Infrastructure Ripe for Investment, Demand for Talent Surges
A consortium led by Spanish infrastructure company Abertis has been named the winning bidder in the largest U.S. toll road deal in history. Citigroup is part of the consortium, which has offered $12.8 billion to lease the Pennsylvania Turnpike for 75 years. Although the Pennsylvania state legislature has yet to approve the deal, Abertis says the contract would make it the largest infrastructure operator in the world with assets in the United States, France, the UK, Latin America and Spain. Albertis Chairman, Isidre Fainé, said in a statement, “Our bid represents the interests of the State of Pennsylvania, contributing our excellent track record in managing toll roads worldwide.” Fainé also notes that, “Civil engineering works such as the Pennsylvania Turnpike are infrastructure assets that serve the communities and territories they transect. They are inextricably entwined in these communities and play a key role in their development.”
Investors around the world are looking to capitalize on growing opportunities in infrastructure. As a result, executive search firm, A.E. Feldman, says infrastructure finance jobs are opening up. Demand is surging for professionals 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 recent surge in infrastructure investing has led to a number of new players looking to make multibillion-dollar investments in U.S. infrastructure assets. In fact, Kohlberg Kravis Roberts & Co (KKR) has just stepped into the ring. The private equity firm says it will begin investing in global infrastructure assets, according to Reuters. KKR’s fund size has yet to be determined but it could reportedly pursue about $5 billion.
KKR has hired George Bilicic, the former Managing Director at Lazard responsible for its power, energy and infrastructure activities, to assume control its new infrastructure fund, according to the FT. The report also notes KKR is seeking to hire new executives for the fund in Europe and Asia.
The FT quotes Henry Kravis and George Roberts, Co-Founders of KKR, as saying, “Infrastructure is a multi-trillion dollar global marketplace with enormous need for private investment. This new initiative is a logical extension of our business, building on the significant expertise we have established by investing in large, complex and regulated businesses.”
KKR’s move comes on the heels of Morgan Stanley’s recent announcement that it has raised billions to invest in infrastructure, including assets in sectors like transportation, energy and utilities. The firm successfully closed Morgan Stanley Infrastructure Partners (”The Fund”) with $4 billion of equity commitments, exceeding an initial target of $2.5 billion.
Global Infrastructure Partners (”GIP”), an independent fund set up by General Electric Co and Credit Suisse Group that invests in infrastructure assets worldwide, has also announced that it has raised $5.64 billion for its flagship infrastructure fund.
International investment and specialized fund and asset management group, Babcock & Brown, also recently announced that it has raised an additional $450 million of committed capital for infrastructure investment opportunities in the North American markets, bringing the total capital raised to $1.85 billion.
Babcock & Brown has already successfully invested a portion of the capital raised in the acquisition of an interest in the Natural Gas Pipeline Company of America (”NGPL”) and the acquisition of an interest in the ICS ports which closed in December 2007.
In a statement, Phil Green, CEO of Babcock & Brown said, “We continue to see attractive investment opportunities in the infrastructure sector, our demonstrated ability to execute on these opportunities, despite the constrained capital market environment, places us in a strong position to continue to expand our specialized funds management platform.”
What’s the Attraction?
Infrastructure is considered by most investors to be long-term, inflation proof, and run contrary to business cycles. So, despite offering lower growth than traditional private equity deals, infrastructure assets are attractive to investors like banks and pension funds because of their stable cash flow. As a result, the rising need for more and updated infrastructure coupled with continuing volatility in other asset classes is opening the door to private investment in public infrastructure - or public-private partnerships (P3).
Johannes Huth, Head of Europe at KKR, is quoted by the FT as saying, “There are likely to be great investment opportunities, especially if the European regulator forces the break-up of energy generation and distribution networks and if the U.S. starts to renew its ageing infrastructure.”
