Demand for Talent Grows as Investors Tap Opportunities in Infrastructure
In Michigan, plans to expand and improve I-94 through Jackson County are reportedly expensive and long overdue, according to the Jackson Citizen Patriot. In Pennsylvania, a three-mile stretch of I-95 was recently shut down, backing up traffic for miles, according to Fox News. The reason for the delays: emergency repairs on a 6-foot crack in a concrete pillar supporting the major corridor through the Northeast. Both of these incidents are merely reminders of the major, widespread infrastructure issues the U.S. currently faces. Unfortunately, current federal financing methods do not to meet the demands of repairing and renewing the nation’s crumbling infrastructure. But politicians and investors alike are pushing for new methods in which the federal government can finance infrastructure more effectively, with a combination of public and private capital – or public private partnerships (PPPs).
Now, as investors around the world seek to tap opportunities in infrastructure, 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.
Renewed Confidence in Privatization
Outside the U.S., there has been a move toward government privatization of infrastructure assets. Here at home, most infrastructure assets are still owned by government-related entities. But things are changing thanks to a widening gap between city and state budgets and the country’s growing infrastructure needs.
In response to the growing concerns about I-94, U.S. Secretary of Transportation Mary Peters recently paid a visit to Jackson to encourage the state to allow the use of private dollars to help foot the bill. The Jackson Citizen Patriot reports she also promised to expedite reviews of I-94 plans by her department. The report quotes Peters as saying, “Innovation in Michigan shouldn’t be met with stale red tape in Washington.” She also estimates that there is more than $400 billion in private funds available worldwide for public transportation projects.
In response to Peters’ comments, Michigan DOT spokesman, Bill Shreck, says, “Public private partnerships can be an important tool in transportation funding.” The report also says that Gov. Jennifer Granholm and the state legislature have created a taskforce to look into the issue.
Renewed government confidence in privatization could create new avenues for committed capital waiting to be invested in infrastructure, according a recent study conducted 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.
A Growing Asset Class
Toll roads, power grids, parking lots, bridges, water utilities, airports, even cell phone towers are all considered infrastructure assets. In recent years, this area of the capital markets has experienced staggering growth, according to a recent report in U.S. News & World Report.
The report states, “The expectation in such deals is that private firms can squeeze more value out of those properties with better management, while cash-strapped municipalities often get a big chunk of money to fund other projects without being forced to raise taxes.” U.S. News & World Report also contends that overall these investments have panned out.
The international leader in infrastructure investments is Macquarie Bank, a fast-growing, Australian company that has spearheaded a major market expansion of infrastructure as an asset class. Macquarie bundles infrastructure investments into funds, and sells them to investors anxious for predictable dividends, stable returns and diversified risk. Specifically, the Macquarie Infrastructure Group - one of the largest developers of toll roads in the world – has managed to grow revenues on most of its roads even when traffic declined.
