Outlook 2016: US P3s accelerate

While the level of activity in 2015 could be seen as disappointing, positive developments indicate the US P3 market will live up to its promise.

The past year may not have seen a great number of attention-grabbing public-private partnership (PPPs; P3s) deals but there were plenty of other reasons that should encourage investors to keep the faith in what could become the largest P3 market in the world.  

The announcement that the $3.6 billion LaGuardia Redevelopment Project was finally moving forward after several delays was clearly headline-worthy – not just for the preferred bidder, which was a team led by French infrastructure investment firm Meridiam Infrastructure and its partners Vantage Airport Group and Skanska, but for the future of privatisations in the US aviation sector overall. 

Other positive news also came out of the Northeast region in November when the Port Authority of New York and New Jersey announced that the two states and the federal government had reached an agreement on equally splitting the costs of the Gateway Project, which at $20 billion would become the largest P3 project in the country. A deal is still a long way off but the fact that progress has been made – the Port Authority also agreed to establish the Gateway Development Corporation to oversee the project that would replace the aging Hudson River tunnel connecting New York and New Jersey – after years of going nowhere is no small feat.

And the good news doesn't stop there. As Roddy Devlin, a partner at Squire Patton Boggs, points out, the sector matured in 2015, expanding beyond transportation to encompass high-speed internet, freeway lighting and compressed natural gas fuelling stations. 

“The past year has been interesting in that it's been a very inventive and creative year,” Devlin told Infrastructure Investor in a phone interview. 

An example is the Detroit freeway lighting P3 project, which was the first to be initially financed with private placement debt.

While there weren't 15 or 20 P3 deals being announced in 2015, interest in the US P3 market remains strong both from institutional investors as well as project sponsors.

“One interesting thing about the US market is that, although current deal flow is weak, it is a key focus of most of the major global P3 players, many of whom are expanding their US operations and personnel,” Devlin says, citing UK-based John Laing, which has an office in the US, as an example. Other major foreign firms like Skanska, Vinci and Cintra all say that the US market is their biggest focus when it comes to global development.

“The smart money is betting that the US will become the largest P3 market in the world, so there's certainly no lack of interest,” Devlin says.