Engineering Inc. - July/August 2009 - (Page 4)

NEWs & NotEs Private Financing Challenges Stand to Alter PPPs T he weak economy is forcing a reduction in public-private partnerships (PPPs). Global financial experts speaking at the Reuters Infrastructure Summit in May said the failures of recent high-profile PPP efforts have fueled concerns about the future viability of PPP financing. Chicago’s $2.52 billion Midway Airport lease, once seen as a model for privatization, has been scuttled by the credit crunch, and political opposition has defeated a $12.8 billion turnpike deal in Pennsylvania. Tom Osborne, of the international finance management firm UBS, said future PPPs will need to be considerably lower in value to be successful. “You’re going to see a more incremental approach, both in the private and public sectors, in order to prove out the concept that privatizations can be an essential tool,” he said. Analysts also noted that downsized PPPs will reduce the amount of money private operators must raise for an upfront government payment. With state and local governments still facing huge budget deficits and crumbling infrastructure, experts contend the need for cash will keep PPPs percolating, albeit on a smaller scale. Modest government properties such as small toll roads are said to be the future of publicprivate partnerships. “Governments look at the experiences of Pennsylvania and some of the other areas where a lot of attention was attracted and say, ‘I don’t need to sell the most important asset in the state,’” said George Bilicic, chairman of the power, utilities and infrastructure division for Lazard, an international financial advisory firm. “Instead, governments should be looking at more modest assets, such as a lone toll bridge or parking garages.” Bilicic noted that while some past PPP leases cover 99 years, durations going forward could be shorter, such as 30 years with renewal if performance standards are met. That, he said, might also be more palatable from a political standpoint. Summit speakers also predicted that future privatizations will involve only part of an asset, allowing the government to retain some of the revenue stream. Additionally, deals could be structured to give the government a share of revenue if the value of the asset grows above a certain point. Public pension funds also could be a growing source of financing for PPPs as fund managers look to diversify beyond stocks and bonds. DOI Touts ‘Huge Potential’ of U.S. Wind Energy Industry U .S. offshore areas demand and wean the near coastal urban United States off foreign centers have huge oil and gas. “We sit on 3 potential for wind energy percent of the world’s development, says U.S. oil reserves. We consume Secretary of the Interior 25 percent of its oil. Ken Salazar. Our dependence on for“More than three-fourths eign oil is a national of the nation’s electricsecurity problem, an ity demand comes from environmental security coastal states, and the wind problem and an economic potential off the coasts of security problem.” the lower 48 states actually U.S. Secretary of the Interior The Interior Departexceeds our entire U.S. elec- Ken Salazar ment’s Bureau of Land tricity demand,” he says. Management has identiSalazar says sustainable sources of fied about 20.6 million acres of public energy must be found to meet future land with wind energy potential in the 4 ENGINEERING INC. July / AuGust 2009 11 western states and 29.5 million acres with solar energy potential in the six southwestern states. Furthermore, there are more than 140 million acres of public land in the western states and Alaska with geothermal resource potential. The National Renewable Energy Lab has identified more than 1,000 gigawatts of wind potential off the Atlantic coast and more than 900 gigawatts of wind potential off the Pacific Coast. “We are opening our doors not just to oil and gas and coal, but also to the wise development of solar, wind and wave, biofuels, geothermal and small hydro on America’s lands,” says Salazar. Silvia Otte/Getty Images

Table of Contents for the Digital Edition of Engineering Inc. - July/August 2009

Engineering Inc. - July/August 2009
Table of Contents
From ACEC to You
News and Notes
Market Watch
Legislative Action
Cover Story: Sen. Barbara Boxer (D-Calif.)
Holding Court
Guest Column
2009 ACEC Professional Liability Insurance Survey
2009-2010 Executive Committee
2009 Fall Conference Primer
Members in the News
One On One

Engineering Inc. - July/August 2009