Infrastructure Sector Expanding, Need Grows for Expertise in Infrastructure Finance
Pennsylvania Governor Ed Rendell says infrastructure renewal would boost U.S. global competitiveness and stimulate the slowing economy battered by tighter credit and soaring oil prices. Rendell says public-private partnerships (P3’s) and imposing tolls on roads are essential to getting the job done. While governments around the world, particularly in Europe and Latin America, have shifted the operation and maintenance of public facilities, including airports, roads, ports and bridges, to private entities for decades, such privatization efforts emerged in the U.S. in recent years… and they are expanding rapidly.
Already, investors around the world are seeking out 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 civic engineering. Additionally, legal jobs are opening up for attorneys with expertise in global project development and complex financial transactions.
Most recently, Barclays Capital, the investment banking division of Barclays Bank PLC, announced the appointment of Trace McCreary as Managing Director and Head of U.S. Infrastructure Finance. According to the firm, McCreary will be developing Barclays Capital’s relationships in the expanding infrastructure sector and will focus on airports, energy generation, ports, rail, roads, social, telecommunications, and water and waste water infrastructure.
“Trace brings a wealth of experience in the origination and execution of financing for infrastructure transactions and is a welcome addition to our leveraged finance team,” said Rick Van Zijl, Managing Director and Co-Head of U.S. Leveraged Finance. “We’ve witnessed a dramatic rise in the rate of private infrastructure investment, which is fueling demand for customized solutions to finance these investments,” he adds.
Focus on Infrastructure
Pennsylvania Governor Edward G. Rendell recently became the new Chairman of the National Governors Association and announced that the organization’s annual “Chair’s Initiative” (which addresses one of the nation’s most pressing public policy challenges) will focus on strengthening infrastructure investment. According to Rendell, the U.S. lags significantly in spending on facilities such as roads, bridges, and passenger rail at 0.6% of GDP, compared with 9% percent in China and 3.5% in the European Union.
“If America is to continue competing in the global economic marketplace, we need an efficient and sound infrastructure,” said Governor Rendell. Noting the American Society of Civil Engineers estimates national infrastructure needs of more than $1.6 trillion dollars over the next five years, Rendell adds that, “For the past two decades, state and local governments have been picking up more of the tab for infrastructure repair, but we can’t keep it up. America’s infrastructure urgently needs attention. From outmoded ports to crumbling bridges to underinvestment in public transit, we must begin a new era of investment in the systems that support our prosperity and our quality of life.”
Rendell is calling for the federal government to “step up significantly” in funding the country’s infrastructure needs. He says the U.S. should establish a capital budget to pay for national infrastructure repairs to ensure the work gets done and prevent the risk of becoming a “third-rate” economic power.
He also plans to work with other states to design and implement strategies for smarter, environmentally friendly, more cost-effective infrastructure investment at the state level, including forming what he calls “groundbreaking public-private partnerships.”
In fact, in an effort to help fund an estimated $80 billion in infrastructure repairs in Pennsylvania, Rendell is already evaluating a bid to lease 500-miles of the PA Turnpike system. A consortium led by Spanish infrastructure company Abertis has offered $12.8 billion to lease the PA Turnpike for 75 years. Although the consortium has already named the winning bidder, 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.
Former U.S. Congressman and Transportation Secretary Norman Mineta , a proponent of public-private partnerships, has said the private sector brings a lot to the table that complements the public sector including the ability to complete projects faster and at less cost.
A New Asset Class
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.
Kohlberg Kravis Roberts & Co (KKR) recently 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’s move comes on the heels of Morgan Stanley’s 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.
As the global infrastructure industry continues to expand there is a greater demand among investment professionals for high-quality benchmarks that accurately reflect this burgeoning asset class, according to Michael A. Petronella, President of Dow Jones Indexes.
As a result, Dow Jones Indexes and Brookfield Asset Management, an asset manager focused on property, power and infrastructure assets, have launched the Dow Jones Brookfield Infrastructure Indexes - a global index series designed to serve as benchmarks of companies that own and operate infrastructure assets, reports Private Equity Wire. The Indexes include benchmark indices to gauge active infrastructure portfolios as well as blue-chip indices that can underlie financial products.
Private Equity Wire quotes Kim G. Redding, Head of Brookfield ’s infrastructure securities platform as saying, “This is an exciting time in the evolution of infrastructure as an asset class. Investor interest and investment opportunities have increased dramatically in recent years, fuelled by the enormous need for infrastructure across the globe and shrinking government budgets, the traditional source of funding for these assets.”
A.E. Feldman’s infrastructure finance division is constantly researching industry trends and developments. To inquire about existing and future job opportunities in infrastructure and project finance, the lines of communication are open. Contact A.E. Feldman’s President, Mitch Feldman, and the firm’s expert infrastructure recruiting team here.
