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.