Rebuilding American infrastructure: opportunities for growth


Where are the US opportunities for growth?

Notes from RARE Infrastructure

More spend on airports, roads, rail and water is likely to flow from the Trump Administration’s infrastructure reform. The acquisition of publicly owned assets by listed infrastructure companies is another potential outcome.

The White House’s ‘Legislated Outline for Rebuilding Infrastructure in America’ is part of the Budget proposal for the fiscal year from October 1 2018 – September 30 2019.

The White House is seeking long-term reform in how projects are regulated, funded, delivered and maintained. President Donald Trump also wants Congress to approve a $200 billion federally funded investment to leverage at least $1.5 trillion in infrastructure investment. The breakdown[1] of this planned $200 billion spend covers:

  • $100 billion Incentive Program to ‘encourage State, local, and private investment by awarding project sponsors incentives for demonstrating innovative approaches that will generate independent revenue, reduce project costs and timelines, and improve performance’.
  • $50 billion Rural Infrastructure Program to ‘enable rural America to address its unique infrastructure challenges, rebuilding and modernising bridges, roads, water and wastewater assets, water resources, waterways, power generation assets and broadband.’
  • $20 billion Transformative Projects Program to ‘spur competition around bold, innovative, and truly transformative projects that could dramatically improve future infrastructure, become self-sustaining without Federal support, and have a significant impact on the Nation, a region, State or metropolitan area.’
  • $20 billion Finance Programs ‘to address a broader range of infrastructure needs, giving State and local governments increased opportunity to finance large-scale infrastructure projects under terms that are more advantageous than in the financial market.’
  • $10 billion Federal Capital Revolving Fund. ‘The proposal is to establish a mandatory revolving fund to finance purchases, construction or renovation of federally owned domestic civilian real property.’

These funding programs subsidise some of the design, construction or financing costs associated with developing infrastructure projects. As such, if this proposed budget is approved and the planned spend comes to fruition, certain segments of the listed infrastructure market that have ‘shovel-ready’ projects are well positioned to take advantage of the above-mentioned programs.

The plan also spells out how Trump Administration endeavours to fix underlying incentives, procedures, and policies to spur better and quicker infrastructure decisions and outcomes, across a range of sectors, namely rail, airports, water and social infrastructure.

We expect the proposed incentives will attract global capital and expertise to the US market, particularly within the toll road and airport segment which includes many operators that have been active in the US over the last decade.

These operators will bring experience in successfully developing and executing similar projects around the world and have the skill sets required to deliver these projects on time and on budget. Within the toll road sector, for instance, Spanish infrastructure operator Ferrovial and Australian toll road operator Transurban, have proven experience in successfully building and operating US toll roads.

By Nick Langley, Co-Chief Executive Officer, Co-Chief Investment Officer, and Portfolio Manager and Richard Elmslie, Co-Chief Executive Officer, Co-Chief Investment Officer and Portfolio Manager

[1] ‘Legislative Outline for Rebuilding Infrastructure in America’, The White House. Note, all currency references are USD denominated.

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