It looks as though European style Public Private Partnerships are slowly on their way to the US. Like many countries the US is facing the classic problem of the urgent need for infrastructure renewal combined with gaps in public funding.
The latest Infra-Americas P3 Conference in the US reported that Government entities are increasingly facing budget shortfalls with limited options to close the gap. In fact, 48 States are facing projected budget shortfalls in 2011 and 2012, with a USD180bn deficit projected for 2011.
With limited options, P3s and asset monetisations are now gaining political acceptance, with stakeholder buy-in and investor confidence. It's been slow going, but the concept is finally starting to gain traction: 24 States have P3 legislation, and 17 transactions have closed, with a further 18 transactions in process.
One big change is that while infrastructure as an asset class is still deemed an attractive investment class, more attention is now being paid to asset characteristic - in other words things like essential service, stable cash flows etc., as opposed to the type of asset (airport, parking, utility etc).
It's pretty clear that funding for P3s and asset monetisations is more readily available today than it was 18 months ago, but syndication is now a requirement with dedicated investment funds. It is worth noting that the larger, more sophisticated, pension funds are also now becoming important players.
It seems to me that virtually all kinds of infrastructure projects are potential P3s - at the moment, it seems as though large toll roads and parking asset monetisations are the most popular, with airport terminal upgrades/replacements now also gaining momentum.
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