Focus Georgia Conference
April 25-27, 2007
Creating value through partnership
General Market Analysis
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PPP market is hyper-competitive.
States are struggling to “open up the pipeline.”
Procurements are sophisticated and challenging for both sides.
Demand for improvement transit grows.
Toll tolerance increasing versus higher taxes.
Social enhancements delivered by PPP deals important to highlight .
Foreign ownership remains an issue, though fading.
Gas prices/fuel economy/environmental debate- watch closely.
Unfriendly Congress needs attention from industry.
Next Highway Bill talks starting; industry must activate.
Myths often outweigh truths on PPP.
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US Infrastructure Investment Market
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Investors (financial, institutional) getting more involved:
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Private placements
Unwrapped products
Derivative products such as interest rate swaps
Subordinated debt
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US Infrastructure Investment Market
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Development of secondary market:
• Financial investors likely become more willing to take construction
risks on Greenfield projects.
• Those willing to take some of these early risks will eventually sell
down to operators and financial investors as the asset matures.
• Frees up the capital from the original investors to take more
projects.
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US Infrastructure Investment Market
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PPP’s will contain new schemes to capture partnership
advantages:
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Availability payment.
Shadow tolling.
Innovative product where private sector’s knowledge is fully used.
High efficiency in the construction phase when the contractor can
focus on production instead of working based on the contract with
variation orders, claims, time delay, and cost overruns.
• Life-cycle thinking with the total cost over the full concession period
in focus instead of keeping the upfront investment to a minimum .
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Partnership
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Stronger emphasis on partnership.
• Public and private sector partners working together to realize project goals.
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Better “educated” clients.
More American contractors as equity investors in PPP transactions.
• Benefits development of the industry
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Private sector capital available from more sources.
• Establishment of infrastructure funds.
• Increased interest from institutional investors for direct investments.
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Willingness to consider different payment structures.
• Availability payment; Port of Miami Tunnel
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Greater general acceptance of PPP as viable alternative.
Higher frequency of Brownfield auctions to raise capital for Greenfield
projects or funding for improving existing assets.
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Focus Georgia Conference
Karl H. Reichelt
Executive Vice President
Skanska Infrastructure Development
99 Canal Center Plaza, Suite 125
Alexandria, VA 22314 USA
karl.reichelt@skanska.se
www.skanska.com/id
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