Which infrastructure bonds are good to invest

We just have to work to make sure the project pipeline is in place so realistic homes can be found for that. Financial Services. Content for business decision-makers. About Us Careers. Hit enter to search. March 17, Ian Fraser. First, as written, QPIBs could not be used for social infrastructure projects like schools or courthouses, despite the acute need to modernize these facilities throughout the nation.

As a result, it may be easier for Congress to either propose its own QPIB-like program or simply expand the existing PABs framework as part of a larger transportation or tax reform bill.

These taxable bonds would directly appeal to a wide variety of investors, including public pension funds , corporate pensions, sovereign wealth funds, insurance companies, and taxpayers in lower income brackets. To add another layer of complexity, a competing AFF bond proposal has been proposed that uses a different subsidy structure. Instead of receiving an interest payment or a direct subsidy, bond holders get an annual tax credit that can be applied to all forms of their taxable income, including federal benefit and wage withholdings.

Regardless of the subsidy structure, both AFF bond proposals retain two core characteristics that make them an appealing policy choice. Both respond to a growing interest in expanding the market for infrastructure debt to appeal to a broader group of individuals and institutions, thereby driving down costs through increased demand. Furthermore, they give cities and states more flexibility to choose between the taxable and tax-exempt bond markets, which may offer different rates or have different appetites for new debt.

As with QPIBs, complicating factors have the potential to undermine the programs. Most cities, states, and the federal government can use bonds to secure infrastructure financing at historically low rates —yet they are not borrowing. Therefore, it is not clear that reducing borrowing costs should be a high priority in the current policy debate.

Second, the short-term political prospects for both AFF bond proposals are relatively dim. The second AFF proposal faces similar challenges, as well as the complication of explaining a relatively novel subsidy structure to members of Congress.

All these new programs, acronyms, subsidy structures, and requirements are confusing. Even more tangibly, these bonds will help deliver the safe, reliable, and resilient infrastructure that America needs to keep its economic engine running.

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Absolutely no spam allowed. Australia, meanwhile, has been privatizing assets to finance the construction of new ones.

It entered into a year lease with a company to operate a state-owned electric grid, using the proceeds to pay for improvements to the Sydney Metro. The U. Given the significant need for infrastructure spending around the world, governments will likely continue seeking ways to incorporate PPPs to bridge the infrastructure spending gap.

Government entities play a crucial role in the infrastructure industry. Not only do they invest heavily in the sector, they also oversee it. As such, they set or regulate the rates many infrastructure companies charge for using their assets. The FERC also reviews proposals to build new liquified natural gas terminals, interstate natural gas pipelines, and hydropower projects.

This oversight limits competition, which allows infrastructure companies to earn a return on their investment in new projects. However, it also prevents them from charging higher market-based fees. Governments can also prevent infrastructure projects from moving forward or delay them by undertaking additional reviews to ensure they're actually needed.

Because of that influence, investors need to understand that governments can inhibit infrastructure growth projects as well as push them forward. Because governments can't meet the global economy's infrastructure requirements on their own, they will need to increasingly rely on private investment. As a result, investors will likely see their opportunity set expand over the coming years as more companies focus on this opportunity.

In the meantime, investors already have several compelling options worth considering. Next, we'll drill down a bit deeper into one of these infrastructure behemoths, then take a closer look at another enticing option. Enbridge is the largest oil and gas midstream infrastructure company in North America. Enbridge gets paid a fee as oil and gas flows through its various pipeline systems, which allows the company to generate steady cash flow that it uses to pay a lucrative dividend as well as expand its infrastructure footprint.

While Enbridge is already the largest midstream infrastructure company in North America, it's not stopping there. The company invests billions of dollars per year to grow its asset base. That growth should continue for many years to come, since the U. As those projects come online, they'll supply Enbridge with a growing stream of cash flow, giving it the fuel it needs to continue increasing its dividend at a healthy annual rate, as it has done since Because of its massive scale, Enbridge offers investors the opportunity to benefit from the growth of the entire North American energy infrastructure segment, since it operates both oil and gas pipelines in the U.

That diversification makes it a low-risk way for investors to add some exposure to the fast-growing energy infrastructure segment in their portfolios. Brookfield Infrastructure Partners is one of the largest owners and operators of infrastructure assets in the world. The company owned stakes in 32 infrastructure businesses at the end of , spread across North and South America, Europe, and Asia Pacific focusing on utilities, transportation, energy, and data infrastructure.

The company's infrastructure assets are critical to support the movement of energy, data, water, goods, and people. Meanwhile, its rail network in Western Australia is the sole freight system to move commodities like iron ore from mines to global markets. The company also operates a vital communications network in France, an important natural gas pipeline system in Brazil, and critical toll roads in Brazil, Chile, Peru, and India.

Brookfield makes most of its money by allowing customers to use its assets for a fee. Drivers, for example, pay tolls to use its toll roads. Energy companies pay tariffs to use capacity on its pipeline assets. Telecom companies, meanwhile, rent space for their equipment on its communication towers. Because these assets are important to customers and global commerce, Brookfield tends to collect a steady stream of fees as customers use its infrastructure, enabling the company to generate a stable income stream.

As the economy grows, it fills up the capacity of Brookfield's assets, which provides the company with opportunities to expand them as well as build new ones. Brookfield Infrastructure aims to invest several hundred million each year to move more people, energy, data, and goods.