Beginning in the late 1980s and on into the 1990s, governments in many developed countries privatized many state-owned enterprises, including infrastructure such as airports, electricity, gas, railroads, seaports, telecoms, and toll roads. Some of these facilities were sold to investors, in whole or in part. In many other countries, enterprises of this kind were instead leased to investors under long-term public-private partnerships (P3s). Thereafter, a growing number of governments used such P3s to finance, build, and operate new airports or airport terminals, electricity facilities, seaports, and toll roads. The sale or lease of an existing facility is called a “brownfield” transaction (in part because significant refurbishment may be needed). By contrast, P3s for brand new facilities are referred to as “greenfield” transactions.
Additionally, a substantial amount of U.S. infrastructure is owned and operated by the private sector, including most of the U.S. energy production and electric and gas utility infrastructure. These assets may be held through publicly traded corporations or (in the case of energy) master limited partnerships, or they may be owned directly by private investors.
Infrastructure projects of both brownfield and greenfield types require long-term financing. In the public sector, such facilities are often financed 100% by government bonds, which in the United States are tax-exempt. When the private sector invests in infrastructure, it typically invests equity to cover part of the costs, and finances the rest via either bank loans or long-term borrowing, such as via revenue bonds. These large financing needs led to the development and growth of infrastructure investment funds, most of which raise equity to invest in privately owned or P3 infrastructure (though a more recent development is infrastructure debt funds, as well). Public pension funds, seeking to increase their overall return on investments, have begun investing equity in such infrastructure as well.
During 2019, Infrastructure Investor reported that investors put a near-record $97.3 billion in new money into infrastructure investment funds of this kind. Pension funds continued to increase their investment in such infrastructure, in most cases by placing a specific allocation with one or more of the infrastructure funds, but a handful of large pension funds have built professional staffs that enable them to make direct investments in individual facilities.
This report reviews 2019 developments in the infrastructure investment fund world, focusing on transportation infrastructure. While the scope of the report is global, it pays particular attention to U.S. developments in P3 infrastructure and the growth of U.S. pension fund investing in this field.
Part 1 Introduction
Part 2 Major Infrastructure Investment Funds And Trends
2.1 Overview
2.2 Examples Of Divestitures And Acquisitions
Part 3 P3 Companies And Projects
Part 4 Pension Fund Infrastructure Investing
4.1 Introduction
4.2 Recent Pension Fund Infrastructure Developments
4.3 Drawbacks Of Direct Investment And Asset-in-kind Transfers
Part 5 Supporting Infrastructure And Finance Information
5.1 Research Reports
5.2 Infrastructure Database Resources
Annual Privatization Report 2020 — Transportation Finance
Other chapters of Annual Privatization Report 2020 are here and past editions of the Annual Privatization Report are available here.