Investment in infrastructure is booming
Investment in infrastructure is booming
Private equity firms are on track to raise a record amount for infrastructure investment in 2018, as money managers are betting on the growing need to improve and expand the world's railways, natural gas pipelines and energy centers. data.
The companies collectively collected $ 68.2 billion in the first three quarters of the year, 18% more than in the same period of 2017 and already exceeded the $ 66.2 billion accumulated in all of 2016, according to Preqin data.
Leading the charge are
KKR -2.64%
& Co., Stonepeak Infrastructure Partners and I Squared Capital, each of which raised an investment vehicle of approximately $ 7 billion this year.
The numbers are ready to increase even more since the total does not include the $ 5 billion raised so far by
BX -0.93%
LP in the initial phase of its $ 40 billion infrastructure fund planned. Meanwhile, two infrastructure majors, Global Infrastructure Partners and Brookfield Infrastructure Partners, which raised $ 15.8 billion and $ 14 billion of funds, respectively, in 2016, are already targeting new groups of approximately $ 20 billion each one.
Institutional investors, such as pension funds, have been allocating more money to infrastructure, attracted by its reputation for constant returns, which are generally found between more secure fixed-income securities and riskier private capital. This is especially attractive, since interest rates are still close to historically low levels and stock prices are near historic highs.
However, achieving those returns is not a success. Now there is a large amount of cash that pursues a limited number of opportunities, which has led to concerns that infrastructure funds will struggle to find places to put their billions to work or pay too dearly to do so. . But private equity officials argue that technological change in telecommunications and energy and the need to improve old railroads and other transport assets create more than enough demand for their capital.
I know. UU It is the largest market for energy infrastructure assets, which are generally not owned by the government. The revolution of the fracturing of the energy industry and the change of the country to be a net exporter of natural gas, as well as the boom of green energy projects, have created new opportunities for investment. KKR said in July that it had agreed to acquireDiscovery Midstream Partners, which collects and processes natural gas, for approximately $ 1.2 billion through a new joint venture with an energy company
Williams
Co
s.
Meanwhile, the digital revolution has attracted the attention of telecommunications assets in the United States, such as cell phone towers and data centers. In June, Brookfield agreed to buy 31 of
AT & T
From Inc.
Data centers in an agreement worth $ 1.1 billion.
Firms with the largest funds argue that their growing scale creates new opportunities by giving them access to deals that smaller funds could not make.
BX -0.93%
is looking for assets that allow it to invest at least 1,000 million dollars, including several publicly traded companies, according to a person familiar with the strategy of the purchasing firm.
Fundraising occurs despite the lack of progress in infrastructure legislation in Washington. President Trump campaigned on the promise of a $ 1 trillion plan for the US infrastructure. UU Y launched a proposal at the beginning of this year. The initiative opposing Congress opposition from the beginning, in large part, because it would require states and cities to obtain their own money to improve roads, airports and water systems.
The White House has changed its focus towards other priorities such as trade. In July, Stonepeak announced that DJ Gribbin, formerly Mr. Trump's chief infrastructure advisor, would join the firm as a senior operating partner.
Funds such as those administered by Stonepeak and Blackstone, which are mainly concentrated in North America, say they will probably focus more on energy and telecommunications than on transport, much of which falls into the category of public assets.
In the United States, the privatization of public assets such as highways, bridges and airports has It has always been difficult due to cheap financing alternatives, such as municipal debt and the challenges of navigating local politics. But other spheres of the infrastructure market are flourishing, business makers say.
"If you want to privatize a toll road in a major urban city in the US, it becomes a very difficult transaction to make," said Robert Palter, co-leader of global capital projects and infrastructure practice in the United States. McKinsey & Co. consultancy "If you talked about a different variety of infrastructure, such as acquiring private ports or railroads, those are offers that are being made."
Governments outside the US UU They are more open to private capital, which gives companies like GIP, Brookfield and KKR with global funds the opportunity to privatize assets there. GIP bought three airports in the United Kingdom, two of which it still owns, and transformed its terminals into shopping centers. Many large transportation offers abroad involve assets that are not owned by the government. In April, GIP bought Italy's second largest high-speed train operator, known as Italo, for € 1.98 billion ($ 2.3 billion).
There have been some examples of public-private partnerships in the United States.
LP is investing in the remodeling and expansion of Terminal 1 at the John F. Kennedy Airport in New York, for example.
Some still hope that the funds will be used to repair public transportation systems plagued by problems in the United States.
"In the end, the reality is that the infrastructure of the US still remains unfortunate," said Mark Weisdorf, former executive director of infrastructure investment platform at J.P. Morgan Asset Management, who now runs a strategic consulting firm. "Eventually things happen and things happen, that catalyst can still come."
Write to Miriam Gottfried in Miriam.Gottfried@wsj.com
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