The Impact of the Euro Crisis on U.S. P3 Market

Proposition: “There is some concern among governments in the US that financially stressed European developers can’t rely on backing from their banks and, therefore, that many U.S. PPP projects that are in the deal pipeline now may not reach financial close. In the past, for example, large Spanish DBFOM developers and their banks have been willing to assume risks US contractors (mainly design-build) won’t take. There is concern now that with a diminished ability to move risks offshore, U.S. deal flow will slow down. This concern exists despite the large increase in federal government support for P3s in the recently passed transportation law.”

Industry Responses: Joe Aiello, Meridiam Infrastructure—

“Nonsense. The US market has undergone dramatic change in the last four years. Yes, the bullishness, revenue risk appetite and available equity of the European contractors has certainly diminished. There is no doubt that revenue risk transfer projects are harder to finance because of less equity available and tougher debt markets for those types of transactions. We have observed a steady shift to availability deals in any event, in part because governments seem to be more confident in convincing their citizens of the merits of these transactions. Putting revenues in the hands of the private sector can be a difficult sell. There is plenty of equity for availability deals and we’ll see good competition. That said – one terrific change happening is the domestication of the industry. US contractors such as Walsh, Fluor and Kiewit are not only in the game as builders, but now participating with equity. This a natural and welcome trend. Local businesses need to feel they can be successful in this market. It took a few years, and we have arrived at a good place.”


About Bill Reinhardt

Editor of Public Works Financing newsletter
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