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Infrastructure Finance: The Business of Infrastructure for a Sustainable Future



Infrastructure Finance: The Business of Infrastructure for a Sustainable Future

Neil S. Grigg

ISBN: 978-0-470-59727-9 February 2010 368 Pages

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A comprehensive look at the emergence of infrastructure finance

Just as infrastructure development acts as a catalyst for economic growth, it is also changing the landscape for potential investors and the burgeoning field of infrastructure finance. Infrastructure systems for transportation, utilities, and public works are essential for economic growth and have quickly developed into an emerging alternative asset class.

Infrastructure Finance examines how the activities associated with updating and creating efficient transportation and communications, reliable and affordable energy, clean water, and other essential systems, have become a profitable financial endeavor. Recently, providing, operating, and maintaining infrastructure has advanced as a recognized and important investment sector that reaches beyond earlier business models. Infrastructure Finance puts this field in perspective and details what you need to know to succeed within it.

  • An informative look at infrastructure finance-an emerging alternative investment for all types of institutional investors
  • Dissects the central organizational and financial issues behind the revolutions that are occurring in infrastructure management and finance
  • Contains detailed guidance for navigating the dynamic field of infrastructure finance
  • Discusses infrastructure as arteries of life for a better world
  • Highlights infrastructure undergoing transformations to adapt to turbulent environments
  • Focuses on Green infrastructure to balance economic and environmental changes

As infrastructure finance continues to grow in importance, you'll need to enhance your understanding of its essential aspects. Infrastructure Finance will provide you with the insights to achieve this goal.

Preface xiii

Acknowledgments xvii

CHAPTER 1 An Introduction to Infrastructure Finance 1

What Is Infrastructure Business? 1

Infrastructure Then and Now 3

A System of Systems 7

Sector Structure and Size 9

Estimating the Per Capita Cost 11

Need for New Approaches 11

Summary 13

PART ONE Infrastructure Sectors and Investments

CHAPTER 2 Models of the Infrastructure Sectors 19

Classification System 19

Infrastructure and Service Organizations 22

Business Models of Infrastructure Subsectors 24

How Infrastructure Systems Serve the Built Environment 26

Matrix of Owners and Users of Infrastructure Systems 27

Infrastructure and Services: Structures and Equipment 28

Infrastructure Support Sector 30

Summary 33

CHAPTER 3 Infrastructure and the Constructed Environment 37

Land Uses in the Built Environment 37

Growth and Change in Urban Areas 39

Financial Assets in the Built Environment 45

Housing Finance as an Engine of Development 47

Commercial and Central City Development 55

Impact Fees and the Growth-Pays-Its-Own-Way Philosophy 58

Future Cities and Infrastructure 60

Summary of Issues and Outlook 62

CHAPTER 4 Transportation Sector 65

Sector Structure and Size 65

Road and Highway Systems 69

Mass Transit Systems 79

Air Travel and Airports 84

Intercity Rail Systems 87

Intercity Bus Transportation 90

Water-based Transportation 91

Pipelines 92

Sector Issues and Outlook 92

CHAPTER 5 Telecommunications Sector 97

Why Telecommunications Is an Infrastructure Sector 97

Then and Now 99

Sector Structure and Size 100

Internet 102

Telecommunication Companies 102

Sector Issues and Outlook 104

CHAPTER 6 Energy Sector 109

Sector Structure and Size 109

Energy Trends 114

Electric Power Industry 116

Natural Gas Industry 119

Petroleum Industry 121

Coal Industry 122

Nuclear Power Industry 124

Renewables 126

Energy Storage 127

Hydrogen Energy 129

Sector Issues and Outlook 129

CHAPTER 7 Water and Wastewater Sector 135

Then and Now 135

Sector Structure and Size 137

Financial Framework of the Sector 141

Financial Issues 144

Business Profiles 145

Water Industry Support Businesses 149

Privatization in the Water Sector 152

Investing in Water as a Commodity 154

Industry Policy and Regulation 154

Coordination in the Water Sector 155

Sector Issues and Outlook 156

CHAPTER 8 Waste Management Sector 161

Sector Structure and Size 161

Categories of Solid Wastes 162

Recycling and the Materials Industry 169

Sector Issues and Outlook 170

CHAPTER 9 Infrastructure and the Construction Industry 173

Then and Now 173

The Construction Industry Today 175

Organization of the Industry by Function and Sector 179

Organization by Business Lines 180

Project Delivery and Finance 182

Construction Companies 185

Sector Issues and Outlook 191

CHAPTER 10 Investor and Business Opportunities in Infrastructure 193

Then and Now 193

Bond Market 195

Stocks of Infrastructure Companies 198

Infrastructure Funds 206

Infrastructure Indices 210

Commodity Markets 212

Mortgage-backed Securities 213

Private Equity and Infrastructure 213

The Infrastructure Support Sector 214

Infrastructure Investment Media 214

Corruption in the Infrastructure Business 215

International Spending Plans 216

Investment Issues and Outlook 216

PART TWO Financing Infrastructure

CHAPTER 11 A Scorecard for Infrastructure Performance 223

Tracking Infrastructure Performance 223

What Systems to Measure? 225

What Are the Performance Standards? 226

How Much Do They Cost? 230

How Ready Are They to Perform? 230

Financial and Economic Data on Infrastructure 234

Infrastructure Scorecard 239

Summary 243

CHAPTER 12 Financial Models for Infrastructure Organizations 245

General Management Model 246

General Financing Model 248

Sector Financing Models 251

How Governments Can Improve Infrastructure Performance 255

Public-Private Partnerships 260

Regulation 262

Summary 262

CHAPTER 13 Capital Markets for Infrastructure 265

Capital Requirements of Sectors 265

Capital Flows of Infrastructure 267

Capital Structure of Infrastructure Sectors 268

Sources of Capital 271

Investment Banking 283

Summary 284

CHAPTER 14 Revenues for the Infrastructure Sectors 287

Flow of Revenues 287

Rate-Setting for Infrastructure-Based Services 289

Rate Regulation 293

Revenue and Cost of Service Analysis 296

Tax Revenues and Subsidies 297

Infrastructure Revenue by Sector 299

Summary 299

PART THREE Toward the Future

CHAPTER 15 Opportunities and Risks for Infrastructure 303

Infrastructure as a Policy Sector 303

Infrastructure Policy Elements 304

Sector Issues 306

Transformational Issues 307

APPENDIX A Data Sources 315

APPENDIX B Infrastructure Companies 317

APPENDIX C Acronyms 321

References 327

About the Author 341

Index 343