US P3 Forum 2011: What Happened in New York? InfraAmericas’ Ten Key Takeouts

By Peter Allison

The overwhelming message from this year’s event – held Jun. 14 & 15 at the Grand Hyatt Hotel in midtown Manhattan – was that P3s breed P3s. In short, more P3 deals will jump-start the market.

It’s not as straightforward as that, however. The US P3 market is almost impossible to define. A P3 in one state may be completely different to a P3 in another. And even within the same state, there will be differences.

But the buzz that surrounded the conference is a reflection of the growing penetration P3s are having across the US at all levels of government. Below are InfraAmericas’ ten key observations from the two-day conference.

(1). The US P3 market needs to see more deals and improved project delivery.
The US P3 industry closed five deals last year. That compared to a total of 21 in Canada in the same period. (Measured by size, those five deals accounted for over USD5bn of capital investment compared to nearly USD8.5bn for four times the amount of Canadian deals). The two markets are vastly different and the US is not likely to offer a Canadian-style P3 deal pipeline in the near future. However, deals need to close in order to better demonstrate the value of P3s and give states and localities more examples to benchmark their efforts against. More P3 developers and equity investors – including US contractors – are on the cusp of investing in P3s but they need to see deal-flow and an increased certainty of execution. In short, more deals would help both private and public sectors.

(2). Budget shortfalls and public spending cuts are both a blessing and a curse for P3s.
Budget deficits and the pressure to rein in public spending, combined with massive infrastructure spending needs, mean that more states and localities are likely to consider innovative funding approaches for public assets. This is an opportunity to get P3s on the agenda. But it’s a double-edged sword to approach P3s merely as a solution to a funding shortfall. They’re more than that. They transfer risk to the private sector and they bring private sector efficiencies to transportation systems. Elsewhere in the world, funding is often lower down the list of benefits P3s can bring.

(3). There is now a serious – and growing – discussion of P3s in the public sector.
The industry can take great encouragement from the fact that a growing number of governors and legislators understand the value of P3s. Governor Snyder of Michigan, who has been a major advocate of the NITC legislation, is one such example. The theme of this year’s conference was the impact of last fall’s gubernatorial and mid-term elections on P3s. However, the P3 industry has arguably been too focused on politics and legislation at the expense of deal execution. The challenge now is moving beyond a broad discussion of P3s, the exchange of ideas, and enactment of legislation, into project implementation mode.

(4). Managing public perception of P3s is important. So too is communicating the right message.
What elected officials – and voters – think about P3s still matters a great deal. Educating them is a slow process. But the industry shouldn’t give up on that. Communicating the message to the public about P3s is also critical. The best way of doing that is giving them direct experience of P3s (see #1). However, getting the message right is important too. The message should be that P3s can reduce congestion, create jobs and deliver economic growth. Both have a direct impact on people’s lives. Explaining the concept of risk transfer – and some of the other benefits of a P3 – does not.

(5). Virginia and Puerto Rico are examples of states that are institutionalizing P3s in order to deliver more projects.
Cognizant of the need to deliver more deals, Virginia has taken bold steps to institutionalize P3s. There is bipartisan support for P3s in the state legislature but Virginia has capitalized on the favorable political winds by establishing a dedicated P3 office, allocating USD1.4bn of state funds to P3s and creating its own state infrastructure bank. This is a dramatic departure from the past and should make P3 deals easier to implement. Puerto Rico is another example of a state that has built the ability to execute P3s into the machinery of government. It announced a preferred bidder for its first major P3 deal – a brownfield concession of its PR-22 and PR-5 highways – days after the conference. Following the lead of Virginia and Puerto Rico – and embedding P3s in the government machine – would be a good approach for other states to follow.

To Read The Full Article, click here: http://www.infra-americas.com/analysis/opinion/880278/us-p3-forum-2011-what-happened-in-new-york-infraamericas-ten-key-takeouts.thtml

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