In light of stalling transaction flows in infrastructure financing, S&P Global Ratings believes the use of “bundling” (the aggregation of multiple projects into a single portfolio for sale to investors) in public-private partnerships is attracting considerable interest.
In a feature for P3 Bulletin, S&P Global Ratings’ senior director, global infrastructure ratings, Trevor D’Olier-Lees, analyses why bundling’s appeal has grown – and how its use could form part of the solution to financing shortfalls.
D’Olier-Lees writes: “By combining projects of comparable characteristics, municipalities can create a project with greater scale – meeting the needs of both issuers and investors.
We have seen that asset bundling can lead to systematic and efficient methods of project assessment, the ability for risk transfer and with a performance-based, long-term asset management focus.”
D’Olier-Lees concludes by asserting that the U.S. water industry, which requires US$84 billion for pipeline repairs before 2020, is particularly apt for bundling. He writes: “Bundling could offer authorities a potential solution. Much like bundling’s use in other industries, by analysing a group of water infrastructure upgrades holistically – thereby identifying shared characteristics – investors and contractors can both employ a more tangible mode of approaching a project. As a result, all counterparties better understand the project’s risks and can make economies of scale savings.”
The article features in P3 Bulletin’s April/May edition (page 19) and can also read online here (subscription required).