Privatization Efforts in the U.S. Gaining Momentum
As the race for the White House heats up, repairing the nation’s crumbling infrastructure remains one of the pressing issues in which the federal government is being urged to intervene. The American Society of Civil Engineers estimates $1.6 trillion is needed over a five-year period just to bring U.S. infrastructure into a state of good repair.
Democratic hopeful, Barack Obama, has promised up to two million new jobs annually through national infrastructure investment. Obama is expected to create a national infrastructure reinvestment bank to expand and enhance existing federal transportation investments. “The national infrastructure reinvestment bank will receive an infusion of federal money, $60 billion over 10 years, to provide financing to transportation infrastructure projects across the nation. On his web site, Barack Obama says, “These projects will create up to two million new direct and indirect jobs per year and stimulate approximately $35 billion per year in new economic activity.”
Republican nominee, John McCain has not proposed a blueprint for road, rail and bridge construction, according to Reuters. The report contends that McCain, however, is a “voracious critic of how Congress loads up infrastructure spending bills with pet projects for members and special interests.”
Federal Assistance Not Enough
Regardless of who is sitting in the oval office next year, the federal government is likely going to be forced to spend billions to rebuild and improve the nation’s decaying infrastructure. Still, executives at leading U.S. engineering and construction companies largely agree that both presidential candidates and parties would be hard pressed to provide the necessary policy and funds fast enough to solve the $1 trillion-plus problem – even if it threatens long term U.S. competitiveness, according to Reuters. The report adds, however, that these experts agree the way should be cleared for the growing amounts of money controlled by infrastructure-focused fund managers to finance everything from toll roads to airports.
The report quotes John Dionisio, head of Los Angeles-based engineering company AECOM Technology Corp as saying “there is plenty of money seeking a home in public private partnerships (PPPs), a form of financing popular in Europe in which governments put companies under contract to invest in infrastructure.”
“Clearly PPPs have a role in financing infrastructure,” David Mongan, President of the American Society of Civil Engineers, told Reuters. “It’s not the only solution, it is simply one tool that is available.”
Investors Seek Double Digit Returns
Right now, infrastructure assets are luring 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.”
Most recently, the city of Chicago reached a $2.52 billion deal to lease Midway Airport for 99 years to The Midway Investment and Development Corporation (”MIDCo”), comprised of Citi Infrastructure Investors, Vancouver Airport Services (YVRAS) and John Hancock Life Insurance Company - the first privatized major airport in the U.S.
Banks and asset managers are currently raising $100 billion to inject into infrastructure projects around the world - twice as much as last year - as investors seek double digit returns from investments lasting 10 years or more, reports Dow Jones Financial News.
The market for unlisted infrastructure funds has grown dramatically in recent years, as an abundance of new opportunities in both developed and emerging markets has paved the way for increasing numbers of vehicles to successfully raise capital, according to the 2008 Preqin Infrastructure Review. The report states there are currently more funds on the road than ever before, as the industry continues to expand into new industries and geographies.
Preqin says it has identified infrastructure fundraisers seeking $95 billion up from $45 billion last year, and just $17 billion in 2006, and $4 billion in 2005. Leading the pack are Australian financial group, Macquarie, and Goldman Sachs which seek a combined $20 billion.
Pension funds are also eyeing U.S. infrastructure assets as an investment opportunity. The California Public Employees Retirement System recently announced it named Randall Mullan as Senior Portfolio Managers for Infrastructure, Internal Global Equity to head up its $5 billion infrastructure program.
CalPERS has earmarked up to 3% of its total market assets to infrastructure through the year 2010, and is exploring investment opportunities in both public and private infrastructure including transportation, ports, energy, water, and communications.
Amid the growing trend, 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 may open up for attorneys with expertise in global project development and complex financial transactions.
A.E. Feldman’s Project & Infrastructure Finance and Legal divisions are on top of global trends in infrastructure investment as well as the latest privatization efforts in the U.S. The recruiting firm invites both investors and companies that own or operate infrastructure assets to contact its President, Mitch Feldman, its CEO, Carol Schwam, and its highly specialized team of executive recruiters directly to open up a dialogue about the array of issues they face and those they anticipate in the future. Candidates seeking information about existing and future job opportunities in project and infrastructure finance are also encouraged to call or e-mail. According to Mitch Feldman, “Our lines of communication are open.” Contact Mitch Feldman, and the firm’s expert recruiting teams here.
