Private Capital’s Role in Overhauling America’s Outdated Infrastructure

Whether you can see it or not, the current state of America’s infrastructure system is costing you money. America’s infrastructure woes, such as bridges requiring emergency repairs or highways buckling, are obvious. Others, however, are more widespread and less conspicuous, and they are costing taxpayers and industries across all 50 states billions of dollars each year.

In fact, our recently released infrastructure report shows data from the American Society of Civil Engineers (ASCE) that reveals the cost of fixing America’s infrastructure issues across all sectors amounts to nearly $4.6 trillion. Given the limitations on federal, state, and local spending in recent years, coming up with a way to finance much-needed repairs may seem improbable. That’s where private capital comes in.

During recent years in which spending on infrastructure has been hampered by growing debt loads and curbs on government spending, private infrastructure funds have stepped in — more than doubling their capital raised since 2009. Both private capital deployed through public-private partnerships (P3s) and private investment without a public component have boosted infrastructure efforts in recent years.

In the U.S., by acquiring a stake in companies that own or operate infrastructure assets, private investors are able to use their experience to act as “custodians of infrastructure,” rather than simply business owners. These efforts may account for just a small portion of all infrastructure assets, but privately owned infrastructure funds punch above their weight.

So what does this mean? Private equity is prepared to invest in infrastructure overhaul. With historically high volumes of dry powder, private equity is primed to take the lead in jumpstarting U.S. infrastructure spending, whether by partnering with state and municipal governments, or investing independently.

In fact, many firms have already done so. KKR invested in a much-heralded deal with the city of Bayonne, New Jersey, and a recently executed P3 between the state of Connecticut and Carlyle resulted in 23 modern highway service plazas. This project created 375 jobs in the state — 200 of which are permanent — and will yield $500 million in economic benefit for Connecticut over the life of the concession. After ArcLight Capital became the lead investor in Terra-Gen Power, Terra-Gen developed and constructed 11 interconnected wind projects totaling 1,547 Megawatts, making Terra-Gen the largest onshore wind portfolio in the United States.

There are countless examples of private equity’s success in answering the call to upgrade our nation’s infrastructure. But the potential for future successes is so much greater. By providing a long-term capital commitment, solutions tailored to market needs and demand, project accountability and oversight, as well as unparalleled project performance and speed to market, private equity is unique positioned to be part of the long-term solution to U.S. infrastructure plans.

The AIC looks forward to participating in the discussion about how a federally-backed effort to overhaul our nation’s crumbling infrastructure system can and should involve private capital.

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