US P3 Market Set for Continued Expansion

The private sector is working to make it easier for states and municipalities to finance critical infrastructure projects.

• The success of Cintra’s managed lanes projects in Texas’ Dallas-Fort Worth area has spurred similar ones in North Carolina and Virginia.
• Organizations such as the North American Development Bank (NADB) are leveraging public and private sector funding at a ratio of 1:20.
• The American Society of Civil Engineers gives the U.S. a “D+” on its infrastructure score card and maintains that $4.5 trillion is necessary over the next 10 years to get to a “B” level.

Some industry leaders maintain that the market for public-private partnerships (P3) is expanding as state and local governments look for new ways to finance transportation, clean energy and other critical infrastructure projects.

ricardo-boschSpanish developer Cintra’s North American Business Development Director Ricardo Bosch said during CG/LA Infrastructure’s 10th Annual Leadership Forum held last week in Dallas that the company has developed three managed lane projects in Texas over the past five years, including the LBJ Express Tollway. He noted that roughly $6 billion had been invested in the managed lanes projects, and added that the public investment was less than $800 million.

“Those who pay for the lanes [in Dallas-Fort Worth] and those who don’t are more than happy with this solution because all of them are in a better position,” Bosch said. “It’s the right time to do these types of projects in the United States.”

Cintra should recover its investment within 15 years, Bosch noted. He added that the project’s success has led to similar deals in North Carolina and Virginia.

Despite a dearth of P3 projects to have made it over the line in 2017, CAMG CEO Andrew Charlesworth said that states and municipalities are increasingly rising to the challenge of solving their own infrastructure issues instead of relying on the federal government.

“The reason I’m much more positive about the market now is because the conversation has changed from federal control to federal enablement,” Charlesworth said.  He also noted that increased delegation from the White House to the states in terms of project delivery is particularly heartening for the market.

“What’s exciting for me is this push toward decentralization in the delivery of infrastructure.”

Chatsworth in 2017 left John Laing Infrastructure to establish the Tri-Pillar Infrastructure Fund. The fund, according to CAMG has a roughly $200 million target and will focus on transportation, accommodation and utilities infrastructure opportunities in North America and Europe.

At the same time, other organizations such as the North American Development Bank (NADB) are currently leveraging public funds to deliver a wide range of infrastructure projects.

“What’s exciting for me is this push toward decentralization in the delivery of infrastructure.” – CAMG CEO Andrew Charlesworth

Managing Director Alex Hinojosa during the event said that his organization has successfully leveraged $450 million in public funds into almost $9 billion in capital for infrastructure projects located on the US-Mexico border.

“Our goal has been to bring in more dollars into priority infrastructure projects,” Hinojosa said. “We are leveraging public and private funds typically at almost 1:20.”

The bank and its sister institution, the Border Environment Cooperation Commission, were created in 1993 under the auspices of the North American Free Trade Agreement to address environmental issues at the border. NADB provides financing and technical to support for infrastructure projects in the region, and is funded by the US and Mexican governments.

Hinojosa said the NADB is currently attracting Mexico pension fund money into infrastructure deals along the border via a new investment vehicle called a Certificate of Development Capital (CKD).

The CKD allows Mexican pension funds to invest in infrastructure projects through senior debt alongside the NADB and other banks. Hinojosa said that the pension funds are required to make investments through registered instruments, and that they have in the past heavily invested in Mexican treasuries.

“To have them to be able to invest in water plants, desalination plants, wind and solar farms, that is a great thing for them,” he said. “We led that charge.”

Some at the event noted that, despite innovations such as the CKD, there remains a gap between the amount of funds currently being raised and the capital needed for infrastructure projects.

“The country spends over $1 trillion annually on infrastructure,” Edward Fanter, a senior member of Deloitte’s Infrastructure & Capital Projects Practice, said. “Yet the American Society of Civil Engineers gives the U.S. a ‘D+’ on its infrastructure score card and maintains that $4.5 trillion is needed over 10 years just to get the country’s existing infrastructure to a ‘B’ level.”

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