Opportunities Grow in Project & Infrastructure Finance
The Pennsylvania Turnpike Commission this month issued an announcement inviting companies interested in learning more about potential partnerships to convene for a meeting. The commission is currently considering public-private partnerships (PPPs or P3s) to finance, design, construct, operate and maintain projects along the Mon-Fayette Expressway and Southern Beltway toll highways near Pittsburgh. The Commission says private involvement is being considering because of the limited state and federal funding available for new transportation projects. According to Turnpike CEO, Joe Brimmeier, privatization may be the most efficient way to advance the infrastructure projects to completion. “We need to look at all options, including alternatives like P3s,” he says. “Timely completion of these projects is important to the region’s economy, and we believe private involvement could accelerate construction, particularly since there’s very limited funding available for new transportation projects at the state and federal levels.”
The infrastructure needs of Pennsylvania are among the most significant in the nation. Funding the nation’s infrastructure projects is currently a focus for the state’s Governor, Ed Rendell. As the new Chairman of the National Governors Association, Rendell 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. “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. Rendell 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.”
Already, 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 named the winning bidder, the Pennsylvania state legislature has yet to approve the deal. A vote is expected on the deal as early as next month. If it passes, it would be the largest ever of its kind in the U.S.
In a recent report the WSJ concludes, “A green light in Pennsylvania could bolster the political will of officials in other states trying to hash out similar deals. That in turn could jump-start projects in waiting, from Florida ’s Alligator Alley to Chicago ’s Midway Airport.” In fact, the report also notes that just last month, New York Governor David Paterson urged legislators to consider leasing some of his state’s roads, bridges and tunnels to help shrink a budget deficit projected at $26.2 billion by 2011.
Proponents of P3s say the lease approach could provide financial relief to state governments struggling with foreclosures, ballooning pension obligations and reduced tax bases, according to the WSJ. Since 2005, eight states have enacted legislation enabling officials to sell or lease highway or transit infrastructure, bringing the total to 25 states, according to the U.S. Department of Transportation.
As state government s grapple with the problem of how to fund infrastructure projects, investment in U.S. infrastructure is also a hot topic on the campaign trail. Although Republican Presidential contender, John McCain, has not proposed a blueprint for road, rail and bridge construction, his Democratic rival Barack Obama has called for the establishment of a $60 billion National Infrastructure Reinvestment Bank over 10 years to rebuild roads, bridges, ports and rails. Obama is also in favor of leveraging private investment to help fund improvements.
Meanwhile, infrastructure assets continue to lure investors around the world. The WSJ states, “As much as states need money to fix their roads and bridges, Wall Street firms are eager to supply it. With the industry’s core businesses in distress from the credit crisis, so-called infrastructure funds — which have already raised more than $160 billion, according to Morgan Stanley — have emerged as one of the most promising growth areas in years.”
As a result, executive search firm, A.E. Feldman, says infrastructure finance jobs exist 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.
A.E. Feldman’s infrastructure finance division is constantly researching industry trends and developments. To inquire about existing and future job opportunities in project and infrastructure finance, the lines of communication are open. Contact A.E. Feldman’s President, Mitch Feldman, and the firm’s expert recruiting team here.
