Infrastructure investment continues to demonstrate resilience in challenging economic conditions and expand beyond traditional asset classes into those exhibiting infrastructure characteristics. With low customer churn, high switching costs and less correlations to GDP, investments into the communications sectors (data centers, fiber and towers) have been most active principally because they are considered as a utility service to consumers and an essential service to businesses.
Investments in long-standing infrastructure asset classes continue to be strong, tilting towards the core end of the infrastructure spectrum (fully regulated utilities, contracted energy assets) with an increasing focus on sustainability. Investment activity in transport infrastructure -- led by ports and rail -- has slowed. Meanwhile, public-private partnerships continue to lag expectations with minimal activity in 2020.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021. Explore national deals trends.
As we look toward 2021, the infrastructure investing outlook is bright. With unprecedented levels of committed capital, an expanding landscape of sectors demonstrating infrastructure characteristics and flexible capital to deploy, we expect US infrastructure investing to reach new highs in both volume and value.
Communications assets will continue to garner increasing interest. Fully contracted energy assets and small-cap regulated utilities will continue to come to market as infrastructure managers look to harvest investments in early funds and strategic investors divest assets to further focus on their core businesses.
The outlook for transport is less clear. With uncertainty surrounding economic activity, travel and commuting behaviors, how and where transport patterns will evolve is not clear, and that lack of clarity will likely dampen transaction volumes.
2021 may finally usher in a rise of public-private partnerships in the US as state and local governments continue to grapple with the daunting challenge of reviving economic activity and address the fiscal realities of COVID-19. Public-private collaboration may result in new P3 asset classes, which can transact more quickly than the more traditional transport and social sectors. These may include government registries (motor vehicle, title offices, etc.) as well as universities monetizing parking and utility systems.
Lastly, we expect to see more structured transactions in which infrastructure sponsors provide liquidity to strategic investors through innovative structures aimed at satisfying both investors’ objectives with respect to rights, returns and risk sharing.
“Investors want more—It may be infrastructure, but is it also an essential service to businesses?”