Private Investors to Help Rebuild America
House Speaker, Nancy Pelosi, is calling upon California venture capitalists to help Congress solve some of the most pressing issues facing the United States today, reports the San Francisco Chronicle. The report states that Pelosi has asked Silicon Valley leaders to send Washington their ideas on how to reverse global warming, improve education and health care…and how to rebuild crumbling U.S. infrastructure.
A growing number of politicians, investment professionals and academics increasingly view private investment as vital to the improvement of public infrastructure. Today, this renewed government confidence in privatization could create new avenues for committed capital waiting to be invested in infrastructure. Chicago, Florida, and Pennsylvania are already proceeding with plans to lease existing infrastructure assets. Now, a number of firms are looking to tap opportunities in the burgeoning sector. 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.
Speaking before the Silicon Valley Leadership Group, Pelosi called for “a massive infusion of resources” into innovative solutions, such as investment in electronic health records, preventive medical care and advancement in green technology, according to the SF Chronicle. Pelosi also called upon Silicon Valley leaders to follow in the footsteps of Presidents Thomas Jefferson, who built roads and canals through the territories of the Louisiana Purchase, and Theodore Roosevelt, who established the national park system.
“We have a responsibility to build infrastructure in America … and to do it in a green way and think in an entrepreneurial way. Our competitors are way ahead of us on this,” the report quotes Pelosi as saying.
Future of P3s
Private capital and toll revenue financing will play a major role in funding future transportation infrastructure, according to Budget & Tax News, citing a survey of numerous experts, including U.S. Department of Transportation officials, state legislators, congressional staffers, state and local transportation officials as well as members of the financial and investment community, think tanks, and private consulting firms. The report finds that the vast majority of respondents believe total reliance on public resources and the fuel tax to fund investments in transportation infrastructure is no longer a realistic option.
The survey also finds that State officials are embracing private-sector financing and tolling out of sheer fiscal necessity – not an ideological commitment to “privatization” or a philosophic attachment to market-driven solutions. Influential political leaders on Capitol Hill are coming to the same conclusion.
Politicians Embracing Privatization
“I am convinced that private dollars, administered through public-private partnerships, are a significant part of the answer to our transportation infrastructure challenge,” Budget & Tax quotes Texas Gov. Rick Perry (R), as saying,
House Speaker, Nancy Pelosi, says public-private partnerships are not only here to stay, but they are likely to grow in importance, according to Reuters. In a recent speech before the Regional Plan Association, Pelosi said, “Private investment is playing an increasingly larger role in public infrastructure. Innovative public-private partnerships are appearing around the country, bringing much-needed capital to the table.”
Using private capital to supplement public funding is central to The National Infrastructure Bank Act, first introduced by Senators Chris Dodd and Chuck Hagel back in August 2007. The legislation establishes the National Infrastructure Bank, which as an independent entity of the government tasked with evaluating and financing capacity-building infrastructure projects.
In his opening statement at a recent Congressional Committee hearing on the bill, Dodd said the proposal would establish “a unique and powerful public-private partnership.” He went on to say that “Using limited federal resources, it would leverage the significant resources and innovation of the private sector. It would tap the private sector’s financial and intellectual power to meet our nation’s critical structural needs.”
Private Investors Flocking to Infrastructure
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. A significant number of private equity funds, as many as 72, are currently dedicated to investments in infrastructure, according to Budget & Tax. The report adds that in the aggregate, those funds are estimated to have raised in excess of $120 billion and could support investments in the range of $340 billion to $600 billion.
Looking ahead, UK buyout firm, 3i Group, plans to raise a publicly listed vehicle for infrastructure investments in the U.S. in the next two to three years, reports Dow Jones Private Equity News, quoting Michael Queen, a Managing Partner with 3i.
The report states the U.S .vehicle will be similar to 3i’s $1.8 billion publically-listed infrastructure fund in the UK . Dow Jones adds that 3i plans to first line up a few infrastructure projects in the U.S. to build a “seed” portfolio that it will later use to raise capital through the public markets route in the U.S. The firm also says it plans to expand in the U.S. by building a dedicated US-based infrastructure team – since having US citizens involved will help with political issues.
Dow Jones Private Equity News also quotes Queen as saying, “Over the next 5-10 years, the U.S. infrastructure market will come to dominate the global infrastructure market in terms of opportunity to build both new and existing infrastructure.”
