•  Plenty in the pipeline 

     

    Deals have been scarce in the US infrastructure market over the past 12 months but that doesn't mean there hasn't been much hard work put into structuring the next wave of major projects.

     

    The pipeline for 2012 offers several reasons for optimism as long-awaited projects such as the Midtown and Downtown Tunnel project in Virginia are expected to demonstrate that the Public Private Partnership (PPP) market will be a key facilitator in ensuring large and complex deals can complete in a difficult funding climate.

     

    Latent demand 

    Infrastructure developments bring much needed economic boosts and the additional confidence deals generate can drive the market forward. The US and Canada have built some of the finest road and rail infrastructure in the world over the last century - much of it responsible for the economic prosperity of various states and provinces.

     

    But the global recession has coincided with a time when that aging infrastructure is beginning to creak.

     

    Consequently, demand for investment is very high. There is a wall of private money being held throughout both countries which, given the right conditions, could be used to unlock very significant projects which simply cannot be supported by the level of public funding they would previously have attracted.

     

    A patchwork quilt 

    What we are striving to achieve in every deal is a structure which offers all parties an acceptable balance of risk and reward. In a country as large and as diverse as the US, the approach to this can differ greatly from state to state.

     

    Some areas simply don’t have a track record of getting PPP’s off the ground – all manner of local politics, legal issues and mistrust of external investors can de-rail a deal even if there is an appetite from the private sector and finance is structured and ready to go.

     

    Anthony Porter, Head of Project Finance – North America, Lloyds Bank, said: “This can breed some cynicism over whether projects will reach financial close in certain areas and means that investors are looking to places like Virginia, Florida, Texas and Colorado to lead the way with their successful PPP programs. 

     

    “In Canada there is typically a greater expectation that projects will be completed amid a uniform PPP legislation, strong governmental support, and experienced public sector partners.”

     

    “The responsible public sector authority ensures that the benefits of PPP’s are transparently analysed and clearly communicated to the public. This approach generally results in strong public support and creates a solid platform from which to sponsor the use of PPP’s.” 

     

    Making the case 

    Communicating the financial, environmental and community benefits of proposed infrastructure is an important first step towards projects getting the green light.

     

    Even before Lloyds Bank can become involved and begin to look at packaging finance for a project, there is a lot of work to be done demonstrating the public benefit, such as improved levels of service, value for money, and the creation of development opportunities

     

    Karl Reichelt, Executive Vice President, Skanska, said: “The market is maturing.  There is huge potential across a number of sectors but we still need to see more realistic projects come to market.  But, if you take the Goethals Bridge as an example, nine consortiums applied for the shortlist and three were selected.  So, you have an enormous number of interest and players out there.  All that is needed is more states procuring more projects to really take the US PPP market to the next level.” 

     

    “As more of these states begin to demonstrate that they can clear the legal and regulatory hurdles which can hold projects up, there is plenty of private debt and equity available to finance them. Providing the economy can remain stable and once a couple of key projects have been delivered, there should be more confidence from both sides.”  

     

    2012 – A VINTAGE YEAR? 

    With only one PPP project coming on line in the US and lower than expected Canadian public infrastructure sector procurements in 2011, there are strong hopes that several major deals will achieve financial close and begin development in 2012.

     

    Along with major consortium partners, we are looking at a number of prospects at various stages of the PPP development process.

     

    These include:

     

    Goethals Bridge - a replacement for the toll bridge which joins Staten Island to New Jersey - an important link at the centre of one of the busiest airport cargo networks in the US.The project involves the Port Authority of New York and New Jersey.

     

    Knik Arm Crossing - a proposed vehicular toll bridge to link the strategically important ports of Anchorage and Mackenzie in Alaska. It will involve a 2.7 mile structure and 19 miles of associated road infrastructure.

     

    Ottawa Light Rail - creating a 21st century public transport system, which includes a major tunnel board under the city to ease congestion. Total investment of C$2.1 billion is expected to bring C$3.2 billion of benefits to citizens.

     

    Alberta Schools - the third wave of investment in new schools across the State of Alberta. The previous 32 year contract for 18 schools was the largest education PPP award in Canada’s history.

     

2/24/2018 10:21:49 PM