The U.S. Infrastructure Opportunity

The U.S. Infrastructure Opportunity

David Snow, Privcap: Hello, and welcome to a Privcap webinar. My name is David Snow. I am CEO and Co-Founder of Privcap, and we’ve got an excellent program for you today involving two experts in infrastructure investment. They are going to be talking about a tremendous opportunity, which is the opportunity to invest in infrastructure assets and businesses in the United States. Both of them are very experience, and we are very interested to hear what they have to say. So thank you for joining us today.

This is going to be an interactive webinar. You will have the opportunity to anonymously submit questions to our experts. We will be keeping track of those, and we’re going to save time at the end to answer your questions. In the meantime, we’re going to hear some thought leadership from our experts and before I ask them to introduce themselves, I would like to ask our sponsor of this program, Rich Martin from Merrill DataSite, to say hello.

Richard Martin, Merrill DataSite: Thank you, David. Good morning, and welcome everyone. Welcome to Webinar: The U.S. Infrastructure Opportunity. I’m Richard Martin. I’m a senior director at Merrill DataSite. And to that end, I’m delighted to be working with Privcap today to present this informative session.

So before I head this back to David, I want to first extend my gratitude to our panelists, Karl Kuchel, the Chief Operating Officer of Macquarie Infrastructure Partners, and Mark Weisdorf, Founder of Weisdorf Associate. I generally appreciate you taking the time to day to share your expertise and viewpoints. Thank you very much indeed. So with that said, David, I’ll hand it back to you and I look forward to the discussion.

Snow: Great. Thank you and very briefly, Karl from Macquarie, would you mind briefly introducing yourself and telling us a bit about Macquarie?

Karl Kuchel, Macquarie: Sure, no problem. Good morning everyone. My name is Karl Kuchel. I’m the Chief Operating Officer for Macquarie Infrastructure Partners. Macquarie Infrastructure Partners, or MIP, is Macquarie’s North American Infrastructure investment franchise. It spans four vintages from 2003. We currently oversee approximately 20 investments in the U.S. and Canada, representing approximately $7 billion of invested capital.

In terms of my background, I’ve been part of the infrastructure investment team here at Macquarie for the last 12 years. The last ten years being based here in New York, and my role spans the entire spectrum of infrastructure investment from sourcing and acquisitions all the way through the management of investments and then divestitures.

Snow: Excellent, thank you. And Mark Weisdorf, if you wouldn’t mind introducing yourself please.

Mark Weisdorf, Mark Weisdorf Associates: Thanks very much, David and Richard. My background is fairly straightforward. I’ve been in private markets for 16 years. Currently I manage a consulting service working with institutional investors and investment management organizations in three private market areas; private equity, real estate and infrastructure. I started in the space about 16, 17 years ago with the Canada Pension Plan Investment Board, where I was responsible for those areas. And most recently, for about ten years, I moved from Toronto to New York about ten years ago to built JP Morgan’s infrastructure platform. About $7, $8 billion in client capital. About $12 billion in assets across three strategies; core, opportunistic and debt. So there we go.

Snow: Great, well Mark, I’m going to throw the first question over to you. I’m hoping you can just set the stage as far as the growth of infrastructure as a distinct asset class in the institutional portfolio. Talk to us about you see rising allocations from limited partners and from institutional investors, and what is behind those rising allocations? What do they hope to achieve in infrastructure?

Weisdorf: Well thanks very much for that question. It’s a soft one. I’ve been speaking to investors around the world about infrastructure for some 15 years, and clearly things took a bit of a pause during the global financial crisis of 2008/2009. But what we are seeing over the last two years, and looking into 2015, is dramatically growing allocations and commitments to the space.

What’s behind it is the characteristics of infrastructure, which is that it has low correlation to equity and fixed income, whether those be private or public equity or fixed income strategies. So it gives you diversification. And there’s a fairly high component, at least for core infrastructure, fairly high component of total return comes from cash flows, from distributions, from assets that are monopolistic in their nature. And that cash flow helps to dampen volatility and therefore, generates relatively predictable, low-volatility returns. So that’s very attractive.

And if we look at what’s been happening in the other major asset classes, what we see is fixed income – oh gosh, interest rates are approaching zero. Not just in Japan, but in Germany. U.S. rates continue to be low. We’re all expecting rates to come up, but in the meantime, they’re quite low. And very few pension plans, in the U.S. for example, can meet their equitable required rates of targets and rates of return in the 7% to 8% category with ten-years treasuries sub two, and with 30-year treasuries sub three, three-and-a-half. So that’s very difficult.

On the equity side, what we’re seeing and we’ve seen it big time the last few weeks, is volatility in the equity markets. So whilst investors, institutional investors, are very happy that equity prices have returned from their post-crisis lows to post-crisis highs, that comes with an awful lot of volatility which really translates into risk. So the two other asset classes, the two other main arrows in an investor’s quiver, have challenges associated with them.

Kuchel: Yeah, it’s Karl here. I mean, I would agree with Mark’s comments on that. I think just drawing them back to the U.S., what I would say is the U.S. is viewed as a very attractive market for infrastructure investment in the global context. And certainly over the last couple of year, we’ve seen the U.S. LP community becoming increasingly interested in investing in infrastructure as a distinct asset class. And also rising interest from non-U.S. LPs coming into the U.S. market and wanting to deploy capital here relative to other infrastructure markets. So I think the U.S. is also a bright spot in terms of LP interest globally.

Snow: Well Karl, let’s further than analysis. You’ve brought just a few slides to kind of illustrate what you think of as the opportunity for private capital to partner with infrastructure investors in the U.S. specifically. I’m starting on this slide here about the importance of infrastructure to the economy. Do you want to kind of walk us through these, and give us your view?

Kuchel: Yeah. I think this slide really just shows something that I hope most people would agree is self-evident, is that quality of infrastructure has a positive correlation with global competiveness given that infrastructure in many cases supports or drives economic activity. And so you see where the U.S. sits there in the global context. What I would highlight though is, and maybe moving to the next slide is, the U.S.’s approach for investment in the public sector investment in infrastructure over most recent times has not been sufficient to maintain the quality of infrastructure. And that’s really what generates the opportunity for a number of investments from all pools of capital. But given that traditional funding sources for infrastructure investment, which has been the public sector, does face some physical challenges, there is an increasing private sector opportunity to invest in infrastructure in the U.S.

And I would break that down, that opportunity set generically down into two, which is firstly, obviously, is population and other macro factors drive growth. There’s a need for infrastructure to support that growth, so that’s either new infrastructure or the expansion of existing infrastructure. But another theme that is key in the U.S. is the deployment of capital into projects to either reconstruct or bring those assets up to a quality that is acceptable to support current activity. One that’s often cited is the interstate road network in the U.S. where there is a significant capital need to bring the existing network up to an engineering standard that is acceptable.

Certainly as part of what we do here at Macquarie, we don’t just focus on infrastructure opportunities that have a public sector counterparty. I think a common misconception is that the opportunity set revolves around public sector entities either looking to monetize existing assets, or to work with a private sector partner to develop infrastructure. In fact in the U.S., when we look at the deployment of capital here, the majority of the capita that we deploy through traditional sourcing channels being private transactions or take privates of listed companies.

So while that is obviously and interesting high-profile piece of the infrastructure investment opportunity, being PPPs and working with public sector participants or vendors. The majority of the deal flow in infrastructure, we’re investing our clients money, is still through sources that you would see across other private equity strategies in other subsectors.

Snow: Well Karl, that’s sad. And I want to just take a look at these two slides very briefly. There is an increase in PPP deal flow. By that we mean public private partnerships. Tell us about what these, what this chart tells us.

Kuchel: Yeah, I think this is an interesting point in that PPPs globally, very well established PPPs – public private partnership – certainly Australia, the UK, continental Europe. They’ve been in place for at least a couple of decades where the public and private sectors partner to deliver infrastructure. The U.S., despite being a very large market and having a very large opportunity for infrastructure investment, has actually lagged the rest of the world in terms of deploying PPPs as a mechanism for delivering infrastructure.

The chart there on the left shows the States that currently have legislation in pace to allow them to deliver infrastructure via this sort of PPP approach. If you took a map of the U.S. 20 years ago, there’d only be a couple of States colored. So that is showing, certainly, that more and more States recognize that due to fiscal constraints and other priorities, involving the private sector – and not just from a capital deployment perspective, but also drawing on the expertise of the private sector – is important and can be beneficial.

And then I would just highlight on the right is that just because, certainly States have legislation in place, it doesn’t mean that they’re immediately active in procuring PPPs.  And so it’s a subset of those with the legislation that are actually active at the moment. I think a key point to note, just generally for the audience is, it’s certainly in many jurisdictions around the world, infrastructure can be a federalist proposition where it’s delivered on a top-down basis. In the U.S., it is at best a State-based approach. And then you can have cities and municipalities that are seeking to procure PPPs. So it is a much more sort of local, decentralized procurement model here in the U.S., which means that various States are at different stages in terms of their familiarity and execution of PPPs.

Weisdorf: In fact, I might say Karl – and I wonder if you’d agree – that the States and the municipalities have more impact and more influence on whether public private partnerships go ahead or not than the federal government does. The federal government can provide some financing, and needs to be supportive in terms of various approvals. But it seems to me that infrastructure is more local than country-wide in the United States.

Kuchel: Yeah, I would completely agree. And different States are more perspective in the way in which you work with public sector entities does vary State to State. So it is much more local. I completely agree on that point.

Snow: Question for Mark Weisdorf. When you say infrastructure, you’re really talking about a lot of different types of assets. And of course, both of you are interested in investing across those assets. Walk us through what you see as the most important differences between the different types of assets under the infrastructure umbrella. And then maybe tell us a bit about how you see the size of the opportunity in these different subsectors.

Weisdorf: Well there’s a number of ways to look at the sector overall, but I think generally speaking, there’s three or four categories. And you can slice and dice risk and return different ways. But the regulated utilities are certainly, generally-speaking, considered infrastructure – water and waste, water, electricity, gas. That would be one category, tend to be regulated by regulatory bodies in the different jurisdictions. In the U.S., it’s usually Statewide regulation.

Then you have transportation assets, which have a different risk profile. And we’re thinking subsectors there would be roads, toll roads, airports, seaports, rail even in certain situations. Those are all certainly hard assets, infrastructure assets, that are required for the movement of energy and people and goods. But the exhibit a greater degree of economic sensitivity.

Then you have social infrastructure in some countries. Less availability of that in the U.S., but more availability of that in Australia, Canada, the UK. And here we’re talking schools, universities, hospitals, prisons. There is government buildings and offices and so on, courthouses and so on. And that is somewhat available in the U.S., but perhaps less so. And we can talk about deals later on. Those often are associated with what we call availability payments. They’re not necessarily assets where there’s a toll or some payment from the consumer to the investor to the lender to the equity investor, but rather it’s governments that choose to work with the private sector. And the private sector builds, operates and maintains these assets. And so it’s the government that pays through a concession agreement to an availability payment. It’s got different terminology too the lenders and the investors. So social infrastructure. And then there’s telecommunications infrastructure, which is a perhaps in my view, a narrower field and perhaps a more volatile potential. So those are the four major subsectors.

What I’ve got on the slide here is I’ve really given examples, actually on the previous slide for just a moment…

Snow: Sure.

Weisdorf: …of the – thanks David – the, where social transportation and utility infrastructure would sit generally speaking on the risk spectrum. These are sweeping generalizations. Infrastructure is very idiosyncratic. You’ve got to look at the specific asset in its specific location with its regulatory regime. And you’ve got to look at the concession agreement to really determine where it sits on a risk-return spectrum. But generally speaking, this is where you might see different types of assets sit on a risk spectrum.

And the only other thing I’d like to point out on this slide before we move to the next is that there’s this middle category there, energy infrastructure. Very broadly which can include regulated electricity and gas. It can include midstream and downstream and storage for oil and gas. It can included electricity power generation, particularly if it’s wind, solar and gas driven. And that again, depending on the structure and the location, that is sort of the mid spectrum. But the reason I wanted to point out energy infrastructure is that it has a different, generally speaking at least in the U.S., you’re dealing less with governments and competing with tax-exempt debt in the energy infrastructure space. Whereas in transportation infrastructure in the U.S. and social infrastructure in the U.S., you have a much bigger component of financing, building, operating and maintaining by various government agencies of those assets. And you have this tax-exempt debt, which is a factor in the procurement, delivery, operation and maintenance of infrastructure.

So if we look at the next slide, this is a breakdown based on a fair bit of analysis produced by the Department of Energy, the energy industry association, McKinsey Boston Consulting Group being – and it suggests that the work that comes from these area studies and groups suggests that there’s very roughly a trillion dollars of need and opportunity in the U.S. over the next seven to ten years. They used to say five to seven years, but I think with the drop in energy prices over the last few months, that might get stretched out to seven to ten years.

And you see that these independent sources have identified needs in the range of $400 billion in the regulated utility space. A lot of that is closing of coal-fired plants, and replacing that with gas-fired generation, but also renewable; wind, solar and so on. Is, sorry that – replacing coal-fired plants with gas and renewable is in the $300 billion power generation requirement, but there’s also transmission and gas distribution required in the regulated utility space.

And then in the midstream space, about $100 billion. All this shale gas and tide oil that’s been discovered not only needs to get out of the ground, but needs to then find its way to refineries, to market, and there’s a great deal of transportation infrastructure that’s required there.

And then lastly, water and waste water. There’s droughts all over the Southwest of the U.S. There’s been lack of appropriate investment in the water and wastewater sector in the U.S., so there’s tremendous needs there. There’s – the government’s had some issues with WIFIA, which is a financing program similar to TIFIA in the road sector. But there’s tremendous need there, and there’s a lot of need in bridges, tunnels, ports and so on. That all adds up to about $200 billion.

Snow: Mark, this is David Snow from Privcap. Let me jump in and ask a quick follow-up question. For both of you, and maybe we could even start with Karl. We know that there’s tremendous need for capital in U.S. infrastructure, but how much of that capital is actually going to translate into private equity style deals for firms such as yours. If I go to a slide that was sent over by Karl, we see that there’s a certain volume and number of infrastructure deals that have been taking place. But it doesn’t seem to come anywhere near fulfilling the capital needs of these four sectors you outlined.

So maybe I’ll throw the first question over to Karl. I mean, just because there’s a need for capital, is that, how much of that is actually going to translate into opportunities for your firm?

Kuchel: No, it’s a good question. And I think the key point to know, I think, on the previous slide is, that is total opportunity or the total investment set. Obviously the private capital investment set will be a subset of that. And it inevitably comes back to the fact that while there may be a capital need, the terms around these deals, which are on a asset-by-asset or deal-by-deal basis, may not always be attractive to the private sector. Or the private sector may not be the logical party to actually finance them.

Mark mentioned earlier, obviously the mini debt market is very active in supporting public sector entities in deploying capital. I agree that that’s not as prevalent in the energy side, but invariably there has to be a meeting of the minds by some of the capital-providing side as well as on the capital-needs side. So if you look at the slide, if you go to the deal slide you will see that there has been pretty consistent deal volume in the U.S. market which is part of this slide, which is the overall North American market including Canada. So from year to year, there is this consistent involvement. So we’re not talking about infrastructure ramping up and there being a huge amount of deals getting done now that weren’t being done previously. And invariably, the opportunity set that is there is sufficient to support this level of deal activity going forward.

So from my perspective, I’m not envisaging the need driving a lot more deal flow. Invariably the deals that get done will be a subset, and that capital need will continue. As it becomes more acute, you’ll see those parties requiring capital, potentially adjusting the terms on which they’ll interact with private capital. And that’s where more and more deals will get done. But I don’t see it, the market at the moment moving into a phase where you’re going to see doubling or tripling of deal flow relative to what you see on this chart.

Weisdorf: Yeah, it’s Mark here. And I agree with Karl. I do think, I don’t think there will be a sudden step-up step change or a sudden ramp up in deal flow, but I do think the next five to ten years potentially provides more deal flow and more capital investment opportunities than the last five to ten years. And the reason I’m optimistic about that is really based on the shale gas revolution. I mean this is a real phenomenon. It’s turning the United States from being a net energy importer to a net energy exporter.

Now it takes time to deploy all of the capital that’s required to make use of the massive discoveries of shale gas and the new technology that’s been applied to extract gas and oil. And not all of that oil – and it’s not just, by the way, in the U.S. It’s also up in Canada and even Mexico is going in that route. So, and not all of the oil and gas that’s being discovered will make its way to the surface and markets. But the massive deposits that have, that are now being effectively worked on will require significant amounts of infrastructure to achieve that achievable goal of the U.S. becoming energy-secure and being a net exporter of energy.

And the interesting thing about the energy infrastructure need and opportunity, is that it is far less subject to what I call – and I mean this in the most respective way – government interference. Because it’s been the private sector that has built, operated, maintained energy from ground to the electricity and gas that comes into people’s homes for many, many years. I mean, there are some municipally-owned gas and electric utilities but very few. And so it’s well accepted that, unlike toll roads and airports where governments have traditionally in the U.S. been the owner-operators. In the energy sector it’s well accepted that the private sector would risk capital, invest capital and earn a return and return on that capital. And so I’m kind of optimistic that a good chunk of this $7, $8 billion dollars on this slide that you’re showing, David, will get done. The question is whether it’s done over the next five years or over the next ten years. Clearly, capital investment plans will change given the current price of oil and gas. But ultimately, that capital will be invested and it will provide opportunity.

The area that’s a little more challenging, that I don’t see tremendous growth – although I do see opportunities in, because the more deferred maintenance there is – the areas I see more opportunity, where I don’t see dramatic change but I do see some increase is, is in the other infrastructure sectors. The water and waste water, transportation sectors. I think we even have a slide there that you might…

Snow: Non-energy opportunities. Yeah, yeah.

Weisdorf: Yeah, that’s the one. And you see, there’s another trillion dollars plus of need in that space. But that, McKinsey, the American Society of Civil Engineers, a number of others believe that there will be a gap in filling the requirements in the non-energy infrastructure sectors. Because although there is improvement and understanding on a State-by-State basis of the potential for private sector partnership with government agencies in procuring and operating and maintain that infrastructure, it’s a slow process. So the general view is that over the next five years there will be a gap in funding those needs. So those needs will continue to exist, but they’re not likely to get funded.

That’s going to take slower to ramp up. But I think I’m still optimistic and Karl, I don’t know what your views are, but I think that there is increasing use of, understanding of and willingness to work with private sector on filling that gap.

Kuchel: Yeah, I think that’s right. I think the energy sector we’ve covered pretty well. On the non-energy side, I would agree. Invariably public sector counterparties are a little bit slower to come to market, so to speak, after they’ve recognized a capital need. Been working on this for about the last ten years in the U.S. and I think over that entire period, certainly market commentators have recognized this coming capital gap that needs to be filled. And we have started to see increasing opportunities. But invariably because it is a State-by-State or a city-by-city phenomenon, the deal flow is linked very closely to those various public sector participants reaching the stage of interacting or being comfortable with private sector money.

So it still will be a little varied in terms of the deal flow. It won’t all come in one wave, but I think just going to the map I walked through earlier, there is an increasing focus and an increasing acceptance. So we should still see more deals getting one. I just would caution against it being sort of a universal wave. There still will be pockets of more and less activity.

Snow: We’ve got some great audience questions that have come in, so I would encourage anyone listening in who has a question for our experts to please send them in. We’ve got about ten more minutes, and therefore I would ask Karl and Mark that you provide short answers. And so with that in mind, I’m going to ask you the biggest question of all from our audience member, and you’re going to be required to summarize your thoughts in an abbreviated answer. And that is, how does the swoon in oil prices affect the infrastructure investment opportunity going forward? Maybe starting with Karl.

Kuchel: So the direct impact on infrastructure that is required to support the supply side, so the production or transport to market, inevitably is going to slow. And Mark already covered that. It’ll push capital expenditure plans out the right. It’ll cause the cancelation of some infrastructure projects. The key point I would note is, obviously oil is a very volatile commodity. We’ve seen it half. We’ve seen it half  I think five or six times in the last 30 years, and it has come back. I’m not saying, quoting a timetable for it to happen this time around, but I think everyone has to recognize that this is a volatile commodity and infrastructure of investment opportunities will move with it.

So going from over a $100 to the $40’s invariably will cause a deferral of the direct infrastructure opportunity, and push that to the right. What I would say is that oil is obviously a large part of the cost base of a number of other infrastructure projects. So if you’re talking vertically integrated waste companies, obviously they’re running full truck fleets. You’re talking about toll roads that are reliant on volumes. Lower gas prices are a positive for those sorts of companies, and so the indirect impact on sort of other infrastructure assets is actually a positive.

Weisdorf: I think the other positive…

Snow: Mark… Yeah, sorry. Go ahead.

Weisdorf: Sorry, David. The other positive is that, think about gas or power generation. I think it’ll just speed up capital investment in gas-fired power plants. Gas prices have dropped dramatically as well. They were already low, but they’ve dropped dramatically in tandem with oil. So I think you’re going to see coal-fired plants that were going to take a while to retire, those are going to be retired very quickly and you’re going to see them replaced much more quickly than you would have otherwise with gas-fired generation.

You’re going to see LNG export plants, again, with gas being cheaper and being abundant in the U.S. You’re going to see more and more capital invested to get that gas to countries like Japan and other countries that are really short gas. So I think there are some offsets to the slowing and stretching out of energy infrastructure investments. So I agree with Karl in that regard. There’s a number of offset, yeah.

Snow: Great. We have a question from someone in our audience about differentiating between large and small to mid-sized infrastructure deals. Are there risk-return outlooks based on size, and are there also deal flow considerations when thinking about kind of mega deals versus smaller deals. Maybe starting with Karl.

Kuchel: Yeah, I mean there are inevitably pools of capital that are more, that have preferred check sized or size of deals which mean there can be more or less competition for various projects. But sort of regardless of the size, you are coming back to those core characteristics and trying to understand how these assets will perform over their lives. And David mentioned earlier the characteristics of infrastructure. So when we’re looking at investments, a minimum investment size is sort of a condition precedent for looking at opportunities. But once you’re over that threshold, you’re really trying to asset each asset and what it’s risk and return parameters are.

So from that perspective, I certainly view it more as a CP as opposed to saying if two assets have the same risk-return characteristics but one’s a $500 million deal and ones a billion dollar deal, I’m not going to price those differently. The number of firms looking at that opportunity may vary, but if you assume that there’s sufficient capital there for it be an efficient market, you shouldn’t see major pricing discrepancies unless you get to deals that are such a size that competition really does fall away.

The term mega deal is thrown around. I think once you do get sort of into the $5 billion plus range, requiring equity of $1 to $2 billion plus, the number of parties globally that can write those checks and can actually be part of those deals does reduce. And that certainly has considerations for someone like us. As a manager, what opportunities do we want to focus on. It brings execution risk into the equation because the additional consideration is, can you put the amount of capital together that you need to to execute on those deals.

Weisdorf: I think it’s a bit of barbell, David. I think not only – I think that smaller deals do exhibit higher risk, but also provide potential for higher return. There’s no doubt that in smaller companies, smaller sets of assets don’t have their profile diversified across as much of a region. They don’t have as large and as diverse an executive management team. They might not have the systems that larger companies have. So the smaller deals do present more risk, but on the other hand, finding those companies, those collections of assets, putting them together, strengthening that – undertaking value-added activities like working with management improve strategy, strengthen the management team, improve systems, make acquisitions, develop and grow and diversify I think presents the opportunity to grow smaller companies and smaller assets into larger ones that are more efficient, that are more competitive and generate higher return. So I think higher risk, but potential for higher return.

Snow: Here’s a question that’s a bit technical, but I think that it will illustrate what it’s like to do business with a State or a municipality. It’s someone asking, what percentage of the deals that you’ve done have required States to guarantee cash flow. To what extent do guaranteed cash flows come in to play when you’re doing these kinds of PPP deals, and is that often a deal killer, a deal impediment? Maybe starting with Karl.

Kuchel: Yeah, guarantee is a strong word. Invariably when you look at infrastructure assets, you’re looking at a volume-based revenue line or you’re looking at some sort of credit risk where a highly, a very strong credit-worthy counterparty is providing the availability or other payments to you. The U.S. hasn’t been a market where the availability approach has been the dominant source or the approach for procuring these projects. But I would say, is that the U.S. is moving in that direction. If you look at Canada and the UK, those projects where public entities do sort of guarantee or provide the availability payments are certain very prevalent. And they’re most prevalent for those projects that aren’t economic, based on general volume or usage factors.

Social infrastructure like courthouses or schools or hospitals don’t have a clear revenue line based on patronage. So you are looking for States to, or Provinces or whoever the public counterparty is, to step up. And I would say that that’s an increasing focus in the U.S., but the U.S. has certainly historically focused more on market factors to drive these projects and make them economic.

Snow: We really only have a couple of minutes left, so I might ask you to both briefly summarize your level of optimism for the future. If you could do it in 30 second or less. How bullish are you about the forward looking U.S. infrastructure opportunity? Starting with Karl.

Kuchel: Yeah, I would say that I certainly am optimistic about the opportunities in the U.S. We’ve been deploying capital in U.S. infrastructure opportunities at about the same rate over the last one or two years, as we have over the last decade or so. We see the pipeline across all of the sectors that we follow offering those opportunities that are attractive. Clearly, macro factors are a key driver of infrastructure opportunities whether it’s physical constraints that drive governments to want to use private capital, whether it’s record low interest rates, a falling oil price. All of these macro factors do throw up different opportunities and given how large the overall opportunities in the U.S., which I think we’ve discussed across various sectors, from a party that is deploying capital on behalf of investors we certainly see sufficient deal flow to deploy the capital that we have available in good risk-adjusted opportunities.

Weisdorf: David, I haven’t been more bullish than I am now really in all of the last 15 years that I’ve been working on opportunities in the U.S. And it really comes down to two factors. One, this energy, self-security and export opportunity is huge and it will take trillions of dollars and a decade or two to get that properly built out. Not just as they say midstream, downstream and gas distribution to people’s homes and business and gas-fire generation, but also logistics, transmission, refining and ultimately export through LNG terminals and others. So that’s one big positive.

And the other is that as Karl’s pointed out, more and more States and municipalities are having experience, are getting educated, are trying, are utilizing various models to partner with the private sector to invest in, operate and maintain infrastructure. And they’re learning that it’s another tool in their toolkit, and it can work well, and it can meet needs in certain circumstances. And over time, people do learn and people get comfortable with new sources of financing and new ways of partnering for opportunities. So the fact that the U.S. has had experience over the past 10 or 15 years, and there’s more and more States using private sector investment in infrastructure to build out their needs is a positive. So I’m very bullish on growing opportunities in the United States.

Snow: Well that’s great to hear, and I think we’re going to have to wrap up this discussion for now. It’s a huge topic and we certainly hope to return to it on Privcap, and we hope that we can invite all of you back to be part of any future fellowship that we put on regarding the infrastructure opportunity.

Want to give a big thank you to Karl Kuchel and Mark Weisdorf, and also want to say thank you to Richard Martin from Merrill DataSite who partnered with us to bring you this great though leadership webinar. So thanks to all of our audience members for tuning in, and we hope that you join a future Privcap program. Goodbye.

Martin: Thank you.

Weisdorf: Thanks very much.

Kuchel: Thank you.