The US: Big country, lots of energy

Oil prices may have dropped precipitously in recent times, yet investors’ appetite for the US midstream sector remains unwavering and helps to boost the country by one slot in this year’s ranking.

“There’s a lot of opportunity in the United States still – even with lower oil prices,” First Reserve’s managing director and head of infrastructure funds Mark Florian told Infrastructure Investor in an interview earlier this year. “The US is a big country and a big economy with lots going on in midstream and power so the US will continue to be a key market for us,” he said. That statement carries weight given that the Connecticut-based energy-focused private equity firm closed its second energy infrastructure fund on $2.5 billion last June, exceeding its target of $2 billion.

Aquamarine, a real asset fund manager established in July 2014, holds a similar view. According to its co-founder and chief executive Joel Moser, unconventional energy is not under threat and is here to stay.

“You might not see lots of new developments at these prices but it is the point at which the industry continues at its current level on a sustainable basis. So, we’re comfortable investing in, for example, transportation resources in support of unconventional,” Moser said in a recent interview. He also thinks recent developments in the sector have led to a more sane investment environment.

While energy and energy infrastructure may be the sectors seeing most activity in the US market currently, there are a number of other developments worth noting as well, such as the Rapid Bridge Replacement Project, which reached financial close on March 18.
The project, which entails replacing 558 bridges in the next three years, is the first major infrastructure project to be procured under Pennsylvania’s public-private partnership (PPP; P3) programme, which was established in 2012.

In addition, an increasing number of transportation projects are being procured as P3s in various parts of the country. Colorado is exploring the possibility of redeveloping the Great Hall terminal at Denver International Airport by partnering with the private sector.

In February, the state’s transportation commission decided a design-build-finance-operate-maintain (DBFOM) model would be best for delivering the Interstate 70 (I-70) East project. The first phase, estimated to cost $1.8 billion, involves a 12-mile segment of the highway that connects Denver International Airport with the city centre and communities to the west.

Last month, Ohio State University issued a Request for Qualifications (RFQ) exploring the possibility of outsourcing the management of its energy systems under a 50-year concession, which includes operating and maintaining the utility system, procuring the energy supply, and implementing an energy savings strategy.

Virginia, which for the time being is quiet in terms of new projects, has made significant changes to its enabling legislation and procurement process with the aim of depoliticising infrastructure investment, ensuring that projects are prioritised based on objective criteria rather than political whims.

SUPPORT FOR TRANSPORT BILL

Speaking of legislation, reauthorisation of a surface transportation bill seems more likely. In February, nearly 300 members of Congress signed off on a letter addressed to John Boehner, Speaker of the House of Representatives, and Minority Leader Nancy Pelosi urging them to “move a responsibly paid-for multi-year surface transportation bill that will support much-needed economic growth throughout our nation.”

The letter, which was authored by two Republican and two Democratic Representatives, is a good example of bipartisan support for infrastructure. What’s more, the results of the November mid-term elections, which gave Republicans control of both legislative chambers, has many convinced that, with one party in control, more may be achieved.

“Once you have both houses of Congress in the hands of the same party, it becomes easier for Congress to pass major legislation. That’s simply a fact,” John Schmidt, a partner at law firm Mayer Brown said during a recent teleconference. If he’s right, then perhaps the US may move up a place or two in years to come.