Carlyle urges legislation to keep PPP proceeds local

President Glenn Youngkin said such a move would kick PPP adoption ‘into fifth gear’ as he singled out airports as promising investment opportunities.

The key to boosting public-private partnerships for US infrastructure lies in incentivising governments to use them, The Carlyle Group’s Glenn Youngkin said in a podcast on Thursday.

The president of the Washington, DC-based private equity firm called for legislation that would allow state and local governments to keep proceeds from PPP deals and reinvest them in new assets. “Being able to maintain proceeds through the partnership and being able to keep those at the state or local level is really important,” Youngkin explained.

What he suggested is essentially a variation of Australia’s asset recycling model, which gives local jurisdictions the leeway to sell public infrastructure to private investors as long as profits are reinvested in new projects.

Youngkin said PPPs have “gained a prominent place” among the tools that can close the US’s $2 trillion infrastructure financing gap, as estimated by the American Society of Civil Engineers. But to urge wider adoption, legislation like this would “move it into fifth gear”.

Carlyle, which manages $162 billion in assets, sees US infrastructure as a great opportunity for investment, Youngkin continued.

“The expectations are that this will be a partnership with government, federal, some state and local spending, but a lot of private sector investment. And that investment will be provided by firms like Carlyle,” he said.

The firm is currently raising its Global Infrastructure Opportunity fund with a $2.5 billion target. It closed the $1.5 billion Carlyle Power Partners II fund in April 2016.

President Donald Trump has committed to mobilising $1 trillion of investments in the country’s infrastructure. His administration has yet to put forward a specific plan, but a budget proposal in May called for $200 billion through 2026 that could be used to attract $800 billion of private capital.

Youngkin said this could be the “primary financial engine behind these PPPs”.

And the best opportunities for US infrastructure deals? He said airports may be a good place to look.

“There’s an extraordinary amount of investment needed in airports,” he explained. “That’s probably going to be the top prospect for investing in infrastructure over the near term.”

However, he warned that the US permitting process is still a major roadblock to building more infrastructure projects.

“Today it takes nearly 10 years to get a project approved. As a result, these projects die under their own weight because they just take so long,” Youngkin concluded. “We’ve just got to find a way to get on with things.”