What Role does Private Financing Play in Public-Private Infrastructure Partnerships?

One of the forms private infrastructure takes is when the government lets a private player build public assets. This could be a road. This could be airspace. This could be water transport lines. Whatever the case may be, the government has a superior right over that property. However, despite of the private-public infrastructure partnership, the government allows a private player to build infrastructure on otherwise be, government property.

Now, infrastructure by definition is expensive. We're talking about tons of concrete, tons of steel, lots of engineering brain power. Also we have to factor in maintenance and upkeep over an extended period of time.

This all translates to a nice heap of cash. This is not spare change. This is not something that you can easily finance with a run of the mill bank loan. Not by a long shot. You need heavy financing fire power to even think of taking on a project of this magnitude. This is precisely where the complications sink in.

It is not unusual that given the rising costs of labor in places like California and New York that the typical American infrastructure project usually reaches into the hundreds of millions of dollars. Billion-dollar projects are not all that unheard of.

Part of this has to do of course with inflation, but also part of this has to do with massive amount of regulation involved. It's not like you can just round up people who have no jobs and pay them a fairly low rate to work for a day.

It doesn't work that way. You have to hire really nice workers.

You have to hire pre-trained workers. You have to hire people who have reached a certain level of experience and all of this adds up to a much larger tab.

What to do? There were always be a need for public-private infrastructure projects, but the direct producers of such arrangements simply do not have the cash. This is why they tap the private finance markets.

Usually, such arrangements are paid for in the United States through bonds. However, for whatever reason, some companies are now turning to private equity players like Silver Link Trains.

Maybe, it has something to do with our technical expertise.

Maybe, it has something to do with our specific focus on infrastructure funding. Maybe, it has something to do with our track record.

Whatever the case may be, there is an increasing emphasis on private financing because for whatever regulatory and non-regulatory reason, the old sources of financing have become too few and far between. Now, this doesn't mean that you cannot apply to those types of funding, but it's anybody's guess whether you would get approved. There's just too many regulations. There's just too many regulatory complications.

Nowadays, in the eyes of many private players engaged in public-private infrastructure deals, the traditional sources of financing are pretty much non-starters. They are more trouble than they're worth. This really is too bad because this kind of depresses the overall volume of private infrastructure.

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