The new $1.2 trillion Infrastructure and Investment Jobs Act ("Infrastructure Act") could boost deal flow in 2022 and for years thereafter for developers, strategic and financial investors, and their advisors. Global Project, Energy and Infrastructure Finance partner Allan Marks assesses the investment opportunities that could be created by the Infrastructure Act in recent interviews with Law360 and Institutional Investing in Infrastructure. Mr. Marks has also co-authored an analysis of myths surrounding US federal infrastructure policy in a new article published in the Journal of Structured Finance.
Mr. Marks noted in the interviews that the Infrastructure Act is "stimulating lots of discussions" for 2022, but that "passage of the bill is just the beginning. We have to look at what was actually enacted, how it is administered, and then we will see more clearly what the private side actually does with it." While most of the expanded federal funding is likely to go towards public works projects, Mr. Marks expects that "any time the whole pie is getting bigger, you will find opportunities where it makes sense for private investors to come in." Those private investment opportunities include new projects in energy, EV charging networks, and public private partnerships.
One factor likely to contribute to the increase in public-private partnerships is a new requirement built into the law. Projects valued over $750 million receiving financing assistance through the Transportation Infrastructure Finance and Innovation Act ("TIFIA") program, Mr. Marks points out, will require a value-for-money (VfM) analysis. "The inclusion of VfM is really important and highlights the desire to lower life cycle costs, not just up-front capital costs of procurement, to encourage operating efficiencies and long-term maintenance."
Spotlighting how the Infrastructure Act also extends the maximum TIFIA loan term for projects, Mr. Marks noted, "This added flexibility will lower the cost of capital and make certain projects more affordable and could lead to more infrastructure being built. So many of the infrastructure projects needed are very long-lived assets, so these are useful changes to the terms of the TIFIA program."
Investment opportunities should grow in transportation, energy and other sectors. He predicts that the water sector, in particular, is likely to benefit from new investment. "Some water projects like water treatment, water storage and recycling will see a considerable, even surprising, amount of private activity," he says. "The [Infrastructure Act] certainly encourages both public and private investment in upgrading the nation's water infrastructure." Mr. Marks also foresees more airport deals, which often involve private investment and activity.
To read his full commentary, read the Law360 article, "$1T Infrastructure Package To Drive Big Work In BigLaw" and the Institutional Investing in Infrastructure article, "Infrastructure Week Becomes Reality: A Meaningful Federal Legislative Effort To Address the Country's Flagging Infrastructure Is Law." (Please note that a subscription may be required for full access.)
Mr. Marks previously took a deep dive into some of the other key provisions of the Infrastructure Act – including improvements in the federal permitting process and a breakdown of new funding for energy and other infrastructure programs – in an article he published in Forbes: "Biden Signs Infrastructure Law: Here's How It Will Streamline $1 Trillion In Spending" right when the law took effect.
Mr. Marks has also published another new article (co-authored with Barry Gold) stepping back for a broader look at the historical mismatch between available capital and the need for better infrastructure in the United States. Among other key takeaways, the authors note, "In contrast to a persistent belief that there is insufficient capital available to fund new infrastructure projects, in fact, there is ample public and private capital available. That available capital is not fully deployed due to a misalignment of costs and benefits, a lack of political will, inefficient project selection, and a misplaced emphasis on low-cost procurement that, together with underfunded budgets for operations and maintenance, results in (a) development of infrastructure without due concern for economic viability or positive externalities, (b) a backlog of deteriorating infrastructure projects needing repair or replacement, (c) higher lifecycle costs, and (d) idle capital and higher costs." Their article appears in the Winter 2022 edition of the Journal of Structured Finance: "Seven Myths About US Infrastructure," click here. (A membership with the Journal of Structured Finance is required.)
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