years as the pace of infrastructure mergers almost doubled to $340 billion between 2005 and 2007, according to Bloomberg.
