BRITISH construction and engineering companies are sizing up an emerging market in Private Finance Initiative (PFI) projects in the United States thought to be worth $1.6 trillion (£1,050 billion).
The American Society of Civil Engineers estimates that this sum needs to be spent over the next five years just to maintain the US’s infrastructure.
British construction companies and engineering design consultancies such as Balfour Beatty, John Laing and Halcrow are champing at the bit to enter this market. Transportation, in particular road-building, is likely to be the primary use for PFI-style deals in the US, but government accommodation, schools and public transport could become increasingly important.
Texas is one of the first states to choose PFI as a way of renewing infrastructure. It has appointed KPMG to advise it on the process. Texas wants to renew all its big highways and build new roads to cope with a population explosion. Tim Stone, international chairman of PPP (Public Private Partnerships) advisory services at KPMG, said that the Texas contracts alone are worth $187 billion. He believes that other states will begin to tender contracts on a similar scale as politicians realise that public funds are not available to repair and renew infrastructure.
“Historically, the US had the money to create assets but has had nothing for maintaining them,” Mr Stone said. “When you build a road or a school, you generate obligations that need to be taken care of. PPP makes sure there is adequate funding for maintenance.”
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Anthony Rabin, finance director of Balfour Beatty, said: “The US isn’t just one market, it’s a series of markets and they are all going to develop at different rates with slightly different priorities and rules. It’s very unlikely that one company will want to be in every market.”
Balfour Beatty is bidding for a contract to build a new toll road, Highway 161, in Dallas/Fort Worth, Texas.
The first PPP deals in the US have involved the transfer of infrastructure assets to private sector investors, such as the sale of the Chicago Skyway toll road to Macquarie Securities, the Australian investment bank, and Cintra, the Spanish construction company. The road was leased to the private sector to operate for 99 years, raising $1.82 billion. However, states are now offering contracts to build new assets on greenfield sites.
Financiers such as Goldman Sachs, Merrill Lynch and Morgan Stanley are likely to follow Macquarie’s lead in seeking out deals that involve asset sales. European construction groups, which generally have stronger balance sheets than the largely regional US construction companies, are more interested in the construction projects.