In the second half of the 20th century, the world’s airports and air traffic control (ATC) systems were essentially all departments of governments. Two events in 1987 launched an ongoing wave of organizational and government reforms. Those events were the privatization of the British Airports Authority (BAA) and the corporatization of the New Zealand government’s ATC functions as Airways New Zealand.

BAA was privatized as a single entity comprising the three major London airports plus several other airports in the United Kingdom. Later government policy decisions led to selling Gatwick, Stansted, and two Scottish airports to new private owners. The improved performance of the privatized airports inspired a global wave of airport privatization and long-term public-private partnerships (P3s) that has resulted in over 100 large and medium-sized airports being either sold to investors or long-term leased as revenue-based P3s—in Europe, Asia, Latin America, and elsewhere. The outlier has been the United States, which has only one P3-leased airport (San Juan International) and a small number of public-private partnership arrangements for airport terminals and other individual facilities.

The corporatization of Airways New Zealand in 1987 also led to a global trend under which more than 60 countries subsequently separated their ATC systems from the government’s transport ministry and set them up as self-supporting corporations, regulated for safety at arm’s length from the government. Within the first decade of this trend, the leading ATC providers organized a trade association called the Civil Air Navigation Services Organization (CANSO). Today CANSO has 86 full members (providers of ATC services) and 88 associate members (mostly supplier companies). CANSO is the ATC counterpart of the global organizations for airlines (IATA) and airports (ACI).

The corporatization of Airways New Zealand in 1987 also led to a global trend under which more than 60 countries subsequently separated their air traffic control systems from the government’s transport ministry and set them up as self-supporting corporations, regulated for safety at arm’s length from the government.

This report reviews developments in the United States and worldwide regarding private-sector participation in airports, air traffic control, and airport security. While the United States remains an outlier when it comes to airport and air traffic control organization and governance, interest in airport privatization via long-term public-private partnership leases continues.

The post Annual Privatization Report 2022: Aviation appeared first on Reason Foundation.

Since the late 1980s, governments have privatized many state-owned enterprises, including infrastructure such as airports, electricity, gas, railroads, seaports, telecommunication providers, and toll roads. Some of these facilities were sold to investors, in whole or in part (as is the case with many European airports). In other countries, public infrastructure facilities were leased to investors under long-term public-private partnerships (P3s). Thereafter, a growing number of governments also 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.

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.
In the United States, a significant amount of infrastructure is owned and operated by the private sector, including most U.S. energy production and distribution plus electric and gas utilities, as well as a fraction of water and wastewater 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. In transportation, however, nearly all U.S. airports, seaports, and toll roads are government-owned enterprises, generally by either state or local governments.

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 cost and finances the rest via either bank loans or long-term borrowing, such as via revenue bonds. These large financing needs have 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, are also making significant equity investments in revenue-generating infrastructure.

Infrastructure Investor reports that during 2021 investors put $136 billion in new money into infrastructure investment funds. Pension funds continued to increase their investment in 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 2021 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 2 reviews the continuing growth and scope of infrastructure investment funds worldwide.

Part 3 then provides an update on the largest companies and major P3 projects underway globally and in the United States.

Finally, Part 4 reviews pension funds’ increasing investment in revenue-generating infrastructure.

Annual Privatization Report 2022 — Transportation Finance

The post Annual Privatization Report 2022 — Transportation Finance appeared first on Reason Foundation.

Governments have used long-term public-private partnerships (P3s) for surface transportation projects for the past 60 years. As documented by José A. Gómez-Ibáñez and John Meyer, the phenomenon began in the 1950s and 1960s as France and Spain emulated the model pioneered by Italy prior to World War II.1 Italy’s national motorway systems were developed largely by investor-owned or state-owned companies operating under long-term franchises (called concessions in Europe). In exchange for the right to build, operate, and maintain the highway for a period ranging from 30 to 70 years, the company could raise the capital needed to build it (typically a mix of debt and equity). The model spread to Australia and parts of Asia in the 1980s and 1990s, and to Latin America in the 1990s and 2000s.

Nearly all the projects in those regions from the 1950s to 1980s were financed based on the projected toll revenues to be generated once the highway was in operation. Some projects went bankrupt as a consequence of reduced traffic and revenues during severe economic downturns (e.g., the oil price shock of 1974), leading to the nationalization of some companies. In the late 1990s and early 2000s, however, the governments of France, Italy, Portugal, and Spain all privatized their state-owned toll road companies and formalized the toll concession P3 model. Australia has allowed several concession company entities to go through liquidation, with the assets (in each case major highway tunnels) being acquired by new operators at a large discount from the initial construction cost.

Other governments in Europe adopted a different form of highway concession. Generally, not favoring the use of tolls, they created the concept of availability payments as a means of financing long-term concession projects. In this structure, the company or consortium selected via a competitive process negotiates a stream of annual payments from the government sufficient (the company expects) to cover the capital and operating costs of the project and make a reasonable profit. The capital markets generally find such a concession agreement compatible with financing the project, via a mix of debt and equity. Since no toll revenues are involved, this model applies to a much broader array of transport and facility projects, including rail transit and public buildings. In the highway sector, nearly all long-term concession P3 projects in Canada, Germany, the UK, and a number of Central and Eastern European countries have been procured and financed as availability payment (AP) concessions.

In a small but growing number of cases—major bridges, as well as highway reconstruction that includes the addition of express toll lanes, for example—governments collect the toll revenues and use the money to help meet their availability payment obligations. These cases are called “hybrid concessions” in this report.

Seven of the top 10 worldwide P3s that reached financial close in 2021 used availability payments, continuing a growing trend over the last seven years. The increasing use of AP concessions has enabled P3s for projects that do not generate their own revenues, as well as hybrid concessions in which toll revenues help the government cover the costs of its AP obligations.

Part 2 Private Highway Projects

Part 3 International Surface Transportation Infrastructure 2021
3.1 Largest International Surface Transportation Public-Private Partnerships
3.2 Countries Reaching Financial Close On First P3
3.3 International P3 Activity By Region

Part 4 U.S. Surface Transportation Concessions, 2021
4.1 Largest U.S. Surface Transportation P3s
4.2 2021 Surface Transportation P3s

Part 5 Federal Policy On P3 Concessions
5.1 Surface Transportation Reauthorization
5.2 Overview Of Financing Tools
5.3 Other Federal Tolling Policy

Part 6 P3 Legislation And Highway Activity Per State
6.1 Overview Of State P3 Legislation
6.2 2021 State Legislative P3 Activity
6.3 State Concession Activity

Annual Privatization Report 2022 — Surface Transportation

The post Annual Privatization Report 2022 — Surface Transportation appeared first on Reason Foundation.

Transportation Finance by Robert Poole

Surface Transportation by Baruch Feigenbaum

The post Annual Privatization Report 2022 appeared first on Reason Foundation.

In the second half of the 20th century, the world’s airports and air traffic control systems were essentially all run by government departments. Two events in 1987 launched an ongoing wave of organizational and government reforms. Those events were the privatization of the British Airports Authority (BAA) and the corporatization of the air traffic control functions of the New Zealand government as Airways New Zealand.

BAA was privatized as a single entity, comprising the three major London airports plus several other United Kingdom (UK) airports. Later government policy decisions led to selling Gatwick, Stansted, and two Scottish airports to new owners. The improved performance of the privatized airports inspired a global wave of airport privatization and long-term public-private partnerships (P3s) that has resulted in over 100 large and medium-sized airports being either sold to investors or long-term leased as revenue-based P3s—in Europe, Asia, Latin America, and elsewhere. The outlier has been the United States, which has only one P3-leased airport (San Juan International) and a small number of public-private partnership arrangements for airport terminals and other individual facilities.

The corporatization of Airways New Zealand in 1987 also led to a global trend under which more than 60 countries subsequently separated their air traffic control systems from the government’s transport ministry and set them up as self-supporting corporations, regulated for safety at arm’s length from the government. Within the first decade of this trend, the leading ATC providers organized a trade association, the Civil Air Navigation Services Organization (CANSO). Today, CANSO has 93 full members (providers of ATC services) and 89 associate members (mostly supplier companies). It is the air traffic control counterpart of the global organizations for airlines (IATA) and airports (ACI).

This report reviews developments worldwide and in the United States regarding private-sector participation in airports, air traffic control, and airport security. While the United States remains an outlier when it comes to airport and air traffic control organization and governance, interest in airport privatization via long-term P3 leases continues, as does interest in reform of the country’s ATC system.

Annual Privatization Report 2021 — Aviation

Part 1 Overview

Part 2 Airports
2.1 Airport Privatization Overview
2.2 Airport Industry Changes In 2020
2.3 Global Airport Privatizations And P3 Concessions
2.4 U.S. Airport Privatization And Public-Private Partnerships

Part 3 Air Traffic Control
3.1 Air Navigation Service Providers (ANSPs)
3.2 Global Space-Based Air Traffic Control Surveillance
3.3 Digital Remote Air Traffic Control Towers
3.4 U.S. Air Traffic Control Reform

Part 4 Airport Security
4.1 Contract Screening
4.2 Trusted Traveler

Annual Privatization Report 2021 — Aviation

Other chapters of the 2021 Annual Privatization Report are here and previous editions of the Annual Privatization Report are available here.

The post Annual Privatization Report 2021—Aviation appeared first on Reason Foundation.

Since the late 1980s, governments in developed (and some developing) countries have 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 also 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.

In the United States, a significant amount of infrastructure is owned and operated by the private sector, including most U.S. energy production and electric and gas utility infrastructure as well as a portion of water and wastewater 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.

In transportation, however, nearly all airports, seaports, and toll roads are government-owned enterprises, generally by either state or local governments.

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 cost 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.

In 2020, Infrastructure Investor reported that investors raised $102.6 billion in new money for infrastructure investment funds of this kind. Despite 2020 being an economically depressed year due to the COVID-19 pandemic, the amount raised was only $18 billion less than 2019’s total.

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 has built professional staffs that enable them to make direct investments in individual facilities.

This section of the Annual Privatization Report reviews 2020 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.

Transportation Finance

Table of Contents

Part 1 Introduction

Part 2 Major Infrastructure Investment Funds And Trends

2.1 Overview

2.2 Examples Of Divestitures And Acquisitions

2.3 Emergence of Long Term Funds

Part 3 P3 Companies And Projects

3.1 Global Companies and Projects

3.2 U.S. 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 2021 — Transportation Finance

Other chapters of the 2021 Annual Privatization Report are here and past editions of the Annual Privatization Report are available here.

The post Annual Privatization Report 2021 — Transportation Finance appeared first on Reason Foundation.

The post Annual Privatization Report 2021 appeared first on Reason Foundation.

Long-term public-private partnerships (P3s) for surface transportation projects have been used by governments for the past 60 years. As documented by José A. Gómez-Ibáñez and John Meyer, the phenomenon began in the 1950s and 1960s, as France and Spain emulated the model pioneered by Italy prior to World War II. Italy’s national motorway systems were developed largely by investor-owned or state-owned companies operating under long-term franchises (called concessions in Europe). In exchange for the right to build, operate, and maintain the highway for a period ranging from 30 to 70 years, the companies could raise the capital needed to build it (typically a mix of debt and equity).

The model spread to Australia and parts of Asia in the 1980s and 1990s, and to Latin America in the 1990s and 2000s.

Nearly all the projects in those regions from the 1950s to 1980s were financed based on the projected toll revenues to be generated once the highway was in operation.

Some projects went bankrupt as a consequence of reduced traffic and revenues during severe economic downturns (e.g., the oil price shock of 1974), leading to the nationalization of some companies.

In the late 1990s and early 2000s, however, the governments of France, Italy, Portugal, and Spain all privatized their state-owned toll road companies and formalized the toll concession P3 model.

Australia has allowed several concession company entities to go through liquidation, with the assets (in each case major highway tunnels) being acquired by new operators at a large discount from the initial construction cost.

Other governments in Europe adopted a different form of highway concession. Generally not favoring the use of tolls, they created the concept of availability payments as a means of financing long-term concession projects. In this structure, the company or consortium selected via a competitive process negotiates a stream of annual payments from the government sufficient (the company expects) to cover the capital and operating costs of the project and make a reasonable profit.

The capital markets generally find such a concession agreement compatible with financing the project, via a mix of debt and equity. Since no toll revenues are involved, this model applies to a much broader array of transport and facility projects, including rail transit and public buildings. In the highway sector, nearly all long-term concession P3 projects in Canada, Germany, the United Kingdom, and a number of Central and Eastern Europe countries have been procured and financed as availability payment (AP) concessions.

In a small but growing number of cases—major bridges, as well as highway reconstruction that includes the addition of express toll lanes, for example—governments collect the toll revenues and use the money to help meet their availability payment obligations. These cases are called “hybrid” concessions in this report.

Seven of the top 10 worldwide public-private partnerships that reached financial close in 2020 used availability payments, continuing a growing trend over the last six years. The growing use of AP concessions has enabled P3s for projects that do not generate their own revenues, as well as hybrid concessions in which toll revenues help the government cover the costs of its AP obligations.

Surface Transportation

Table of Contents

Part 1 Overview

Part 2 Private Highway Projects

Part 3 International Surface Transportation Infrastructure
3.1 Largest International Surface Transportation P3s
3.2 Countries Reaching Financial Close On First P3

Part 4 U.S. Highway Concession
4.1 Largest U.S. Highway P3s
4.2 2019 Highway P3s

Part 5 Federal Policy On P3 Concessions
5.1 Overview Of Financing Tools
5.2 A Recent History Of Federal Transportation Policy
5.3 Other Federal Tolling Policy

Part 6 P3 Legislation And Highway Activity By State
6.1 Overview Of State P3 Legislation
6.2 2019 State Legislative P3 Activity
6.3 State Concession Activity

Annual Privatization Report 2021 — Surface Transportation 

Other chapters of the 2021 Annual Privatization Report are here and past editions of the Annual Privatization Report are available here.

The post Annual Privatization Report 2021 — Surface Transportation appeared first on Reason Foundation.

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.

The post Annual Privatization Report 2020 — Transportation Finance appeared first on Reason Foundation.

As documented by José A. Gómez-Ibáñez and John Meyer, the phenomenon began in the 1950s and 1960s, as France and Spain emulated the model pioneered by Italy prior to World War II.1 Italy’s national motorway systems were developed largely by investor-owned or state-owned companies operating under long-term franchises (called concessions in Europe). In exchange for the right to build, operate and maintain the highway for a period ranging from 30 to 70 years, the company could raise the capital needed to build it (typically a mix of debt and equity). The model spread to Australia and parts of Asia in the 1980s and 1990s, and to Latin America in the 1990s and 2000s.

Nearly all the projects in those regions from the 1950s to the 1980s were financed based on the projected toll revenues to be generated once the highway was in operation. Some projects went bankrupt as a consequence of reduced traffic and revenues during severe economic downturns (e.g., the oil price shock of 1974), leading to the nationalization of some companies. In the late 1990s and early 2000s, however, the governments of France, Italy, Portugal, and Spain all privatized their state-owned toll road companies and formalized the toll concession P3 model. Australia has allowed several concession company entities to go through liquidation, with the assets (in each case major highway tunnels) being acquired by new operators at a large discount from the initial construction cost.

Other governments in Europe adopted a different form of highway concession. Generally not favoring the use of tolls, they created the concept of availability payments as a means to finance long- term concession projects.

Other governments in Europe adopted a different form of highway concession. Generally not favoring the use of tolls, they created the concept of availability payments as a means of financing long-term concession projects. In this structure, the company or consortium selected via a competitive process negotiates a stream of annual payments from the government sufficient (the company expects) to cover the capital and operating costs of the project and make a reasonable profit. The capital markets generally find such a concession agreement compatible with financing the project, via a mix of debt and equity. Since no toll revenues are involved, this model applies to a much broader array of transport and facility projects, including rail transit and public buildings. In the highway sector, nearly all long- term concession P3 projects in Canada, Germany, the U.K., and a number of Central and Eastern European countries have been procured and financed as availability payment (AP) concessions.

In a small but growing number of cases—major bridges, as well as highway reconstruction that includes the addition of express toll lanes, for example—governments collect the toll revenues and use the money to help meet their availability payment obligations.3 These cases are called “hybrid” concessions in this chapter.

Eight of the top 10 worldwide P3s that reached financial close in 2019 use availability payments, continuing a growing trend over the last six years. The growing use of AP concessions has enabled P3s for projects that do not generate their own revenues, as well as hybrid concessions (discussed above) in which toll revenues help the government cover the costs of its AP obligations.

Part 1 Overview

Part 2 Private Highway Projects

Part 3 International Surface Transportation Infrastructure
3.1 Largest International Surface Transportation P3s
3.2 Countries Reaching Financial Close On First P3

Part 4 U.S. Highway Concession
4.1 Largest U.S. Highway P3s
4.2 2019 Highway P3s

Part 5 Federal Policy On P3 Concessions
5.1 Overview Of Financing Tools
5.2 A Recent History Of Federal Transportation Policy
5.3 Other Federal Tolling Policy

Part 6 P3 Legislation And Highway Activity By State
6.1 Overview Of State P3 Legislation
6.2 2019 State Legislative P3 Activity
6.3 State Concession Activity

Annual Privatization Report 2020 — Surface Transportation

Other chapters of Annual Privatization Report 2020 are here and past editions of the Annual Privatization Report are available here.

The post Annual Privatization Report 2020 — Surface Transportation appeared first on Reason Foundation.

• Aviation
• Surface Transportation
• Transportation Finance

Past editions of the Annual Privatization Report are available here.

The post Annual Privatization Report 2020 appeared first on Reason Foundation.

BAA was privatized as a single entity, encompassing the three major London airports plus several other U.K. airports. Later government policy decisions led to selling the Gatwick and Stansted airports, and two Scottish airports, to new owners. And the improved performance of the privatized airports inspired a global wave of airport privatization that has led over 100 large and medium-sized airports to be either sold to investors or long-term leased as revenue-based public-private partnerships—in Europe, Asia, Latin America, and elsewhere.

The outlier has been the United States, which has only one P3- leased airport (San Juan International) and a small number of public-private partnership (P3) arrangements for airport terminals.

The corporatization of Airways New Zealand in 1987 also led to a global trend under which more than 60 countries subsequently separated their air traffic control (ATC) systems from the government’s transport ministry and set them up as self-supporting corporations, regulated for safety at arm’s length from the government. Within the first decade of this trend, the leading ATC providers organized a trade association, the Civil Air Navigation Services Organization (CANSO). Today CANSO has 93 full members (providers of ATC services) and 89 associate members (mostly supplier companies). It is the ATC counterpart of the global organizations for airlines (IATA) and airports (ACI).

This report reviews developments worldwide and in the United States regarding private-sector participation in airports, air traffic control, and airport security.

While the United States remains an outlier when it comes to airport and air traffic control organization and governance, interest in airport privatization via long-term P3 leases continues, as does interest in reform of the country’s ATC system.

Part 1 Overview

Part 2 Airports
2.1 Airport Privatization Overview
2.2 Airport Industry Changes In 2019
2.3 Global Airport Privatizations And P3 Concessions
2.4 U.s. Airport Privatization And Public-private Partnerships

Part 3 Air Traffic Control
3.1 Air Navigation Service Providers
3.2 Global Space-based Atc Surveillance
3.3 Digital Remote Air Traffic Control Towers
3.4 U.S. Air Traffic Control Reform

Part 4 Airport Security
4.1 Contract Screening
4.2 Trusted Traveler

Annual Privatization Report 2020: Aviation

Other chapters of Annual Privatization Report 2020 are here and past editions of the Annual Privatization Report are available here.

The post Annual Privatization Report 2020 — Aviation appeared first on Reason Foundation.

Annual Privatization Report 2019: State Government

Other sections of the Annual Privatization Report are available here.

The post Annual Privatization Report 2019: State Government appeared first on Reason Foundation.

Long-term public-private partnerships (PPPs) for highways have been used by governments for the past 60 years. As documented by José A. Gómez-Ibáñez and John Meyer, the phenomenon began in the 1950s and 1960s, as France and Spain emulated the model pioneered by Italy prior to World War II.1 Italy’s national motorway systems were developed largely by investor-owned or state-owned companies operating under long-term franchises (called concessions in Europe). In exchange for the right to build, operate and maintain the highway for a period ranging from 30 to 70 years, the company could raise the capital needed to build it (typically a mix of debt and equity).

The model spread to Australia and parts of Asia in the 1980s and 1990s, and to Latin America in the 1990s and 2000s. Nearly all the projects in those regions from the 1950s to 1980s were financed based on the projected toll revenues to be generated once the highway was in operation.

Some projects went bankrupt as a consequence of reduced traffic and revenues during severe economic downturns (e.g., the oil price shock of 1974), leading to nationalization of some of the companies. In the late 1990s and early 2000s, however, the governments of France, Italy, Portugal, and Spain all privatized their state-owned toll road companies and formalized the toll concession PPP model.

Australia has allowed several concession company entities to go through liquidation, with the assets (in each case major highway tunnels) being acquired by new operators at a large discount from the initial construction cost.

Other governments in Europe adopted a different form of highway concession. Generally not favoring the use of tolls, they created the concept of availability payments as a means to finance long-term concession projects. In this structure, the company or consortium selected via a competitive process negotiates a stream of annual payments from the government sufficient (the company expects) to cover the capital and operating costs of the project and make a reasonable profit.

The capital markets generally find such a concession agreement compatible with financing the project, combined with a mix of debt and equity. Since no toll revenues are involved, this model applies to a much broader array of transport and facility projects, including rail transit and public buildings.

In the highway sector, nearly all long-term concession PPP projects in Canada, Germany, the UK, and a number of Central and Eastern Europe countries have been procured and financed as availability payment (AP) concessions. In a small but growing number of cases—major bridges, as well as highway reconstruction that includes the addition of express toll lanes, for example—governments collect the toll revenues and use the money to help meet their availability payment obligations. These cases are called “hybrid” concessions in this section.

After a weak 2017, global PPP activity rebounded in 2018 with five project closings worth more than $1 billion each. Table 1 in the report displays the top 10 deals, which were compiled using information in Inframation and Inspiratia, two PPP data resources. Five of the top 10 worldwide PPPs that reached financial close in 2018 use availability payments, continuing a growing trend over the last five years.

The growing use of AP concessions has enabled PPPs for projects that do not generate their own revenues, as well as in hybrid concessions (discussed above) in which toll revenues help the government cover the costs of its AP obligations.

Annual Privatization Report 2019: Surface Transportation

Other sections of the Annual Privatization Report are available here.

The post Annual Privatization Report 2019: Surface Transportation appeared first on Reason Foundation.

First, the reformist government of New Zealand, led by Labor Finance Minister Roger Douglas, converted the air traffic control system from a tax-funded entity (part of the Ministry of Transport) into a free-standing government corporation, supported by charges levied on aircraft making use of air traffic control services. That led to a paradigm shift, under which some 60 countries corporatized or privatized their air traffic control (ATC) systems in the 30 years that followed.

Also in 1987, the reformist U.K. Conservative government of Prime Minister Margaret Thatcher privatized (via a public share offering) the British Airports Authority, operator of the three largest London airports. This, too, led to a paradigm shift under which airports around the world have been sold or long-term leased in the subsequent 30 years.

This report reviews developments in airports, air traffic control, and airport security in 2018, with an emphasis on corporatization, privatization, and long-term public-private partnerships. It includes discussion of the changing patterns of ownership among the major private-sector operators and funders of airports, and the implications of these paradigm shifts on investment and modernization of aviation infrastructure.

Annual Privatization Report 2019: Aviation

Other sections of the Annual Privatization Report are available here.

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The need to finance both types of transactions has spurred the creation of a new kind of financial entity: the infrastructure investment fund. These funds enable various kinds of investors (insurance companies, investment banks, pension funds, etc.) to pool their capital and hire staff experienced in infrastructure finance and management to build a portfolio of infrastructure assets. Some of these funds are set up for a limited term (often 10 years), at which point the assets are sold to others and the proceeds distributed. Other funds are open-ended, with no set time frame but generally much longer expected duration. Some infrastructure investment funds specialize in a geographic region (e.g., Europe) or in a sector (such as energy or transportation).

During 2018, Infrastructure Investor reported that investors put a record $80 billion in new money into infrastructure investment funds. Pension funds continued to expand their participation in infrastructure, viewing this as a way to diversify their portfolios in hopes of increasing the overall return on their assets. Conventional and renewable energy displaced transportation as the number one interest of infrastructure investors in 2018.

This report reviews 2018 developments in the infrastructure investment fund arena, explores a relatively new concept called “infrastructure asset recycling,” explains the growing interest in this sector by public-sector pension funds, and summarizes major PPP projects worldwide and in the United States as of 2018.

Annual Privatization Report 2019: Transportation Finance

Other sections of the Annual Privatization Report are available here.

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Annual Privatization Report 2019 examines the latest on privatization and government reform initiatives at all levels of government. The individual sections available now:

Aviation

Surface Transportation

Transportation Finance

State Government

Additional chapters will be posted in the coming months.

Previous versions of the report are available here.

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Austill Stuart
Editor, Annual Privatization Report
Privatization Policy Analyst, Reason Foundation
austill.stuart@reason.org

The post Annual Privatization Report 2019 appeared first on Reason Foundation.

Annual Privatization Report 2018: Education

For other sections of the Annual Privatization Report 2018 please visit here.

The post Annual Privatization Report 2018: Education appeared first on Reason Foundation.

Part 1
Global Overview

Part 2
International Highway Infrastructure

Part 3
U.S. Highway Concessions

Part 4
Federal Policy On Public-Private Partnership Concessions
4.1 Overview Of Financing Tools
4.2 A Recent History Of Transportation Policy
4.3 The President’s Infrastructure Plan

Part 5
State Law And Policy On P3 Concessions

Part 6
Major Highway P3 Concessions By State

Annual Privatization Report 2018: Surface Transportation

Annual Privatization Report 2018

The post Annual Privatization Report 2018 — Surface Transportation appeared first on Reason Foundation.

Part 1: Introduction

Part 2: Major Infrastructure Investment Funds In 2017

Part 3: The Increasing Role Of Public Pension Funds

Part 4: U.S. Transportation P3 Infrastructure Finance

Part 5: White House Infrastructure Initiative And Asset Recycling

Annual Privatization Report 2018: Transportation Finance (pdf)

Annual Privatization Report 2018

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