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United States Infrastructure Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8621 Description Following decades of underinvestment, the federal stimulus plan and the pressing need for newinfrastructure facilities in transport, energy and utilities have revived the dormant infrastructure sector inthe United States, and the country is fast emerging as the new frontier market for public-privatepartnerships (PPPs), high-speed rail and renewable energy projects, to name but a few.The proliferation of PPP schemes and infrastructure investments in the United States has undoubtedlyaccelerated in the past two years. This has prompted BMI’s Infrastructure team to expand its coverage ofthe sector to capture aspects of the US infrastructure sector - such as the stimulus plan or state-specificregulations - that will provide a more thorough analysis of the industry. New features include: a chapter examining the transport PPP market in three different states and oneregion through analysing existing legislation and case studies; a chapter on Federal Loan Guarantees forthe energy sector; and four new company profiles: Skanska US, Balfour Beatty US, GlobalInfrastructure Partners (GIP) and TransCanada. Volume I of the report encompasses the regulatory, business environment/investment environment,political and economic analysis, and the company profiles. Volume II is solely dedicated to majorinfrastructure developments and key projects in the transport, energy and utilities and constructionsectors. In BMI’s United States Q409 Infrastructure Report we are forecasting the US construction industry tocontract by 12.6% year-on-year in 2009, to reach a value of US$503.24bn. Data for the construction industry’s real growth in 2008 were released in late April 2009, and showed a5.6% contraction in the industry, aligning almost perfectly with BMI’s forecast for a 5.5% contraction in2008. This confirms four years of year-on-year contraction in the US construction industry, which BMIbelieves will reach its deepest point in 2009. The US infrastructure sector showed signs of optimism over the past quarter, hinting that perhaps theworst is behind it. In the transport sector, the PPP market showed stability, a change from the turbulencethat defined last quarter. Two toll road projects in Texas - both conditionally awarded in Q109 to a joint venture formed from thesame two companies, Cintra and Meridiam Infrastructure - signed comprehensive developmentagreements (CDAs),, which officially awards the contracts, somewhat akin to a commercial close. In June2009, a CDA was signed for the North Tarrant Expressway project. However, reaching that stage was nota smooth road, with political and legal obstacles delaying the signing of the CDA. Initially BMI notedthat this might spell bad news for the LBJ Freeway, the second PPP awarded to the companies. However,we were pleasantly surprised when, in September 2009, a CDA was signed for this contract too, with littleevidence of difficulty. This signals good news for the PPP market, in Texas at least, and has reinstalledsome confidence in the process, which had been knocked following failures of high-profile projects overthe past year, such as the Midway Airport in Chicago, the Pennsylvania Turnpike and the Alligator Alleytoll road in Florida. Further progress was made on the privatisation front for the Port of Virginia, with two more bidssubmitted for leasing and operating the cargo facilities. One of the bids came from private equity firm theCarlyle Group, which proposes a joint investment with the Virginia Port Authority, according to theVirginia Examiner. The other new bid came from a partnership between investment bank GoldmanSachs and Carrix Inc., which is 49% owned by Goldman Sachs Infrastructure Partners and is theparent company of stevedore SSA Marine. These join the original, unsolicited bid from CenterPointProperties, which was submitted in March 2009. In the utilities sector news has been dominated by renewables projects. The development of new wind andsolar power capacity illustrates the growing market for renewables in the US, where companies have beenattracted by incentives such as federal loan guarantees. In September the US Department of Energy(DOE), along with the US Treasury, handed out the first round of grants for renewable energy projectsunder the American Recovery and Reinvestment Act (Recovery Act). The DOE has awarded US$502mnto 12 renewable energy projects, all of which use either wind or solar power. The grants were approvedunder section 1603 of the Recovery Act, which provides financial support for clean energy projects in theform of direct payments in lieu of tax credits. The projects approved in the first round are estimated toprovide 2,000 jobs and generate 850MW of clean electricity. Despite activity in the sector, data released by the commerce department in June show that compared withApril 2008, construction spending was down 10.7%, which illustrates continued difficulties in bothprivate and public sector investment into the industry. The former is stifled by the limited access tofinancing, which has been a key stumbling block in infrastructure projects, and is putting companies offgetting involved in tenders. On the other hand, public sector investments, led by the stimulus packagefunds, are likely to take time to filter through, as regulations to disperse the funds are put in place, andstates submit potential projects. As of June, for example, just 1.2% of the stimulus funds for transport hadgone through, according to the Transportation Department’s weekly progress report. In addition, the timelag between the funds being deployed and jobs on the ground is substantial unless projects are what isknown as ‘shovel ready’. However, if the public sector can push the funds through it will present anupside risk to our forecasts for 2009 and 2010. Table of Contents
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