North American Infrastructure Leadership Forum
October 23, 2018
Peter Muller
Roughly 150 to 200 attendees representing infrastructure leaders from government, finance, engineering, contracting, equipment, technology and services attended this two-day conference. I only attended day one. Most attendees seemed to be from the finance sector. As the title indicates, the focus was definitely on North America, yet the most interesting session was the luncheon keynote by Ray Washburne, President, Overseas Private Investment Corporation (OPIC). My notes from that speech follow:
OPIC provides:
• Political risk insurance
– Sanctity of contracts
– <1% default rate
• Structured debt
– Up to 75%
– <$500 M
• Investment funds
– Up to 1/3rd debt
It was previously reactive but now it can do feasibility studies up front. It has doubled in size to $60B. Can put equity in. Has bipartisan support. Can operate in 130 countries. Must have US companies involved. Addressing human rights and environmental issues is key to getting loans which take 4-1/2 months for approval. They are a lender of last resort to lift emerging markets.
The Chinese are making a massive asset grab around the world. They gift projects, providing finance, design and build with Chinese resources. They do zero for the local economy. When the project defaults they take over ownership.
Notes from other sessions (may be conflicting since more than one speaker involved):
Financing of large projects is becoming more difficult. The public side is not carrying its weight. States see availability payments as debt which goes to the balance sheet. The international market is more about “user pays”. Long-term secure revenue is attractive to finance initial capital.
Need to go beyond P3s – “Recycling” – not clearly explained.
The money is there – the most important aspect is a knowledgeable team.
The governance model and management model and business investment case are key.
The private sector can bring good management know-how.
Managed lanes rather than toll roads.
Equity investors get 22% – 24% returns.
Most states have add-on regulations above the feds making for a complex situation.
My take-aways:
The US is not a very attractive marketplace for infrastructure investors.
OPIC could help US firms get projects going overseas.
About half the sessions/breakouts were of little to no interest to me/ATRA.
There seemed to be little interest in new technology solutions – rather in new ways to finance.
Since ATRA is worldwide, it may make more sense for us to focus on CG/LA’s Global Infrastructure Leadership Forum which is in Montreal March 26 – 28 2019. Whether we attend or not should be driven by the supplier members IMHO.
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