Investor interest in supporting new building efforts is well ahead of past years.
Private Equity Firms Spending on Infrastructure
- First 9 months of 2018: $68.2 billion
- 2017: $73.2 billion
- 2016: $66.2 billion
- 2015: $50.3 billion
Source: Preqin, quoted in the Wall Street Journal
Private equity investors are flocking to infrastructure investment opportunities as long-needed projects move towards lift-off.
The pace of their investments topped $68 billion the first nine months of the year – up nearly one-fifth from the same period last year – and surpassing the 12-month spend two years ago, according to a recent report.
Less than a decade ago, it stood at less than $15 billion annually.
Icons of Infrastructure in recent days contacted thought leaders it has worked with in the past year to gain their insights into this buoyant trend.
The Trump Administration plans announced in 2017 to invest $1 trillion in infrastructure has fizzled. Now come private investors to fill in the funding breach, experts included Sia Kusha, Plenary Group head of project development and partnering, said. Plenary Group is a long-term investor, developer and manager of public infrastructure.
“Private equity sees this market as both sustainable and growing,” says Sia Kusha, of the Plenary Group.
“Private equity sees this market as both sustainable and growing, although lack of consistent pipeline particularly in the US has tempered expectations a bit,” Kusha said.
“Recent deals also indicate a much more robust need for equity and significantly more competitive returns. Debt markets remain disciplined and long-term investors and developers are anxiously waiting to engage public owners and bring projects to market,” he said.
Matthew Neuringer, associate at Ashurst, a New York law firm, and an expert on public-private partnerships, said the future portends an uptick in infrastructure work.
“The combination of low interest rates, local government’s being tasked to take an increased role in finding alternative ways of funding and financing infrastructure and the pervasive infrastructure crisis in the US, has created a perfect storm scenario for alternative financing of mega infrastructure projects,” he said.
Martin Travers, group president at Black & Veatch, a major engineering, consulting and construction company based in Kansas, said the stars are aligned for a constellation of new telecommunications and transport infrastructure.
“Examples include the upgrade and enhancement of communication technology through the rollout of 5G wireless technology that will provide high speed, low latency connectivity to people as well as connected devices that will enable new applications that improve infrastructure efficiency and reliability as well as improving environmental sustainability,” he said.
‘’Also, the infrastructure investments that are being funded will support the deployment of newer and more efficient transportation technology including electric vehicles, autonomous vehicles and high-speed transportation including hyperloop deployment that will increase transportation efficiency globally, Travers said.”
Recent news reports document the surge in private equity investment in infrastructure.
The Wall Street Journal reported, “Private-equity firms are on track to raise a record amount for infrastructure investing in 2018, as money managers bet on the growing need to upgrade and expand the world’s railroads, natural-gas pipelines and data centers.
“The firms collectively raised $68.2 billion in the first three quarters of the year, up 18 percent over the same period in 2017 and already surpassing the $66.2 billion they amassed in all of 2016, according to data from Preqin.
“The numbers are set to swell even more as the total doesn’t include the $5 billion raised so far by Blackstone Group in the initial phase of its planned $40 billion infrastructure fund. Meanwhile, two infrastructure powerhouses, Global Infrastructure Partners and Brookfield Infrastructure Partners, which raised $15.8 billion and $14 billion funds, respectively, in 2016, are already targeting new pools of roughly $20 billion each,” according to the newspaper.
Icons of Infrastructure’s network of thought leaders confirm the spurt in investment – and the enormous public needs driving it.
Kusha said, “Public sector owners, on a global scale, are having difficulty keeping up with growing demands related to infrastructure. Transportation, buildings, energy and renewables infrastructure, all have been neglected for many decades and as they age, and urbanizations continues, owners are looking for alternative mechanisms to fund and finance both brown and greenfield projects.”
When it comes – the infrastructure spend will be broad – and transformational.
Travers said, “For many years infrastructure has primarily been thought of as bridges and roads and while infrastructure investment in roads and bridges will and should continue, the investment in newer technology has reached business case maturity that will attract significant portions of the funds being created.”