‘Hybrid’ infrastructure deals to dominate US

Advisors, investors and bankers at a panel on greenfield and brownfield assets at PEI’s Infrastructure Investor Forum in New York said assets that blend characteristics of both asset types are likely to dominate infrastructure investment in the coming years.

Rather than brownfields or greenfields, industry practitioners believe “hybrid” deals that mix both asset characteristics will dominate the future of the US market.

That was the main sentiment expressed during a panel on the distinction between greenfield and brownfield assets at PEI’s Infrastructure Investor Forum in New York.

Greenfield, or new-development investments, are often contrasted with brownfield, or existing investments as two distinct sub-asset classes within infrastructure. But panelists and conferees gathered at the event seemed to think that this distinction was too black-and-white.

Luis Palazzi

Jim Smith, head of infrastructure investment banking at Merrill Lynch, pointed to a Texas project, the SH-121, as an example of an investment that blended characteristics of both greenfield and brownfield assets. Texas had asked potential concessionaires to finish building portions of the toll road that the state had not yet funded and stood ready to award a concession for the existing portion of the road. Other panelists nodded as Smith said the project would have been a good deal for the people of Texas. A public transportation agency, the Northern Texas Tollway Authority, ended up funding the project on its own.

Stephen Howard, head of infrastructure and project finance at Barlcays Capital in New York, agreed with Smith, adding that “hybrid” deals similar to the SH-121 would likely get more traction in the future.

For pure greenfields, both Howard and Smith agreed that the municipal bond finance market will continue to provide an attractive financing option.

In New York, investors will likely find ample opportunities for both kinds of opportunities, Samara Barend, the executive director of the New York State Commission on State Asst Maximisation, told the audience. She added that the New York State Asset Maximisation Board, the body overseeing public-private partnerships in New York, should be set up soon and ready to facilitate such investments.

Panelists also took a “hybrid” view on the power of infrastructure investments to facilitate job creation. Though greenfield projects are often viewed as a bigger job creator than brownfields, Luis Palazzi, vice president of infrastructure concessionaire Abertis USA, said that governments can actually create as many jobs with brownfields as with greenfields. In Pennsylvania, for example, Abertis would have invested about $2 billion in the first few years of managing the state’s turnpike, had their bid ultimately succeeded. That investment, Palazzi said, could have supported and created a lot of jobs.

Job creation is ultimately the result of what governments do with the proceeds from their brownfield deals, Palazzi added.