The US P3 market is on the cusp of finally catching up to other developed countries such as Canada, Western Europe and Australia in terms of deal flow. US P3 executives have seen a precedent-setting year in terms of deal closings in 2012, as three major transportation deals, one airport deal, one water concession deal and one university parking P3 have reached financial close or are about to close.

The better news for market deal makers is that this year is paving the way for several deals going forward, as the pipeline of deals is heavy right now in the US. In 2011, only one P3 transportation deal in the US closed in 2011, when the government of Puerto Rico leased its PR-22 and PR-5 toll roads. In contrast, Canada closed four P3s, while Europe closed on six deals.

With financial closes being reached in the US and many more already on the way, European banks are also looking to the US. Overseas investment banks BBVA, Bank of Mitsubishi-Tokyo, BMO Capital Markets and Santander were among the lending banks for California’s Presidio Parkway project, which closed in June, while Barclays and BMO were among the underwriters for Virginia’s Midtown/Downtown Tunnel projectin April.

“The US is where the money is right now,” said one executive at a US investment bank. “With the euro on the decline and European banks facing tighter liquidity requirements set by Basel III, we’re going to see more foreign banks looking to invest less in euro-denominated deals and plow money into deals on this side of the Atlantic. We’re already going to be partnering with European banks on a couple of different water and transportation deals. That makes things even better for the US.”

Not only is the deal pipeline strong in the US right now, but several states have passed or are considering passing pro-P3 legislation, including Pennsylvania, New York, Maryland, Alaskaand Texas. Ohio, following in the footsteps of Virginia, has stated its intent to create a P3 office. On a federal level, the Moving Ahead for Progress in the 21st Century (MAP-21) bill that increased the TIFIA credit assistance programto US$1.7 billion in annual funding from US$120 million, could lead to an increase of transportation P3s. 

“I don’t think 2012 has been a mere fluke,” said Geoff Segal, vice president of government relations at Macquarie Capital. “If you look at the projects in the US pipeline right now – the Goethals Bridge replacement, Ohio River Bridges, they are all bound to have a similar result to the ones we’ve seen so far this year. Deals this year like the Ohio State University parking concessionshowed us that you can initiate a P3 process and reach financial close relatively quickly in certain sectors.”

Segal also said that what made the PR-22 and PR-5 deals so important is the precedent it set. “There is a shift happening in the US right now that was started by Puerto Rico, when it created a P3 authority,” he said.

“Then Virginia Department of Transportation (VDOT) also created a P3 office. We see that Ohio is doing it as well. Pennsylvania is the newest state to be headed in the VDOT direction in creating the Center of Excellence and having it permeate the state’s Department of Transportation. We can expect to see more state governments adopt a similar model.”

The P3 executives said that going forward, however, more needs to be done to educate the public on P3s, as protests from residential groups, politicians, unions and truckers association will continue.

Richard Norment, exectuvie director of the National Council on P3s (NCPPP) added that “It’s very difficult for the P3 industry to overcome long-held public attitudes and public perceptions that infrastructure, and especially water utilities, should not be run by private partners. This industry, as well as the general press, needs to do a better job in educating people. Most of the time in these deals, there is a lot of confusion about the level of public control that will be retained. It has to be emphasised that the state or municipality will still control water costs and toll rates.”

P3 deals closed or finalised in 2012:

• Presidio Parkway (California)
• Virginia I-95 HOT Lanes
• Virginia Midtown Tunnel
• Bayonne (New Jersey) Water and Wastewater
• Ohio State University Parking
• Luis Munoz Marin Airport(Puerto Rico)

P3s under serious consideration or expected to close in 2013:

• Knik Arm Bridge Replacement(Alaska)
• Goethals Bridge Replacement(New York State)
• East End Crossing(Ohio River Bridges)
• Second Innerbelt Bridge (Ohio)
• Yonkers Public Schools(New York)
• Port of Virginia
• Allentown Water and Wastewater System(Pennsylvania)
• Scudder Falls Bridge (New Jersey, Pennsylvania)
• SH 183(Texas)
• Travis County Courthouse(Texas)
• East-West Highway(Maine)
• Carlsbad Desalination Plant (California)
• New Jersey Transit Parking(New Jersey)
• New York City Parking Meters(New York)
• I-70(Colorado)
• LaGuardia Airport Central Terminal Building (Port Authority of New York and New Jersey)
• Newark International Airport Renovation
• High Desert Corridor, I-710 South Freight Corridor, Sepulveda Pass Corridor, SR-710 Gap(Los Angeles Metro, California)